HydrogenOne Capital Growth notes that its portfolio company Sunfire GmbH has announced a successful equity funding round, part of a wider funding package totalling more than €500m.
The investment adviser believes this is a significant financial milestone for Sunfire, with €215m raised in a Series E equity financing round, further complemented by a term loan of up to €100m provided by the European Investment Bank and access to about €200m of previously approved but undrawn grant funding. The transaction is subject to customary regulatory approvals and is expected to close in Q2 2024. This makes Sunfire one of the best capitalised electrolyser manufacturers in the industry.
Sunfire is an industry leader in alkaline and solid oxide electrolyser manufacture. Sunfire is expanding its alkaline electrolysis production capacity at Solingen and Limbach-Oberfrohna, Germany and developing advanced research facilities in Dresden. Sunfire’s pressurised alkaline and high-temperature solid oxide electrolysis technologies have the potential to become key enablers of the transition to renewable energy, offering a scalable and efficient means of producing green hydrogen. Accordingly, Sunfire targets installing several gigawatts of electrolysis equipment by 2030 in large-scale green hydrogen projects, securing a leading position in the fast-growing global electrolyser market.
Non-material change to the investment policy
HGEN originally (18/10/21) invested £20.2m in Sunfire, representing 19.6% of the company’s GAV at that time. It secured an agreement to make follow-on, anti-dilution, investments in Sunfire. At 31 December 2023, HydrogenOne’s valuation of its investment in Sunfire was £27.1m, representing 20.4% of GAV. Sunfire’s revenues have expanded ten-fold since the initial investment in 2021, and continue to anticipate a robust growth trajectory. The company has exercised its rights to make a follow-on investment of £0.3m in Sunfire as part this funding round, which mitigates the potential impact of dilution by leaving the company’s stake in Sunfire unchanged.
The company’s investment restrictions require that no single private hydrogen asset will account for more than 20% of the GAV (assessed at the time of investment). However, this would break this rule and so the board has resolved to make a non-material modification to the investment restrictions. Investments in Sunfire, measured at the time of investment, shall not exceed 21% of the company’s GAV. The investment policy, including restrictions relating to all other investments, shall remain unchanged. The company’s investment restrictions shall continue to require it to invest and manage its assets in a way which is consistent with its object of spreading risk.
[We have absolutely no problem with this – it would have been crazy not to protect HGEN’s exposure to Sunfire with such a relatively small investment. The long term outlook for HydrogenOne seems very attractive, it is just a shame that it cannot raise fresh equity capital to support further growth.]
HGEN : HydrogenOne’s Sunfire gets €0.5bn of new funding