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Hello, this is CleantechTV and my name is Giles Parkinson.
Joining us today is Jo Hume, an Energy and Environmental Analyst with private equity fund CVC Ltd. Jo, welcome! Thanks for joining us!
Thanks for having me.
Tell us, Jo, tell us about CVC and your interest in the cleantech and energy sector.
Yeah, CVC has been involved in the clean technology sector very actively since 2002 when we won a license for effectively a joint venture with the government to establish the Renewable Energy Equity Fund...
That was a co-funded fund... which was for early stage investment to try and get new and emerging and promising renewable energy technologies off the ground.
We then launched a later fund the CVC Sustainable Investment Fund which is the more active fund now.
What do you have in your portfolio? And which part of the sector do you find particularly interesting - is it in renewable energy or other cleantech options?
The Renewable Energy Equity Fund, CVC REEF, it was a closed fund so we're figuring out - it was meant to end in 2010 - so we're working with the government to figure out what's going to happen to that fund...
So the more active fund is now the CVC Sustainable Investment Fund.
Within that portfolio it covers all aspects of environmental sustainability so we do have a lot of air, water and land purification technologies and companies within there, waste management and clean energy.
The most active sector now - the sector we're most actively involved in and assessing is in clean energy because there is such a global trend and demand for clean energy technology. So that's certainly where we are focused.
But we also are constantly looking for other environmental options around air, water and land... And water is another big emerging area.
Now one of your portfolio companies is Bio Power Systems, the wave and tidal energy company, and they've been in development phase and now I guess they are approaching commercialization phase.
What's the challenge of getting a company across the so called 'Valley of Death' into actually producing things?
It is so capital intensive. And so you just need a lot of capital to get to build power stations, to get to demo programs up...
And this is particularly compared to perhaps IT, venture capital investment in IT, where you need to engage a few programmers - quite a few programmers and some good computers and so forth...
Compared to commercializing clean energy technologies.
You have to build power stations, you have to connect them to the grid, you have to run them for a year before any bank is even going to look at them...
And so it's highly capital intensive which is a key challenge and it takes a lot of time.
And this means that you need venture capitalists with very deep pockets.
Or you need to partner up with a big global corporate like a GE or a Seimens or somebody that's just going to either partner with you or buy you out at some stage of the technology development.
Yeah, so the challenge is enormous but it's not insurmountable. But it's huge.
And it's particularly hard here in Australia because there is not a lot of public funding support for that.
Good R&D. But post R&D in the demonstration commercialization phase, there's not a lot of public money going into that area.
What sort of policy changes would you like to see that will help us bridge that gap between research, R&D, and commercialization?
I fully agree with Susan Jeanes, I don't know if you've seen her work from the Geothermal Power Association...
In that the private sector is just not able to wear the risk associated with commercialization at the moment without help and so it does need public funding going into demonstration and proof of concept projects -
Such as loan guarantees and equity guarantees...
Loan guarantees would help, yeah. And just straight equity injections.
Or some sort of mechanism that provides a higher feed in tariff or not necessarily a feed in tariff but some sort of higher power price that will get these new technologies over the commercialization hump.
Ultimately, they are anticipated to be cheaper than a lot of the current technologies that we have...
Particularly renewable energy technologies but it's expensive to develop them and then when you get economies of scale you get yourself over the commercialization hump and the price is fully anticipated to come down.
But it needs that initial funding assistance...
And as one of our investees, Bio Power Systems, Tim the CEO there says...
They are largely agnostic in regards to which form the support comes whether it's in a higher power price to get the projects over the line or it's in the form of a loan guarantee or just a straight equity injection so long as it leads to the same outcome.
What about the size of the market? I guess, a lot of the cleantech or the private equity, the venture capital is being focused in the US and now I guess a lot of it's in China...
Is it realistic to expect that we can have such an industry in Australia? I mean, do we have enough capital to actually make it work? And how important is it that we do have a cleantech industry that develops here?
The VC industry here is so thin here for early stage and it's retreated since the financial crisis there's no doubt about that.
And there is some anecdotal evidence of it retreating even further as super annuation funds and so forth here in Australia...
Because they're so big, they're looking globally at private equity and venture capital funds...
And assessing whether they can, those international funds will perform better than local ones and so some of the private equity allocations, local, from local investors, are actually going overseas...
And so yeah to the second part of your question, how essential is it that we have a venture capital industry here...
I mean it would be tragic for a lot of our fabulous innovations and technologies to go overseas at a very early stage because then they'll have no sort of Australian home grown element.
And from my point of view - it's just um - You know, we do want to be a smart country. We don't want be just a bunch of people digging stuff out of the ground.
So it's more from that point of view - keeping smart people and innovation here.
Jo, look, thank you very much for joining us today on CleantechTV and we hope to talk to you soon.
Ok, right. Thanks, Giles. Bye.