Movers & shakers:
Kevin Skillern
The Deal Magazine
November 11, 2020
By Claire Poole
New Energy World Network: GE Capital, NRG Energy, ConocoPhillips partner to invest in emerging technologies
Kevin Skillern, managing director of venture capital at General Electric Co.'s investment arm GE Energy Financial Services, is like a rock star in the world of clean-energy technology. At a recent conference focused on the sector in Austin, Texas, entrepreneurs lined up to meet him after his presentation, hoping to pitch their startup ideas or just shake his hand. One young woman who was starting an offshore energy generation company approached him rather nervously, but he patiently questioned her technology and pointed out its strengths and weaknesses, showing off his training. (Skillern holds a B.S. in electrical engineering from the University of Texas at Austin as well as an M.B.A. from Stanford University.) "If it works, you have an interesting proposition," he told her.
Skillern, 40, is used to looking at propositions. GE Energy Financial Services' investments include energy management providers Grid Net Inc. and Tendril Inc.; wind power equipment makers Southwest Windpower Inc. and Danotek Motion Technologies (which also has funding from Vinod Khosla's Khosla Ventures); solar power maker Soliant Energy Inc.; and compact electron beam developer Advanced Electron Beams Inc. Last month, it re-upped its investment in SolarEdge Technologies Inc., an Israeli company that has developed solar power-harvesting and photovoltaic-monitoring solutions.
Like others, GE has made some challenging investments, including Advent Solar Inc., whose plans to raise money in the capital markets to acquire solar cell and module manufacturing equipment were dashed by the financial crisis of September 2008, which forced the company to lay off most of its employees and try to license its technology to others. Advent's board and shareholders ended up selling Advent in November 2009 to Applied Materials Inc. for an undisclosed price, which some observers say returned just pennies on the dollar for its investors.
GE also helped out private equity-backed wind farm developer Noble Environmental Power, which was forced to cancel its $375 million initial public offering after the financial crisis and last year restructured $306 million of its debt. GE put $200 million into three of the company's wind parks in April 2009 after a $100 million investment in July 2008.
While it won't disclose returns, GE appears to have had good payoffs from the IPOs of lithium-ion battery maker A123 Systems Inc., biocatalyst developer Codexis Inc., efficient-lighting designer Orion Energy Systems Inc. and gear transmission equipment maker China High Speed Transmission Equipment Group Co. Ltd. And it may see more coming, with drilling additive maker Glori Energy Inc. filing for an initial public offering on Oct. 5.
Like venture capital firms, GE often invests with others. But this past January it signed a rather unusual joint venture with oil giant ConocoPhillips Co. and power generator NRG Energy Inc. called Energy Technology Ventures, which plans to invest $300 million in roughly 30 energy technology companies over the next four years. Its first investments have been in solar developer Alta Devices Inc., clean-coal developer Ciris Energy Inc. and nonfood biofuels developer CoolPlanetBioFuels Inc.
Skillern, who grew up in Houston, spent more than 10 years working in the oil industry, including eight for consulting firm Booz Allen Hamilton Inc., before joining General Electric in 2004. He spoke with The Deal magazine's Claire Poole from his office in San Francisco about the JV and what's going on in the clean-energy sector.
The Deal magazine: Tell me about Energy Technology Ventures. What was the idea there?
Kevin Skillern: The core realization was that three partners working together are worth more than the sum of the parts. We have a lot of experience selling equipment around the world and investing in energy assets, and we had a lot of relationships in the industry. We wanted complementary partners who could bring expertise to the table. What entrepreneurs wanted from GE was more than money, but relationships and the credibility of our organization.
When we looked at how we could bring more of that to the table, we thought of which partners could we bring in, including a large oil company and a large power company. They have expertise that complements us, and they're not competitively threatening. From portfolio companies' perspective, they get more money and get more opportunities to collaborate. In the end, we're trying to create the premier investment partner if you're a clean-energy startup.
How's it going, what have you invested in so far, and what are you looking at investing in now?
We've made 12 investments, not all of them public. At the core of what we're looking for is brilliant innovations and brilliant innovators. At the end of the day, we want things that matter at scale, that solve a large problem. You want brilliant innovations that solve real problems, and you want a brilliant team that can go out and do it and execute it. And it can be as broad as you can be. There's not a narrow focus. We touch everything in the energy space in terms of technologies and markets.
