Stem, the decade-old behind-the-meter battery startup that was searching for a purchaser earlier this yr to bolster its development ambitions, is now launching a plan to go public through a special-purpose acquisition company (SPAC) reverse merger.
Friday’s announcement names Star Peak Power Transition Corp. because the SPAC that may allow Stem’s capital wants. The transaction is predicted to lift $608 million in gross proceeds, together with Star Peak’s $383 million of money held in belief and $225 million in a “non-public funding in public fairness” dedication from funds and accounts managed by BlackRock, Van Eck Associates Company, Adage Capital Administration, Electron Capital Companions and Senator Funding Group.
If the transaction closes within the first quarter of 2021 as anticipated, it’ll create an organization with an fairness worth of about $1.35 billion, listed on the New York Inventory Alternate beneath the ticker image STEM. That may enable the corporate to “considerably speed up” its development in its present markets of the U.S., Japan and Canada, in addition to “allow growth to a number of further international markets,” CEO John Carrington mentioned in a Friday assertion.
Stem is among the final pure-play power storage startups and has raised about $210 million in fairness funding over time, culminating in a 2018 Sequence D for $106 million. It’s additionally raised roughly $355 million in venture financing.
By going public, it’s hoping to spice up its capital accessible to fund a pipeline of tasks that has grown from $1.2 billion in late 2019 to about $2.7 billion within the third quarter of 2020, based on its Friday investor presentation.
The SPAC mannequin has turn into an enormously well-liked means for inexperienced expertise startups to entry public markets to finance development in fast-growing markets, led by a bunch of electrical automobile startups together with Nikola Motor and Fisker Automotive, EV charging suppliers ChargePoint and Nuvve, and battery producer Eos Power Storage.
Stem’s enterprise of offering battery programs and software program and companies to retailer and shift renewable power, present backup energy and form constructing masses to optimize utility payments is tapping right into a market rising at a report tempo within the U.S. and overseas. U.S. storage installations broke one more report within the third quarter of 2020 with 476 megawatts put in, based on the newest Power Storage Monitor from Wooden Mackenzie and the Power Storage Affiliation.
However because the market grows, so does the competitors amongst suppliers of battery programs, software program platforms to handle their efficiency and financing choices to cut back the upfront prices for patrons seeking to set up them. Past well-known battery suppliers like Tesla and Fluence, deep-pocketed European power giants Enel, Engie, Shell and Complete are backing the behind-the-meter battery corporations they’ve acquired. Partnerships like these between Siemens and Macquarie and Schneider Electrical and Huck Capital are funneling financing to business and industrial clients searching for low-cost distributed power.
In that gentle, “it was fairly apparent that Stem needed to go public in a method or one other,” Elta Kolo, content material lead for Wooden Mackenzie’s Grid Edge crew, mentioned in a Friday interview. “Something that includes and manufacturing makes it arduous to get the capital they want from conventional enterprise capital.”
Stem’s position in opening up the behind-the-meter battery market
Stem was based in 2009 as energy electronics startup Powergetics and rebranded as Stem in 2012, changing into one of many first pure-play suppliers of batteries to assist constructing house owners and operators shave peak-demand utilization and reduce on their utility payments.
It gained early clients in California, aided by excessive demand prices for business buildings and a pleasant regulatory atmosphere, together with the state’s Self-Era Incentive Program for behind-the-meter batteries. Stem has gained hefty incentives from this system, but in addition noticed its participation push it into controversy in 2015 and 2016, when it returned a number of the funds it obtained after accusations of gaming the lottery system for securing them.
Stem additionally scored a coup in 2013 with an 85-megawatt contract with Southern California Edison as a part of the utility’s first large-scale procurement of distributed power sources to assist substitute grid capability misplaced with the closure of the San Onofre nuclear energy plant. It has additionally taken over administration of the battery portfolio developed by one other SCE contract winner, AMS (previously Superior Microgrid Options), which was not too long ago acquired by power storage integration heavyweight Fluence.
AMS’ acquisition has left Stem as one of many few standalone, pure-play power storage startups that’s remained unbiased over the previous decade. New York-based rival Inexperienced Cost Community was acquired by Engie in 2016, The subsequent yr, Demand Power was purchased by Enel and German-based Younicos was acquired by Aggreko.
Stem has additionally been shifting from its early go-to-market mannequin of proudly owning the batteries, software program, companies and contracts for these behind-the-meter tasks, as competitors has grown and market alternatives exterior California have lagged behind expectation.
As an alternative, it’s refocused on offering its software program platform, dubbed Athena, to clients and venture builders seeking to optimize the combo of batteries and different behind-the-meter sources in opposition to a posh set of power invoice cost-cutting and power market revenue-generation alternatives.
Stem revealed final yr that it laid off lower than 10 % of its workforce because it made the shift to a software-centric strategy working with venture companions to realize new clients. It additionally confirmed this yr that it had been searching for a purchaser for the corporate.
However WoodMac’s Kolo warned that this capital-light strategy nonetheless must deal with the necessity for financing to bolster the enterprise case for commercial-industrial behind-the-meter battery installations. “Though they mentioned they’re going to a capital-light strategy, it is advisable to get these property within the floor — and C&I clients are a really robust market.”
Whereas utility-scale storage and residential power storage have been rising quickly, commercial-scale behind-the-meter storage has been comparatively flat, with extra cost-conscious clients and a checkered set of utility and regulatory situations making it difficult for these sorts of tasks pencil out economically. Stem launched its first front-of-meter, distribution-grid-connected tasks final yr, searching for alternatives in a comparatively bigger market.
Likewise, pure-play software program approaches to the behind-the-meter power storage choices are contending in an more and more consolidated panorama, Kolo mentioned. On the battery administration software program entrance, Greensmith was acquired by Wärtsilä in 2017, and Geli was acquired by Hanwha Q Cells this summer season. Equally, digital energy plant software program and companies supplier Enbala was acquired by Generac in October.
Behind-the-meter batteries are more and more being put in place not solely to mitigate demand prices but in addition to retailer and shift distributed photo voltaic to extend its worth and supply emergency backup energy in microgrid formations, Kolo famous. “The important thing to success within the standardization of merchandise is the way you scale, and the way you scale quick.”