“The pace of scaling asset-heavy solutions to the sustainability transition has never been faster” - P Capital joins Cleantech for Europe
September 16, 2024
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P Capital is a provider of private credit solutions to European entrepreneur- and family-owned companies, including developers of sustainable infrastructure. Since its inception, the company has invested over five billion euros into more than 170 companies across a variety of industries.
P Capital invests through three strategies:
Now, P Capital joins the Cleantech for Europe’s investor coalition.
We join CEO Daniel Sachs and Director of Sustainability Anna Skarborg to discuss their work, the state of the European cleantech space, and how to fund the scaleup of innovative cleantech solutions.
How do you identify the most promising sectors or companies for P Capital's investments? What is your approach to balancing risk and reward?
Daniel: We have a twenty-year legacy of on-the-ground deal sourcing and networking, meaning the majority of our investments are the result of our network. We take pride in our sector-agnostic approach where we remain active in our core verticals – including renewables, health care, food, leisure, passenger transportation, communication and financial services – but observe thematic trends and shifting landscapes with a contrarian mindset.
Balancing risk and reward comes through extensive due diligence, bespoke structuring and ensuring there is strong alignment of interest between P Capital and the companies we fund. Relationships have always been central to our business. The more emphasis there is on partnerships, the greater the transparency and insight.
What current trends in the private debt and equity markets do you think are most influential, and how is P Capital positioning itself in response to these trends?
Daniel: For the private debt market, the overarching trend is the continued retreat and entrenchment by banks which allows for new opportunities and increased market size. This is particularly true for companies owned by entrepreneurs and families.
With uncertainty and turmoil in the market and the subsequently higher cost of equity, there is a growing need for flexibility and partnership, which creates heightened awareness of alternative financing providers.
The overwhelming majority (85%) of private debt in Europe is currently used to fund buy-outs in the secondary market, while this sort of financing is underutilized in the large primary capital needs, like the sustainability transition. We are working to change that.
Anna: Non-sponsored private credit is particularly well-placed for business activity driven by the sustainability transition. We’re seeing lots of activity from cleantech companies with de-risked technologies that are ready to scale.
The strong network of relationships we’ve built at P Capital is our core deal sourcing gateway and our strategy moving forward. We continuously make sure we are a true strategic financial partner by offering access to a valuable network, working with the companies we fund to encourage and support their constant evolution, and being a constructive partner during uncertain times.
Equity solutions are noted to be best suited for businesses with large market potential, which is not the case for most cleantech ventures. For cleantech ventures who are operating in niche or smaller markets, how can they effectively leverage limited capital resources without compromising their growth potential?
Daniel: I wouldn’t necessarily agree that equity is always best for companies with large market potential. It very much depends on the nature of the opportunity. Non-dilutive capital can be a large piece of the puzzle for many sorts of growth opportunities, allowing the right ventures to access capital to scale without reducing shareholder incentives.
Bespoke debt financing will play an increasingly important role in the sustainability transition in the future. Many cleantech ventures typically have asset heavy business models and debt is a correspondingly essential part of the equation. Simultaneously, many cleantech ventures are not yet in a state of technological readiness or maturity to secure traditional bank or more institutional financing solutions. This pushes the relevance of flexible alternative debt to the forefront of the sustainability transition’s needed solutions. Such financing and strategic partnerships – like P Capital’s vast network and ability to connect entrepreneurs with relevant partners – unlock scale.
Can you share any case studies or examples of successful co-investments in the cleantech sector that P Capital has been involved in?
Anna: P Capital has completed multiple investments into solar power (Better Energy, UrbanVolt, Golden Peaks Capital), wind power (Ilmatar), advanced recycling (Limerick Polymers Production), fossil fuel alternatives (Biokraft) and more sustainable food production (Hima, Kingfish Company).
With Q1 2024 EU cleantech debt investment reaching a record €16.7 billion, significantly surpassing previous averages, is Europe’s cleantech transition increasingly dependent on debt financing? What implications does this trend have for the sustainability and stability of the cleantech transition?
Anna: The pace of scaling asset-heavy solutions to the sustainability transition has never been faster. Given the high capital requirements of the funding structures in this space, debt investment needs have grown in parallel and will continue to do so. As business models in the space continue to mature and become de-risked, debt is likely to contribute an increasing share of this overall capital need. We see debt needs continuing to increase as a function of the overall capital required of the sustainability transition, but also increasing in relative share of the total capital need.
Thank you, Anna and Daniel, for sharing your insights with us! We look forward to working with you and the P Capital team.
