Institutional investors back Generate Capital with $200m

The firm is pursuing a strategy to invest in promising clean energy technologies that are bankable through offtake agreements.

Generate Capital has raised $200 million of equity from institutional investors to pursue its strategy of backing promising clean energy companies.

Alaska Permanent Fund, the US’s largest sovereign wealth fund at $62 billion, was the lead investor. The others were not disclosed.

Generate co-founder Jigar Shah said in an interview that backing from US institutions “validates” the company’s belief that the underlying principles of an offtake agreement apply to a range of clean energy assets and can make newer technologies bankable. The company invests in renewables, energy efficiency, battery storage, waste, water and agriculture companies.

It is difficult for the likes of energy efficiency and battery storage developers to obtain funding from banks or other lenders for a leasing model that requires upfront capital for new technologies, explained Shah, who founded SunEdison and left the business as chief executive in 2008. Generate seeks to close that financing gap by backing developers that have projects that can be signed to service contracts.

“Solar and wind projects are really just a pattern as opposed to an asset class, but it’s a pattern around projects that work like offtake agreements,” Shah said. “If we can find that formula […] then we should have the right way to fund those deals.”

Shah is now president of San Francisco-based Generate and says the company has invested $500 million since it was founded in 2014, deploying around $10 million at a time to a developer.

Generate will manage permanent capital outside of typical fund structures and is targeting returns similar to traditional infrastructure investments, according to Shah. He said the company wants room to shift to different sectors and the ability to hold investments longer than the life cycle of a fund.

“The way this sector works is this year the returns could be double digit and next year they could be single digit. If you have a fund, this year you’re competitive and next year you could be uncompetitive,” Shah explained. “We have the ability to pivot. Today, we could be doing anaerobic digesters, the next we could be doing fuel cells for forklifts.”

Generate has recently committed to develop an anaerobic digestion plant in Michigan and New York and has been active in battery storage and solar as well.