đż Friday's Climate Infra Brief: May in the Rear View
The apparent thesis is locked in: Data centers buy power at almost any price and the grid is the constraint. I believe it, you believe it, the strategics paying 14x for anything with a queue position believe it most. When everyone agrees, then it is not a thesis and starts feeling like the market is fully securitizing a demand story.
And the public market is opening its doors much earlier than it used to. Fervo priced its IPO on May 13 around $7.6B and opened near $10B, the largest clean-energy listing on record. Fervo booked $138K of revenue last year. Two weeks later, the Italian fast-reactor developer newcleo confirmed a Nasdaq SPAC merger at a $2.4B valuation; underground-reactor startup Deep Fission is running a Nasdaq roadshow targeting up to $1.7B. Newcleoâs first commercial reactor isnât penciled in until 2032. The market is now willing to fund things that are pre-revenue, sometimes pre-prototype.
When every MW clears at a price that assumes the boom, and every M&A process opens at a billion, if Iâm a mid-market infra or growth fund writing $30â200M checks, Iâm not winning that auction. Iâm bidding against utilities with a regulated cost of capital, credit shops with a lower one, and now a public market thatâll fund pre-revenue. So the real question for the month: when demand is no longer a secret, where is anything still underpriced?
Been exploring 3 things. First: own the bottleneck, not the MWs. The scarce thing was never power, itâs *deliverable* power. A wave of companies is attacking the âwhere can I actually get electronsâ problem from every side: EPCs, construction labor, the grid equipment supply chain. Texture raised $12.5M to instrument the rural co-op grid (42 million Americans on systems built for one-way power flow). DG Matrix raised $60M to build solid-state transformers. Heron Power launched partnership with LG Energy Vertech. Youâll build your own list.
Two: Manufacture the credit, own the spread. The deal I found most interesting this month wasnât exactly a deal. Eos and Cerberus launched Frontier Power USA for long duration zinc-based storage, Cerberus anchoring $100M. But the equity isnât the story. The story is the ~$1.5B, 15-year, non-cancellable technology-performance insurance framework from Ariel Green , backed by A+/AA- Lloydâs paper, that lets the project debt price at investment grade, turning squishy technology risk into rateable credit risk. Love the structure.
And thatâs not the only way to manufacture credit. On June 2, Voltus and Google signed a first-of-its-kind âBring Your Own Capacityâ deal â 100 MW of aggregated distributed resources in PJM, three years, with Google funding the VPP so the capacity shows up as clean, dispatchable supply. Same idea as the Lloydâs wrap: somebody steps in to swallow the messy, un-bankable risk so the financier gets investment-grade paper. Whoever owns the credit-enhancement template can earn the spread of an asset class.
Three: Buy the brownfield, fix the back office, repower. A decade of DG got built for the tax-equity flip, not for 30 years of operation. This is merely a hypothesis: the returns are dragged because nobodyâs minding the store. Raptor Maps clocks average site underperformance at 5.8%+ and thatâs just the production. The drag also sits at back office burdens for DG assets: unbilled community-solar credits, subscriber churn, RECs left on the table, claims never filed. So roll up 20+ sub-5MW sites, automate the back office onto one platform, enhance cashflows. Then repower where it pencils, an inverter-and-module swap runs 40â70% of a new build, lifts yield 10â30%, and keeps the interconnection. With new queue positions 4-7 years out, what youâre really buying is a live grid connection?
Will report back on what I find along those threads. It does feel like a market that buys power at any price isnât the same as a market thatâs easy to make money in, but I do see the middle as the one place left to be early on something other than demand.