BeyondNetZero, the climate investing arm of General Atlantic, is seeking to provide affordable energy for global consumers as fossil fuel-related energy costs show steep and sustained increases.
The rise in commodity prices due to the war in Ukraine “should improve the economics of the companies we invest in, because ultimately those companies are looking to reduce or displace the use of fossil fuels, which have increased in price”, Eli Aheto, managing director at BeyondNetZero, told New Private Markets. “We are intending to live by Article 9 standards. It’s not just the environmental benefit, it’s also the social benefit and the governance standards.”
BeyondNetZero’s latest deal, a majority stake in off-grid solar provider Sun King, provides energy access to rural households in emerging markets that are not connected to local energy grids. BeyondNetZero – which launched in July 2021 with a $4 billion target – led a $280 million Series D fundraise in Sun King. M&G’s $5 billion impact fund, Catalyst, also participated in the funding round, and previous owner Apis Partners has retained a small stake. Apis said Sun King had experienced growth of 5x since it invested in the business in 2017, although it did not specify how it was measuring growth. The company has annual revenue of more than $200 million and sold 1.2 million units in 2021.
“We need to find solutions that we can scale immediately, not in five years’ time,” said Aheto. “We have a bias towards those things versus early-stage, unproven technologies that won’t really get to market for another five years. With this investment in Sun King, it’s very clear how they’re already scaling and what the immediate greenhouse gas benefit is.
“The product is fair and affordable for consumers,” he said. Sun King’s solar panel equipment is sold to consumers on lease-purchase terms: consumers pay a down payment and instalments, paying in total around $150 per equipment set. Once it is paid off, consumers have free energy access for the product’s life – approximately 30 years. “Running grid electrification to rural households costs multiples of that [$150] per household. We expect there will be a vast need for some sort of an alternative to rural [grid] electrification.”
The company’s social impact was as important for BeyondNetZero, Aheto said: “The alternatives for consumers today are kerosene lanterns and flashlights. Kerosene is an open flame in your house – that’s not great from a health perspective, and it’s expensive.” Aside from the limited uses of kerosene lanterns and flashlights, both require consumers to regularly purchase kerosene or batteries – leaving consumers subject to rising retail prices and supply chain issues for these products.
Apis invested in Sun King in 2017 via its $287 million first fund. The firm has a focus on financial inclusion: “We generally invest in technology-enabled financial services,” Apis co-founder and managing partner Udayan Goyal told New Private Markets.
So why did Apis invest in a solar panel company? “We saw Sun King as a financial services company.” Energy access facilitates economic participation, Goyal said. And once consumers have paid off the equipment, “they can use the equipment as collateral for further loans”, said Goyal.