Wayne Van Dyck,Founder/CEO ClimateCapex

Transcription

Pemo: Welcome Wayne. So good to speak to you again. Really interested in Climate [CapEx 00:00:07]. Do you want to give me some background and a little bit about what you guys do?

Wayne Van Dyck: Well, thank you, Pemo. Yeah. Climate CapEx is a digital FinTech platform that’s designed to basically accelerate the velocity of capital flowing into clean energy projects. Basically it’s a FinTech platform that automates project financing with a focus on, at least initially, on solar and storage projects between 2 million and 200 million with a primary focus on institutional investors.

Pemo: Right. And how does it actually work? Do you want to just break that down a little bit for me and for the business?

Wayne Van Dyck: Sure. The way that technology works and what makes it unusual is that it’s a confidential system and it’s based on a profiling technology or a hierarchical structured taxonomy that we developed a number of years ago in another business. And basically the way it works is that we go out and we actually interview institutional investors that are looking to put capital to work in the climate area and we interview them to find out exactly what kind of capital they have, debt equity, tax equity, development capital, et cetera. What kind of technologies do they like to invest in, what are their geographic preferences, hurdle rates, deal structures, all that information goes into a confidential profile. And then on the other side, let’s call it the other side of the transaction engine. This is a transaction engine which really consists of two components.

Wayne Van Dyck: The second component is what we call the project evaluation engine. And what that does is when a developer or a project owner comes to us, that’s looking for capital for their project, they go through a similar profiling process or a process where basically we ask them a whole series of questions about their project. Those questions or the answers to those questions go into a bunch of algorithms, models, industry standards, and basically comes up with an analysis, if you will, of the project where we basically score the project on 25 major criteria. And then we take that information through a bunch of algorithms and we then also build a 20 year cashflow model of the project.

Wayne Van Dyck: And then that all rolls up into what we call a financeability score. And so if the project is above the threshold, that would looks like we would need in order to be able to make the financing… In other words, we’d want to take it to our investor sources. If it’s above the threshold, we then put the profile of the project into the matching engine, with the profiles from the investors, and then through a series of algorithms and fitting algorithms, we actually match the project with the right investors.

Wayne Van Dyck: And then the system automatically notifies the investor that there’s a project that meets their criteria. And then they get a blinded summary of the project. They can look at the project and decide whether they’re interested in it. If they are, they then respond through the system. And the system then sets up the clearance of the NDAs so that we can basically release the rest of the project information to the investors. And then if the investors still interested, we introduced the investor to the developer. And at that point, then they start the conversations about collecting all the information from the data room for the due diligence process. And if they come to a conclusion and then make an investment, then we collect a small introduction fee.

Pemo: Wow. So it’s a really a matchmaking service for climate change startups and investors. Fantastic.

Wayne Van Dyck: Exactly.

Pemo: Yeah. That’s so great. And so tell me, obviously, things changed a lot at the beginning of 2020 on a few levels. Did you notice a change in like more investors and more startups interested in climate change issues?

Wayne Van Dyck: The evolution of this technology came out of the fact that we started this a number of years ago. We originally started out representing the developers who were looking for money, and we developed a company called Repower Capital. And when you’re representing the developers, in fact to go out and raise money for them, that business is regulated by… At least in the United States is regulated by FINRA, the financial advisory board. And so we were a FINRA licensed broker dealer, and we were representing the developers. And about two years ago, we saw a big change in the marketplace where suddenly a lot of capital is coming into the marketplace that wasn’t here before.

Pemo: So would that have been beginning of 2020?

Wayne Van Dyck: Yes. Somewhere in that. Well, late… Around 2020, a lot of people were coming into what’s called impact investing, ESG investing, sustainable investing. And so we decided to take the business model and flip the business model and instead of representing the developers, we now represent the investors.

Pemo: Yeah. Wow. Well, because obviously, I mean, I’m a boomer and I’ve been a climate change gal since I was in my early twenties, but I really noticed a difference around the time of the COVID crisis of people all of a sudden paying much more attention to climate change.

Wayne Van Dyck: Absolutely.

Pemo: It sort of makes sense as far as the timing goes. Thank goodness more people are paying attention. So how serious do you think the climate crisis is? You are also long in the tooth in regards some focus on this, correct? Like me.

Wayne Van Dyck: Yeah. I actually started working on what I thought was going to be the energy crisis. I started the first large scale wind energy development company in the United States for utilities right back in the late seventies. And so I’ve watched the energy crisis morph into the climate crisis. I spend a lot of time following what’s going on in the climate crisis, plus the fact that I’m living in California, where we have very significant wildfires now. We’re looking at a very significant drought. I think that the climate crisis is extremely serious.

Pemo: High temperatures.

Wayne Van Dyck: Exactly. Right now in India, for example, they’re having huge heat wave [inaudible 00:07:26].

Pemo: I know, I saw that. The people are dying and I mean, I traveled in India in my twenties, and it was hot, but nothing like what they’re reporting at the moment. So gee.

Wayne Van Dyck: Exactly.

Pemo: It’s a real concern.

Wayne Van Dyck: No, I think it’s very extremely serious, which is why I’m spending all my time working on it.

Pemo: No. Really good karma, really good karma. So tell me, what kind of startups are you approaching or are approaching you to look for funding?

