Investment Strategies in the Forestry Value System: A Great Lakes Regional Perspective

Transcription

1 Investment Strategies in the Forestry Value System: A Great Lakes Regional Perspective Peter Adriaens, PhD, BCEEM Professor of Environmental Engineering, Finance, and Entrepreneurship Center for Venture Capital and Private Equity, The Ross School of Business Director, Center for Smart Infrastructure Finance, College of Engineering The University of Michigan, Ann Arbor adriaens@umich.edu (734)

2 Benchmarking Great Lakes Forest Investment 1. Impetus for study: The Finnish Experience 2. Emerging Forestry Ecosystem 3. Traditional investment in paper mills 4. Equity and P3 investments for forest bioeconomy industries 5. A snapshot of the Great Lakes forest investment ecosystem 6. Project Finance: Bankable projects for Data sources: Bloomberg, Michigan Forestry Industry

3 Forest Bioeconomy Strategy: A Finnish Story By 2005, competition on cost for the same product was impacting Finnish forestry companies, resulting in layoffs and poorfinancial performance A government policy strategy to promote the bioeconomy started taking hold in the first decade of the 21 st century By 2016, the bioeconomy represents 16% of the national economy, whereby 40% is derived from forestry The target by 2030 is to increase the bioeconomy to $109 bn and increase forest products to 70%. Data sources: Finnish Forestry Industries, Ministry of Economic Affairs and Employment

4 Criteria for public procurement and incorporation of bio-based products in urban sustainable development Fund structures for pilot and full-scale demonstration projects using public-private partnerships Tactics: Setting the Strategy in Motion Education of consumers and industries to promote demand of forest biobased products and services Development of standardization and certification processes of bioeconomy products Retraining and re-education programs to ensure workforce development and availability

5 Source: Finnish Forestry Industries Blue Ocean Strategy: Forests as Biorefineries for Green Chemistries Potential Investment Universe 1. Textiles: 141 deals; $1.6 bn. 2. Plastics: 461 deals; $3.5 bn. 3. Pharmaceuticals: 63 deals; $0.7 bn. 4. Cosmetics: 92 deals; $2.1 bn. Brands

6 Traditional Investment in Mill Operations Data sources: Bloomberg, Michigan Forestry Industry

7 Investing in Emerging Forestry Value Chain Private equity Venture capital Corporate venture, strategic, M&A Corporate strategic, M&A, sales-driven reinvestment Data sources: Bloomberg, CleanTech Group, Pitchbook

8 Private Investment Risk and Expectations VC (money in) Exit (money out) What s Happening Research Tech Dev Market Dev Early Sales Recurring Revenue Positive EBITDA Securable Assets Revenue Growth Stable Revenues Strategic Partner Uncovering Hidden Value Bus/Tech Stage Concept Bus Plan Proto-type Pilot Commercial Product Market Adoption Market Acceptance Market Acceptance Mature Mature Rebirth Type of Financing Gov t Grant or Angel Seed Early Stage VC Expansion Capital Growth Capital Venture/ Mezz Debt Proj Fin Debt, Equity, Tax Equity IPO/ Acq Corp Debt PIPE (private investmen t in public equity) Buy Out

9 Venture Capital Investment: A Regional Perspective of Great Lakes States and Provinces % Technology: 2%

10 Forestry Investor Universe in the Great Lakes Region Source. CleanTech Group i3 Platform

11 Exemplar VC Investments Specialty chemicals (e.g. Vertichem, Ontario; $4 M.). Green specialty chemical company. Investors are Dundee Venture Capital and Bank Gutenberg Commodity chemicals (e.g. Renmatix, Pennsylvania; $132M). Production of cellulosic intermediaries for biochemicals and biofuelsinvestors include Kleiner Perkins, Waste Management, Total, Bill Gates Fiber (e.g. Fiber Byproducts Corp, Indiana). Recycler and reprocessor of wood waste for consumable products. Investors include Beringea Biofuels (e.g. Woodland Biofuels, Ontario; $20M.). Cellulosic conversion to biofuels. Investors include Investeco Capital, Arctern Ventures, Middleland Capital Carbon (e.g. Finite Carbon; Pennsylvania; $2 M). Carbon aggregation platform. Investors include TL Ventures Drones/software (e.g. DroneSeed, Washington; $5 M.). Reseeding technology for forests. Investors include Techstars and Social Capital Syndicate Advanced Materials (e.g. Spinnova, Finland; $3.2 M.). Producer of novel fiber products from wood-based biomaterial. Investors: Lenzing AG, VTT Ventures Ltd, Besodos Investors Ltd and Finnish PE. Source. CleanTech Group i3 Platform

12 Venture Capital Investment: Exit Valuations Relative to Other Sectors

13 Project Finance (Debt + Private Equity): Investing in Bankable Technologies and Products Structure Execution *SPV, Special Purpose Vehicle No Great Lakes forestry companies involved in project finance!

14 Developing a Blue Ocean Investment Strategy: Scaling Value-Added Great Lakes Industries