- Local production of electric batteries on top of investors' agendas
- Financial rounds on green projects bring together state aid, VCs, sponsors and corporates
The French government’s push to strengthen energy supply chains within the EU is starting to generate more investment opportunities and deals for corporates and funds, infra experts told Mergermarket.
“The COVID wake-up call, and current increased geopolitical tensions, make investments to strengthen local energy supply chains even more crucial,” Societé Generale’s Global Head of Mining, Metals and Industries Finance Lenaïg Trenaux said.
Electric-vehicle battery cell manufacturer Verkor's recent EUR 2bn mega-round is the perfect example of an infra project designed to reduce carbon dioxide (CO2) emissions attracting public and private investment, experts said. And it can be replicated elsewhere, they said.
The proceeds will be used to build a gigafactory in Dunkirk (Dunkerque) in the North of France to produce locally lithium-ion batteries for European manufacturers of electric vehicles (EVs).
This project saw major investments from private investors (around EUR 850m), including infra funds like EQT and Macquarie, big corporates like Renault [EPA:RNO] and CMA CGM as well as substantial French state aid (EUR 659m), while the European Investment Bank (EIB) provided EUR 600m in debt.
Verkor has a score of 15 out of 100 at the time of publication, according to Mergermarket's Likely to Exit (LTE) predictive algorithm, indicating a low probability of an exit in the near future.*
The European Commission (EC) cleared the French state aid for Verkor at the end of October, a clear signal to the market that the time has come for projects like this.
The mega-round is occurring in what was already the record year for deals in the French EVs industry and hydrogen space with so far a total value of EUR 1bn across 10 deals (Verkor deal excluded), according to Mergermarket proprietary data. The second record vintage was last year where 14 deals were completed for a total value of EUR 671.38m, Mergermarket data show.
Projects like Verkor are meant to unlock synergies from the various stakeholders, an infra lawyer and a sector banker said. Public authorities help to get faster construction permits, along with a streamlined regulatory process, while investors strive to keep the projects profitable, they said.
Having a varied range of investors also allows project promoters to chase sustainability and profitability simultaneously, Lenaïg Trenaux said, adding that stakeholders need to track everything from the extraction of raw materials to the energy used in the production process and recycling issues.
Projects like Verkor are best understood as France and the EU's response to the US Inflation Reduction Act (IRA), which provides USD 369bn (EUR 350bn) in subsidies for green industrial projects, experts said.
Meanwhile, not far from Dunkirk in Douai, another gigafactory project to produce electric batteries will be unveiled next year. This project, led by battery manufacturer Automotive Energy Supply Corporation (AESC), a unit of China’s Envision Group, was first announced in 2021 and is set to raise EUR 1.1bn from investors including Renault, state-controlled investment bank Caisse des Dépôts and the EIB. Last month, the European Commission confirmed the EIB will invest EUR 450m in this project.
Another project to clean up the production of steel has also attracted a lot of attention. GravitHy, a company producing sustainable iron and steel, was created last year in Fos-sur-Mer in the South of France. It pledged to raise EUR 2.2bn to buil up its first factory using carbon hydrogen to produce sustainable iron and steel.
French energy giant Engie [EPA:ENGI] and UK-based metallurgical plant solutions specialists Primetals Technologies are among the companies set to invest alongside the EC, the French state and Netherlands-based infra fund EIT InnoEnergy.
With France's government betting on a European response to the IRA and EC support for state aid, expect more giant projects to emerge in 2024.
*Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.