Wayne Van Dyck: Well, our funding, we’re looking for what we would call a strategic investor at this point. These are people who are already in the business, that have got a commitment to climate, doing something about the climate and who understand the issue that we’re trying to address. The issue that we’re trying to address is that if you look at the world of climate change and you look at the speed with which we need to start to accelerate the deployment of renewable energy technologies, the IEA says that we need to accelerate the deployment of, let’s call all of the technologies, including solar, but primarily solar, because it’s going to become the cheapest form of electricity. We need to accelerate the current deployment from about 300 or 400 billion a year to a trillion dollars a year. And one of the biggest barriers to holding that back is the kind of archaic process by which capital finds projects. It’s all kind of done with people’s relationships.

Wayne Van Dyck: And what we’re trying to do is to bring technology to bear on that. And we believe based on the modeling that we’ve done. And so on that we can increase the velocity of capital two to four times, which means we could basically get a lot more projects built a lot quicker because of making the technology or making the process by which developers get connected with capital a lot easier and a lot faster.

Pemo: And I understand that you are basically representing the investors, but you also need startups or projects. And that was my original question. Are you noticing that there’s much more like growth in that area as regards of people’s innovations? And-

Wayne Van Dyck: Well, since we focus primarily in what’s called the middle market. So we’re focusing on projects between 2 million in solar and storage between 2 million and 200 million. Right now there’s about 1300 projects between five megawatts and 75 megawatts, which is middle market in the United States, currently looking for about 40 billion dollars worth of capital. So there’s lots and lots of projects out there.

Pemo: Right. And how did they find you? I mean, what do you do to reach out to them or to put them in your system?

Wayne Van Dyck: Once we get the technology relaunched, we’re going to reach out to them through all kinds of eCommerce, traditional marketing, referral networks, advertising. Basically since we don’t charge the investors and the developers anything, we found it’s very easy for them to use our service because we don’t charge them anything.

Pemo: That’s great.

Wayne Van Dyck: And if they think they’ve got their capital, they’ll often take their project and put it into our system because we might be able to find a cheaper source of capital than they’ve already got. And since it doesn’t cost them anything, we found it very easy to market it to the solar developers.

Pemo: And so is it mainly solar and storage projects that you’re focusing on?

Wayne Van Dyck: Right now, we’re focusing on solar and storage because if you follow a guy by the name of Tony Seba, Tony Seba basically says that by 2030, the price of solar and storage will have dropped so much that it will be the cheapest form of electricity generation in the world, almost everywhere in the world. And by that point, it should be… Well, according to the IEA, we should be putting about a trillion dollars a year into solar development for about 20 to 25 years, if we hope to solve the climate crisis. So we’ve decided to focus primarily on solar at least now. The big wind energy projects are already pretty well covered by the big investment banking firms because those projects tend to be very large. They’re now multi-billion dollar projects. So we’re focusing on solar and storage.

Pemo: And so what’s the deal, I did read quite a few months ago, I think, because everyone’s beefing up on the solar just on homes, but I noticed that in the US that a lot of the local governments charge more for people who are using solar panels than people that are just taking the power. And is that going to change and why would that be happening? Because that’s obviously an obstacle to solar being taken up.

Wayne Van Dyck: Well, the utilities are regulated industry and the way that they make money is by charging. They get a fee for the amount of capital that they deploy. So they would rather buy the project and own the projects themselves rather than having the homeowners do it. On the other hand, the homeowners, in order to encourage the homeowners to do it, in some places they’ve got, what’s called net metering, which means that you can put a solar panel on your roof of your house and if you don’t use all the energy, you can sell it back to the grid. The utilities don’t really like that very much because they sometimes have to pay more for it than they think they should. And so they’ve been resisting that in some cases.

Pemo: Yeah. Right. And so lastly, tell me if you could do one thing to help the climate crisis, obviously you are committed. What would that be?

Wayne Van Dyck: Well, if I were God and I could do whatever I wanted to do and it would stick, I think the most important thing that we could do right now is to pass a carbon fee and dividend along the lines that’s being promoted by the Citizens’ Climate Lobby, where basically we put a fee on all of the fossil fuels and then collect the proceeds from that and give it back to the people. But what it would do is it would change the economics of the energy business, such that it would be more expensive to generate electricity and use electricity generated from fossil fuels than it would be from renewables. And that would then force a lot more people to get into the business of developing solar projects, developing biomass projects and so on. We just have to do it a lot more rapidly and until we get the signals in the economy correct by properly pricing, including the external cost of fossil fuels, we’re not going to get there fast enough. So I would pass a fee and dividend.

Pemo: That’s great. Gee, I hope that they follow your idea because it’s COP26 seemed like a total dead loss on some levels. And I was ashamed to read that the Australian government had a fossil fuel stand there. And I was like, “WTF? Oh my God, I can’t believe it.” So it doesn’t seem like people or governments, anyway, are taking it as seriously as they should. So let’s hope that they listen to this podcast.

Wayne Van Dyck: Well, the other thing that would help a lot would be to get rid of the subsidies that are still being given out to the fossil fuel industry because it’s distorting the economics still. So you’re absolutely right.

Pemo: Yeah. Anyway, look fabulous to talk to you again, Wayne. It always stimulates my imagination and possibilities, and I wish you all the best with Climate CapEx.

Wayne Van Dyck: Thank you very much.

Pemo: Okay.

Wayne Van Dyck: And we’ll look forward talking again soon.

Pemo: Yeah.