EnergyPro Asset Management Ltd, EPAM, a UK company focused on accelerating the energy transition through improved energy efficiency, is to raise £2m ($2,53 million) of growth funding to bring UK companies and investment to opportunities in the $12 billion Indian energy efficiency market.
EPAM will employ the equity raised to advance its strategy of identifying and executing transactions that simultaneously:
· Provide technology and know-how required in India to help the country’s drive towards greater energy efficiency;
· Generate opportunities for UK-based companies working in the energy transition seeking to enter the Indian market;
· Create measurable economic and social impact;
· Develop further revenue and investment opportunities for EPAM.
On 7 May 2020, EnergyPro Assets Ltd (‘EPAL’), EPAM’s joint venture with the Indian Government‘s energy service company, Energy Efficiency Services Ltd (‘EESL’), was named the fastest-growing Indian owned company in the UK in research by Grant Thornton, the international accountancy and consulting firm, in conjunction with the Confederation of Indian Industry. EESL itself is backed by the Indian Ministry of Power and four state energy companies.
EPAM provides EPAL with advisory services ranging from the identification of opportunities to execution of transactions and post-transaction management. EPAL has executed over £60m of investments including the first overseas acquisition by an entity under the Indian Ministry of Power. EPAM’s relationship with EESL has facilitated several other opportunities for EPAM in India, and provides the Company with unparalleled insight into key policy decisions and future technology requirements.
While virtually all Indian households now have access to the electricity grid, the needs of economic development coupled with a policy goal of meeting (or even exceeding) its Paris Accord commitments on Climate Change, mean considerable further investment is required in the Indian energy sector. The key drivers of the market are:
· Meeting the energy demands of an economy expected to be the world’s second largest by 2050;
· Increasing the share of non-fossil fuels to 40% of the total electricity generation capacity;
· Reducing the emission intensity of the economy by between 33% and 35% by 2030 from the 2005 level.
The Indian government is firmly committed to improving energy efficiency and EESL has implemented a number of world leading programmes including UJALA which has delivered over 360 million LED lamps on a commercial model. The World Bank estimates energy efficiency in India to be a USD $12 billion opportunity.
EPAM is dedicated to commercializing and deploying energy efficiency technologies in India and the UK in support of the UN’s Sustainable Development Goals, particularly the requirements to double the global rate of improvement in energy efficiency by 2030, promote access to research, technology and investment into clean energy, and expand and upgrade energy services for developing countries.
The Company has built strong relationships with key stakeholders in the Indian energy sector and, given the favourable market dynamics, there is a significant opportunity for the Company to leverage its strength in deploying new clean technologies to support the high growth of the Indian market and other territories. EPAM management believe the Company can facilitate up to £500m of investment over the next five years, generating a range of revenue opportunities, including advisory services, management fees and co-investment.
EPAM has a current pipeline of about 20 live opportunities, five of which are well progressed. Further, the Company has signed a MoU with two clients including a UK provider of highly efficient process heat technology wishing to enter the Indian market, a market opportunity EPAM estimates to be worth some $50m annually.
To capitalize on these opportunities, EPAM is seeking funding of £2m to build out the EPAM team and associated infrastructure to enable execution of the pipeline it has generated, and build further links within the Indian market. EPAM will also continue to hold the existing investment in the joint venture until a contracted liquidity event occurs in March 2023, offering the opportunity for investors to see a strong return within the near term, driven by existing asset value.
In line with India’s wider economy, its energy market is going through a transition requiring significant investment in new technologies. Per capita energy consumption in India is relatively low (compared to similarly developed economies), and ensuring comprehensive and stable supply is a stated aim of the Indian government. As part of the Paris Accord, India has committed to reduce carbon emission intensity by 33-35% from 2005 levels by 2030. As part of efforts to reach the target, it is operating a number of world leading energy efficiency programmes, and is targeting a 30% penetration of electric vehicles by 2030.
The joint venture with EESL demonstrates the power of UK-India collaboration in the energy transition. EPAM has a unique proposition to support this and, in its joint venture, has demonstrated the ability to successfully combine UK and Indian expertise.
Dr. Steven Fawkes, Chair of EPAM, said: “We have been inspired by India’s commitment to scaling-up energy efficiency, and the work of EESL which as well as contributing to solving India’s energy challenges has a global impact. Our joint venture achieving the number one spot in the India meets Britain tracker of fastest-growing companies, is a testament to the progress we’ve achieved together with EESL, but it’s a step along the way of a much bigger journey”.
