The ability to drive innovation against increasing threats of severe weather and other factors that are pounding the energy grid will determine the success of investors in the utilities sector, Steven Kantowitz, partner at Energy Impact Partners (EIP) told PE Hub.
EIP, a New York-based private equity firm, on Monday teamed up with RS Technologies, a portfolio company of family office Werklund Growth Fund, for an equity investment of C$150 million ($109 million) to accelerate the expansion of RS Technologies.
Werklund Family Office is based in Calgary, Alberta. It manages the philanthropic, financial and business affairs of David Werklund and the Werklund family.
RS designs, engineers and manufactures composite utility poles and other products for the electric transmission and distribution sectors and the communications sector. Its products are distributed across North America, Europe and the Caribbean, among other regions.
“We were fortunate that they chose us because they believe that we bring a lot of non-financial benefits to this business,” Kantowitz said. “The ability to help drive innovation in this space is an important part of what we are doing here.”
Made from composite or fiber reinforced polymer materials, RS products aim to help add resilience to the grid against severe weather occurrences, such as hurricanes, fires, ice storms and other threats. These include woodpeckers, which devour wooden poles.
As more funding is channeled towards reinforcing the aging grid in the US and other countries, many investors are picking up opportunities in this sector. They say it has proven to be relatively resilient against the macro-economic environment of high inflation and high interest rates.
Even though many players are jumping into the sector, Kantowitz said, EIP’s “secret sauce” is to spend time looking for areas where it can unlock disproportionate value.
“We spend a lot of time identifying the sub-themes within the broader clean energy landscape where we think the EIP platform can add disproportionate value,” he said.
The utilities sector is also supported by many renewable energy sources that are coming online, Kantowitz said. New infrastructure is being built to support renewables as well as electric charging systems for electric vehicles.
He said stakeholders are “starting to see the real-world impact of resiliency, reliability and real infrastructure solutions” that help enable the growth of renewables or “the distributed nature of how energy is being consumed and supplied today,” all of which supports EIP’s investing thesis.
Kantowitz said EIP will focus on enhancing resiliency and reliability, adopting new engineering standards, optimizing a sales strategy, as well as making composite “a much bigger part of the pie” of grid hardening.
“Fortunately, this business has more than enough organic growth ahead,” Kantowitz said. He was also bullish on M&A prospects.