The Canada Pension Plan Investment Board (CPP Investments) has invested $273.2 million into San Francisco-based energy-as-a-service provider (EaaS) Redaptive Inc. as part of its quest to foster decarbonization.
Founded in 2015, Redaptive provides enterprise customers with data-driven energy generation and efficiency programs. These include HVAC, LED lighting, solar, electric vehicle and other utility upgrades that can be deployed at large sites or across real estate portfolios. Redaptive also funds the upfront costs.
Existing investors, including California-based growth equity firm Linse Capital and commercial real estate and investment firm CBRE are also participating in the investment. Redaptive is expecting to announce a second close in early 2023.
“The Sustainable Energies team has spent significant time evaluating the market landscape for potential investment opportunities as part of our global distributed energy services strategy,” Bruce Hogg, managing director and head of sustainable energies at CPP Investments, told SustainableBiz in an email interview.
“As part of this strategy work, we identified high-growth platforms that could achieve our desire to scale investment in the sector, through which Redaptive was flagged as an attractive strategic target within the commercial and industrial energy efficiency sector. The Sustainable Energies team has spent significant time evaluating the market landscape and meeting management teams for potential investment opportunities.”
CPP Investments' Sustainable Energies group has net assets totalling approximately $30 billion as of the end of September, including investments in renewables, utilities and power generation. As of June 2022, Toronto-based CPP Investments had $523 billion in assets under management.
CPP Investments and Redaptive
CPP Investments first began contact with Redaptive management in the summer. From there, it underwent “due diligence” of the company’s existing operations, corporate structure, financial controls, governance and its future prospects.
Redaptive said it has increased bookings of its EaaS by more than 100 per cent year-over-year.
“The investment was sized to provide Redaptive funding to execute on its business plan, while providing room for existing investors to participate in the round,” Hogg said. “The US$200 million investment by CPP Investments provides us with meaningful exposure to the company at an attractive valuation.”
Hogg referred to the International Energy Agency sustainable development scenario, by which improvements in energy efficiency represent more than 40 per cent of the carbon emissions reduction necessary by 2040. According to Hogg, it is the single largest contributor to decarbonization.
"This funding gives Redaptive the capability to accelerate our growth and help more customers reach and exceed their energy efficiency and sustainability goals. In CPP Investments, we have found a partner who understands our mission and shares our passion for making carbon reduction an attainable goal for organizations around the world," Redaptive CEO Arvin Vohra said in a statement.
Redaptive had planned a $137-million IPO during 2022, but in November it informed the U.S. Securities Exchange Commission it would withdraw the offering.
EaaS market growth and CPP's clean energy interests
Redaptive helps customers in various industries including higher education; agriculture, food and beverage, technology and services, logistics, healthcare, retail, industrial and manufacturing.
The company lists examples of its work, such as helping Iron Mountain with a LED retrofit program across 174 sites and a HVAC retrofit program across 120 sites in Canada, the U.S. the U.K., Ireland and Puerto Rico. Redaptive says the retrofits will avoid 331,000 tonnes of carbon dioxide emissions over the service term — equivalent to avoiding 672,000 barrels of oil.
According to research from Guidehouse Insights Leaderboard, the EaaS market in North America is forecast to grow at a 30 per cent compound annual growth rate between 2022 and 2030; from approximately $6.5 billion to over $52 billion.
“CPP Investments is continuing to evaluate investments in the energy-as-a-service space, which are utilized across a number of sub-sectors of focus to enable the energy transition,” Hogg said. “Key themes include the decarbonization of energy systems behind-the-meter, the decentralization of generation technology and the digitalization of resources on the grid.”
In July, CPP Investments was one of several investors in a $150 million Series C funding round for Colorado-based plant protein start-up Meati Foods.
The same month, it committed approximately $307.1 million to U.K.-based Octopus Energy Group, which manages 3 GW in renewable energy projects and has developed Kraken, a scalable smart grid platform. In December 2021, CPP Investments had announced a strategic partnership with Octopus.
In October, it joined the $450 million Series E financing round of Boston-based Form Energy Inc., a developer of multi-day energy storage systems.