February 17, 2012

Dow Jones/VentureWire

Coal-Conversion Co. GreatPoint Gathers $420M Series D

Chinese industrial conglomerate China Wanxiang Holdings has committed to a $1.25 billion partnership with coal-conversion company GreatPoint Energy Inc. that includes a $420 million Series D equity round, VentureWire has learned.
The equity financing represents the largest such investment by a private Chinese corporation into a venture-capital-funded U.S. company, according to industry tracker VentureSource.
Previously, GreatPoint Energy raised more than $150 million from investors including Advanced Technology Ventures, Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers, Khosla Ventures.
With its new financing from Wanxiang, GreatPoint Energy will build the first large-scale plant in China to convert coal into natural gas using a process called hydromethanation.
When the first phase of the project is complete in 2015, the plant should produce 30 billion cubic feet of natural gas, representing about 0.5% of China's projected energy needs, according to the companies.
The companies will establish a joint venture to build and operate the first plant, then build more like it in Asia and elsewhere.
Ray Lane, a managing partner with Kleiner Perkins, and a GreatPoint board member, says the deal illustrates a shift in the way clean-tech or new energy projects are commercialized, developed and financed.
"I don't think (GreatPoint's) technology would get built into a plant in the U.S. right now," Lane said. "Maybe 10 years ago, maybe 10 years from now, yes, but not now from lack of funding. The banks here wouldn't do it. It's more affordable to develop it in China and Russia…Our role will be to make the technology work at large scale there. If you make one work, I guarantee there will be thirty more in the world in the next decade, and banks will line up to fund them all."
Shanghai-based China Wanxiang Holdings, which produces about one-third of the world's auto parts, gains about 20% of its revenue from energy-related business today. Wanxiang also owns large swathes of land that are rich in coal but short on water in China's Western desert region.
GreatPoint Energy, which has 30 employees, has developed technology to convert coal into natural gas using a metal-based catalyst and water in a single-step process and proprietary, heat-balanced systems.
Chief Executive Andrew Perlman says his company's coal gasification plants will not require the vast quantities of water and chemicals used in hydrofracking, a popular commercial method to extract natural gas from shale, and they do not produce air pollution, solid and liquid waste associated with coal combustion power plants.
"It's not perfect, in that it is not a source that's renewable like solar or wind. But it's definitely clean tech," Perlman says.
GreatPoint's system captures carbon dioxide that might otherwise be released into the air. The company then sells the CO2 to the oil industry, which uses CO2 to get more oil, from existing, drilled wells.
Wanxiang's president, Dr. Gu Jun Yuan, said GreatPoint's systems use one-third of the water required by other coal gasification plants his team reviewed in a worldwide search--an important factor to consider when setting up a gas plant in the desert.
GreatPoint started in 2004, a time of excitement among venture funds regarding clean energy and renewables.
Unlike companies such as failed solar panel maker Solyndra LLC, GreatPoint survived the recession years after 2008 without government subsidies, during a time when available capital for start-ups was constrained.
By 2009, it was clear to GreatPoint executives and investors that the U.S. would not be its best first market, says the company's first venture investor, Bill Wiberg of Advanced Technology Ventures.
"It comes down to the economics of natural gas pricing in the U.S. and China," he said. "Wanxiang…[is] willing to step up in a significant way, financially, to help the company bring this tech to realization, because in China, the all-in cost of natural gas produced using GreatPoint [technology] will be substantially lower than if you were to build for the same capacity, using other gasification plant technology, or natural gas imports."
He added that GreatPoint's catalytic material makes the gasification process run at lower temperatures and pressure than in other systems. "It's a one-step process where others have two steps. That has an impact on capital cost and the environment, both."