Q&A with Dr. Alex Westlake, Investor-in-Residence.
Leif investment analyst Matt Stamp interviews Alex Westlake.
Alex has over twenty years’ experience in founding and financing sustainable technology businesses throughout Europe and Asia. He has raised over $1bn in project and carbon finance for over 1GW of renewable power (both wind and solar) across China, and has a private investment portfolio valued at more than $100m. We get some more details on his life and achievements, from his beginnings as a Chartered Engineer to the $100m AIM IPO of his company Camco and his acquisition of Swedish precision manufacturing company Microbas.
Alex, you completed a PhD in Wind Energy at Durham University between 1992-1996, a time when the Renewable Energy sector was still very niche and mysterious. What was it that motivated you to commit to such a pioneering area of study?
I think one of the primary reasons for pursing a PhD in Wind Energy was that I was inspired by my professors in the final year of my undergraduate engineering degree, Professor Spooner and Doctor Bumby. I feel like that is often the case, you have figures in life who you admire and they motivate you. The second reason was a real desire to help the planet, as cliché as that sounds. I felt that even then we were heading towards a crunch point where action was essential, and I wanted to dedicate my time to the cause.
Your first job after your doctorate was at PowerGen, now E.ON, the largest supplier of energy and the largest supplier of renewable electricity in the UK. What was your role in the company?
When I finished my PhD, I wanted to get the practical experience I needed to become a Chartered Engineer, and the job I got at the PowerGen Technology Centre provided that. I found the variety of job interesting, it consisted of a mixture of research as well as practical condition monitoring, replacement and repair of high value electrical equipment in PowerGen’s coal and gas fired generating fleet. The experience was great and I learned a lot when I was there.
Post-privatisation was a challenging but also exciting time for the industry. PowerGen’s expansion overseas gave me the opportunity to move to Beijing in 1998 as a project developer, looking at investing in independent power producers (IPPs) and buying generation assets through mergers and acquisition. This gave me commercial skills to complement my technical skills and I think this mix has stood me in good stead as an entrepreneur and investor.
In 2003, you co-founded Clear World Energy . Clear World Energy started as a renewable energy development company, and you helped to register the first Windfarm Project under the Clean Development Mechanism of the Kyoto Protocol. Tell me some more about this project, and other sustainable projects CWE helped to develop?
The renewable energy industry was in its early stages when I first worked in Beijing, so my initial work was as a consultant on several consulting projects, supported by UNDP and the British Government amongst others, to develop a framework for the Renewable Energy Law and for carbon emissions trading under the Kyoto Protocol for the Chinese Government. This was a fantastic time of learning, of travelling throughout China, and working with early Chinese entrepreneurs in the renewable energy space and other experts to create the conditions for rapid growth of renewables and emissions reductions technology in China. During this time, I realised that there was an opportunity to start my own company so I co-founded ClearWorld Energy to develop climate change mitigation projects in China.
A key tool in the financing of such projects was the Clean Development Mechanism of the Kyoto Protocol, where emission reductions from developing countries could be traded with the developed world. The first CDM project I worked on was the Huitengxile Wind Farm, which I did together with the Chinese Renewable Energy Industries Association, and then I went onto to write methodologies for coal mine methane utilisation and waste heat utilisation. China had a lot of heavy industry, so to reduce emissions from these sectors would have a large impact. I focused on where I could make the biggest emission reductions first, and the more complex emission reduction projects came at a later phase.
It seems that the carbon market is now revived and growing again despite the COVID-19 pandemic. What is different between now and then and what advice would you give based on your experience with listing Camco on the AIM market in 2006?
First of all, it is great that the carbon price in the EU-ETS is now at record heights. This will spur investment into climate mitigation just as the news from all quarters reflects the urgency of the problem. After Covid-19, I think there is a real tangible sense of ‘build it back better’ which was not there after the financial crisis in 2008, when companies scaled back their environmental spend. Now in 2021, it seems everyone is doubling down.
Listing Camco on London’s AIM market in 2006 was a challenging process, but one I would do again. Tapping into the public markets is a fantastic opportunity for those companies which are able, but it comes with real responsibility and stress, so you have to make an honest assessment as to whether you are ready. What we are seeing today with the SPAC market is a lot of companies coming to market with a fully-funded business plan. There will be some stress with this approach, but they should be able to effectively leverage the finance they have raised towards action on climate change. There are going to be many different mechanisms for financing emission reductions, and all of them need to efficiently work together if we are going to be successful in our generational fight against climate change.
From 2008, ClearWorld Energy began investing in businesses that contributed towards creating a sustainable economy and improving our environment. What lessons would you share with new investors looking to get into the sector?