“India’s fast-growing economy is rich in human initiative, with strong historic links to the UK. We have witnessed first-hand the commitment, throughout government and industry, to de-carbonizing the economy and building a sustainable future for India’s 1.4 billion people. We have also identified a major opportunity for UK companies to participate in the growth of the Indian low-carbon sector.”
Management has spent considerable time cultivating a network of contacts, both in the Indian market to understand its needs. and in the UK (and beyond), with firms with the solutions to meet these needs. EPAM is a member of the UK India Business Council and has regular contact with the Alliance for an Energy Efficient Economy. Its relationship with its JV partner, EESL, provides unique access to key policy decisions, market needs and emerging Indian technologies and companies. The joint venture represented the first of its kind by EPAM’s co-investor, Energy Efficiency Services Ltd (the largest publicly owned energy services company in the world) and demonstrates their confidence in the EPAM team to deliver this and future opportunities.
EPAM has received formal notification from HMRC that its EIS advance assurance application has been approved.
EPAM’s model involves leveraging its market expertise to deliver three key income streams: advisory, transaction fees and on-going management fees. In addition, transactions may give rise to further co-investment/JV opportunities. These could be acquired by either EPAM, or separately (by its financing partner).
All opportunities are screened according to how they fit into known market needs in India, regulatory and policy landscape, technological maturity, team, and potential impact. As a result, EPAM has a pipeline of some 20 opportunities and is actively working with a number of these companies.
These include a company that has, in partnership with UK gas network operators, developed and proven a new design of process heater for use in the gas supply and chemical industries. Its average thermal efficiency (90%) is considerably higher than (46%) for a traditional technology in this market. They also include the manufacturer of a patented electric motor and control system that radically improves engine efficiency, with potential applications in vehicle e-superchargers, air compressors and fuel cell compressors.
EPAM is also focusing on several further companies developing technologies with applications in the Indian energy market, including a developer of EV charging infrastructure, a developer of grid-scale energy storage systems, and a provider of AI based building control systems that enable grid integration.
Launched in 2009, EESL is the world’s largest public energy services company (ESCO), and is a JV set up by the Indian Ministry of Power and four of the largest Indian Public Service Utilities (with a combined market capitalization of $30 billion): NTPC Limited, Power Finance Corporation, Rural Electrification Corporation and Powergrid Corporation. EESL was established to create and sustain markets for energy efficiency in India, and is the leading agency for implementing programmes on energy efficiency. Its approach is to leverage large-scale procurement and provide financed solutions in the sector.
Given the profile of EESL in the Indian energy market, EPAM considers its strategic relationship with the company to be highly beneficial both in understanding policy and technology needs and in facilitating new commercial opportunities for EPAM.
The EPAM senior management team are currently in place and bring a wealth of complementary experience across the energy sector. The key individuals are:
Dr. Steven Fawkes (Chair)
For over 30 years Steve has had a significant impact on energy efficiency in the UK and beyond through his thought leadership and the large efficiency programmes he has implemented for corporates, the public sector and governments around the world. He founded EnergyPro in 2012 and his work has been recognised by awards from RWE, the Energy Institute, the American Council for an Energy Efficient Economy and the India Business Group. Steve is on the Board of EPAL.
Stephen Packer (CFO)
Stephen has 25 years’ commercial finance experience in telecommunications, professional services and energy services. His early career saw him in divisional level finance roles within FTSE250 companies before moving into the private equity sector. He provides M&A support as well as operational finance support to EnergyPro clients and spin-offs to facilitate delivery.
Mike Tivey (Non-Executive Director)
Mike has 25 years’ experience in the property, energy services and engineering, construction and PFI sectors. His career has spanned the start-up business through to large corporates having worked at board level for a FTSE250 outsourcing and energy services company. Mike has experienced the fulfilment of investing, developing, and ultimately selling a business he co-founded and now likes to help others achieve that.
EPAM is in the process of assembling an advisory board of industry professionals with a wealth of market knowledge and network contacts. Initial discussions have commenced with five individuals who are India- or UK-based experts in the energy sector, with backgrounds in either the consultancy, government or legal sectors.