How has your expertise helped your portfolio companies?
CoolPlanetBioFuels has a very compelling technology, an economic proposal in the biofuels segment. They make gasoline from nonfood biomass feedstocks, and they make it very economically. In that case, GE had a lot of technology in process, and Conoco understands the product and is an important partner.
Another of the companies we backed is Ioxus, which is commercializing ultracapacitors that are used in industrial applications. Think of a battery: It doesn't have a lot of energy, it charges and recharges. Ultracapacitors are a million times that. They're used in hybrid vehicles and locomotives. In that case, GE makes a lot of products that use capacitors. If Ioxus goes down the path it is now on and makes the best product available in the market, that's important to us. We will actively figure out how to use their products at GE. We've found dozens of opportunities in the GE family.
So how does that investment help ConocoPhillips and NRG?
They [the investments] don't have to be supremely suited to each of the partners. It works as a partnership: Some will be interesting to some and not to others. The whole strategy is, we're going to invest in companies with world-class products and help them build them.
What have been some of the real winners in GE's portfolio?
Outside the partnership, GE's invested in 40 energy technology companies. There aren't a lot of winners in this industry. It's still pretty early days. There've been companies that have had IPOs, some that haven't done so well. Well, you say, what's the story? You're seeing a separation of the pack, the best from the worst. How do you think about success? We're trying to earn attractive returns on our investments, but it's the opportunities that GE benefits from. We want to do great on both. But we think of ourselves first and foremost as financial investors.
What kinds of returns did you earn on the initial public offerings?
We never talk about returns.
Do you have a target return you are looking to achieve?
Yes, we do, but we don't want to talk about it. We want to be in the top percentile of the funds. That's what we intend to do and aspire to do.
What is the dollar range of your energy investments?
At the small end, a few million dollars; at the higher end, $10 million to $20 million. But that's generally across cycles.
What's hot in energy right now?
We see a lot of things we like. We've made a lot of investments in smartgrid, which has been very active. And despite the fallout from Solyndra, we're relatively bullish in solar. A couple of weeks ago we invested in a solar plant in Colorado, and we have a handful of investments in the solar industry. We think it's very attractive given where the industry is going. We're pretty bullish. Efficiency is also an area that's attractive to us.
So what's not hot? Biofuels? Fuel cells?
We don't think of it as this massive chromatic. When we launched the platform with NRG and Conoco, we have this engine to see all these great innovations and pick out the innovations. It's about having the coverage of the market. I'm superhigh on CoolPlanetBioFuels. There are some fuel cells that aren't interesting. In the stock market, this sector has been beaten down as natural gas prices have gone down. In general, at the highest level, there's attractive growth occurring in energy technology, and it isn't limited to one small slice. It's happening across all sectors. The reality is, even with electric vehicles, there are tremendous electric initiatives. I see opportunities across the board. It just depends on how fast will it play out.
What have been GE's more challenging investments and why?
GE Energy Financial Services has had to write down its investments in a few companies, and the experiences of them demonstrate the difficulties with marketing and scaling a new technology in the energy industry. The companies often did not execute their development plans within reasonable time frames to bring their technologies to commercial maturity fast enough and/or were not sufficiently adept at handling adversity. This is precisely why our goal is not just to provide investments, but also to connect startups with GE's various businesses, to facilitate high-impact technical and commercial collaborations, through which we bring "more than money" to help companies succeed.
What has the energy industry learned from Solyndra's troubles?
What venture capitalists know, and what many more others should now understand because of Solyndra, is that there will be winners and losers in VC investing. One of the key reasons for Solyndra's downfall was the significant price reductions that have occurred due to competition in the solar industry, which is in fact a very positive development because it is exactly what is required for the solar industry to really become important in the energy industry and is driving significant demand growth globally.
Despite setbacks, it is important that we continue to invest in new technologies, to continue to advance the energy industry. Of course, it is important to pick more winners than losers, which is why when we invest in any company, we bring the technological and industrial expertise of GE to help us assess and invest in top technologies and strong management teams.