Investing in cleantech during the early years after the financial crisis was difficult, as companies were pulling back from environmental spend, but I made the decision to continue investing as I knew that climate change was not going away. Start-ups in cleantech have quite a deep ‘valley of death’ and often require substantial follow-on funding to scale, so the journey then was tricky. I certainly learned a painful lesson, it might be the right idea but if the timing is wrong and your pockets are not deep enough then start-ups fail.
Now it seems the road ahead is slightly easier. Longer term investment vehicles, like Breakthrough Energy Ventures, are emerging which are better matched to the capital requirements of new cleantech technology and investors are generally more aware of the transitions that need to be made. Of the investments I am holding now, I like them all for different reasons. Mint, which uses microbes to extract precious metals from electronic waste, is exciting as it is learning and applying the best of nature, a process called bio-mimicry. Carbonscape, which takes waste wood and purifies it to battery grade graphite (pure carbon) for lithium ion batteries, is important as it means that we can shorten supply chains and use renewable waste instead of mining graphite as happens today. I think if we are to successfully get through the eye of the needle required by the energy transition then we need to invest in deeptech coupled with digitisation and not just digitisation.
In the past decade you have also been very active as an angel investor, acquiring Microbas Precision AB in 2014, a precision engineering company based in Hässleholm, Sweden. What was attractive about this company versus others you looked at?
I think that some people may be curious as to why I moved from investing in cleantech to precision manufacturing, and how the two fit together. For me, a lot of the improvements in cleantech in the next 20 years will require increasing precision – from thin film printed and tandem solar cells to earth observation satellites to help track climate change. So when we looked at Microbas, first and foremost it had good potential to be a profitable company. However, its skills to take mechanical components to a micron level of precision was something that really piqued our interest. For example, one of Microbas’ clients, another Swedish company called Mycronic, produces mask writers that hold a unique position as the world’s sole production solution for advanced photomasks that are essential for manufacturing complex displays. To put that in layman’s terms, the resolution of pretty much every flatscreen TV, smartphone or laptop screen has been enabled by Mycronic, and all of that has been enabled by precision mechanical components from Microbas. I was shocked that a small company from Hässleholm could have such a big global impact, and it made me keen to acquire the company.
Since we acquired it, Microbas has branched out even further. We have enabled the display, thin-film and semi-conductor industry, and have now taken our precision and applied it to optics. The substrate for mirrors on satellites are made by Microbas, and I believe that Earth observation satellites will play a key role in tackling climate change. They allow us to measure the concentration of gas in the atmosphere accurately, where emissions are most dense, and they can also monitor forestry projects for example, providing real data about the production of biomass and reduction of carbon to satisfy investors and end consumers. The key reason why we invested in Microbas was because it was going to be the cornerstone for a lot of innovative clean technologies.
Are you still investing and how do you balance your time between Leif Capital and your investment portfolio?
I spend most of my time now with the team at Leif Capital to secure larger amounts of strategic capital for innovative companies so they can accelerate and thrive. I am still investing in sustainability start-ups and looking to acquire precision companies through ClearWorld Energy and LakeWall Holdings. Nowadays these investments are mainly adjacent to existing companies in my portfolio – sustainability, materials precision, digital education and healthy food - or where I can leverage my past experience rather than getting involved in completely new areas. I am a technology optimist but I think this must go hand in hand with tackling social issues, such as inequality and discrimination, if we are to transition to a fair and abundant world.
Why did you join Leif Capital and what aspirations do you have for the company? Where do you see our focus narrowing in the future?
I first met Tom Whitehouse, founder of Leif Capital, about twenty years ago when we were helping to establish a global public-private partnership to accelerate the deployment of renewable energy and energy efficiency (www.reeep.org). Tom was the communications expert, leveraging his journalistic background, and I was establishing the REEEP in East Asia, with a regional centre in Beijing. We’ve worked together on and off over the years and, when I moved to London last year, he was the first person I contacted to see how we could accelerate the transition to a sustainable world.
I think to effectively tackle climate change, we must create symbiosis between three key players: the entrepreneurial innovators, the large corporates who have the built-in scale of use and financial muscle, and the financial investors who can lead investments. We need to get these three actors working symbiotically together, in a way that is better and faster. At Leif Capital, we want to focus on advanced materials, e-mobility, the transition to net-zero and the precision technologies that underlie all those areas, and this prospect is very attractive to me. I think I bring some good experience to the company and I am going to my best to shift the needle.
Matthew Stamp (Investment Analyst: Leif Capital)