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Startup doing ‘industrial photosynthesis’ raises $645 million in one of the sector’s biggest investments ever

Cutting emissions from aircraft is one of the toughest challenges in the energy transition. A small group of startups say they have an answer, and investors are racing to give them cash.

The latest is a company called Twelve, which raised $645 million from backers including the private-equity firm TPG and Alaska Airlines in one of the largest investments ever for clean jet fuel.

The investment values Twelve at more than $1 billion. It is one of several startups using a chemical process that mimics photosynthesis to produce jet fuel with far lower emissions than fossil fuels. They are raising significant amounts of cash in the midst of a rush of funding deals.

Last week, Brookfield Asset Management said it would invest more than $200 million into a company called Infinium that has a generally similar approach. Brookfield might put in up to $850 million more. A few years ago, Prometheus Fuels, a startup with a deal to sell fuel to American Airlines that has a comparable process, hit a $1 billion valuation. A competitor called HIF Global is also a unicorn after raking in investment.

Investors are shifting their bets in clean fuels to companies that use chemistry to turn carbon dioxide, water and renewable electricity into energy. Known as eFuels, synthetic fuels or power to liquids technologies, they offer the tantalizing possibility of producing limitless amounts if given enough cheap renewable power.

“This actually has a shot at eventually replacing fossil fuels,” said Zachary Bogue, co-managing partner at the venture-capital firm DCVC. It was one of Twelve’s first investors and is putting money in again in the new fundraising.

Such approaches are seen as the most practical long-term fuel source. Airlines are currently using some biofuels, which are made from fats, oils and greases; trash; or plants. The supply of these will likely be constrained eventually by the availability of feedstock material and land.

Many clean fuels projects are facing high costs and failures, contributing to Air New Zealand’s recent shelving of a 2030 emissions target.

The wave of investment into eFuels backs a trend in the energy transition under which companies with cash and the backing of big companies emerge as potential winners.

“We’re trying to move as quickly as we can to bring supply to the market,” Nicholas Flanders, Twelve’s chief executive officer, said in an interview. Alaska Airlines and a group of European carriers including British Airways have agreed to buy Twelve’s fuel, which can have emissions up to 90% lower than conventional jet fuel.

Twelve’s first plant, located in Moses Lake, Wash., will make about 50,000 gallons annually when it starts operating next year. Production of the new fuel won’t make a dent in the 100 billion gallon a year jet-fuel market for at least another decade, but capacity is growing across the industry.

The list of industry unicorns is short. Twelve joins Prometheus, HIF and a rival startup called LanzaJet, which is backed by Southwest Airlines and makes fuel from ethanol.

TPG committed $400 million to future Twelve plants and invested in a roughly $200 million fundraising for the company as a whole. The rest of the funding is small loans from banks including Japan’s Sumitomo Mitsui.

Flanders co-founded Twelve in 2015 at Stanford University’s business school with a pair of students getting doctorates in mechanical engineering and chemistry. The company’s name refers to the most abundant form of carbon on earth, the isotope carbon-12.

Twelve’s process uses devices that run on renewable power called electrolyzers. They bring carbon dioxide and water into contact with metal catalysts. Removing an oxygen atom from CO2 yields carbon monoxide, which is combined with hydrogen from the water to make synthesis gas. That syngas can be processed into fuel.

While many companies use electrolyzers to make hydrogen, Twelve is one of the few adding carbon in an integrated process, which it says can work at much lower temperatures. Its technology also makes a hydrocarbon product that can be used to make everything from plastics to laundry detergents. Procter & Gamble and Mercedes-Benz are among the companies talking to it about its applications.

Flanders is the son-in-law of Carlos Ghosn and says he talks to the former CEO of Nissan about managing Twelve’s suppliers. Supply-chain and construction kinks have contributed to delays at Twelve’s initial plant and pushed up costs across the industry.

Subsidies from the 2022 climate law and state incentives help producers close the cost gap with conventional jet fuel, as can government grants and loans.

One constraint on the burgeoning industry is the supply of green power. Twelve’s Washington project runs on hydropower, giving it an edge over its rivals. Power availability will be a key factor dictating where Twelve locates subsequent plants, Flanders said.

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The Swedish start-up is struggling to secure funds and has suffered a number of worker deaths

Northvolt’s sub-Arctic battery factory in northern Sweden was meant to symbolise Europe’s green fightback against China and the US. Instead, the start-up is in danger of turning into an emblem of the continent’s failure to stay in the race.

The Swedish battery company has raised more capital than any other private group in Europe — more than $15bn in equity, debt, and government support.

It is now struggling to secure funds as it tries to ramp up production at the gigafactory in Skellefteå while scaling down on other projects and cutting jobs.

“It’s extremely difficult to get through the Valley of Death for start-ups when they’re trying to scale up. And the valley is deepest for battery cells. You’re burning through a lot of cash very quickly,” said Lars Lysdahl, battery expert at consultants Rystad Energy. “The competition from the Chinese is very intense.”

The stakes are high, and not just for Northvolt. The European Commission made the battery sector one of its industrial priorities, crucial to supporting the all-important automotive industry as it faces up to a transition to electric vehicles that China is so far winning.

“There is a vicious circle in markets that is affecting investors and governments,” said one person close to Northvolt. No carmakers were abandoning electric vehicles, but they were delaying their plans and deliveries, the person added.

On the same day that Mario Draghi, the former Italian prime minister and head of the European Central Bank, presented his report on European competitiveness earlier this month, Northvolt scaled back its ambitions dramatically. It said it would look for buyers or partners for its materials, recycling and energy storage businesses.

Its Skellefteå factory, set in the far north of Sweden to benefit from an abundance of renewable energy, has a technical annual capacity of 16 gigawatt hours. But in 2023 it produced significantly less than even 1GWh, the level needed to power about 17,000 cars.

Boosting production is a complicated and expensive process that affects most battery projects, but the extended delays have hurt revenues and now threaten its future expansion.

“The ramp-up is taking a lot longer than initially planned, and there’s a long way to go,” said the person close to Northvolt.

Peter Carlsson, Northvolt’s chief executive and co-founder, told the Financial Times in July that in the first quarter it had produced about 15,000-20,000 cells a week in Skellefteå and needed to reach 100,000 a week by the end of the year to be in the “1GWh space”.

In 2025 with “all lines fully operating, fully functioning . . . a handful” of GWh should be possible. Profitability could be reached in 2026, he added.

Northvolt produced its first battery cell in Skellefteå in late 2021, but its low capacity usage has meant that it has been unable to come close to the prices offered by Asian rivals such as CATL and BYD of China, Panasonic of Japan and LG and Samsung of Korea, which dominate the battery industry.

“We in Europe need to get our shit together if we want to have a chance to be competitive going forward,” said Greger Ledung, battery research expert at the Swedish Energy Agency, an early backer of Northvolt.

“Batteries are such a central technology, you can’t opt out of it. You can’t have a transport industry, a defence industry in the future without having secure sources of batteries,” he added.

Ledung said that the Draghi report had underlined the importance of Europe being able to compete with Chinese groups that are “heavily state financed”.

Nevertheless, Sweden’s prime minister this week dashed the hopes of a state rescue of Northvolt, ruling out the government becoming a shareholder, noting it was up to private investors and the company to solve matters.

Founded in 2017 by two former Tesla executives, Northvolt has captured more than $50bn in orders from Europe’s leading carmakers and industrial groups, many of whom have also become shareholders in the Swedish company.

At the end of last year, Volkswagen was its biggest shareholder with a 21 per cent stake while BMW held just under 3 per cent.

Northvolt has raised $4.5bn in equity and $9.3bn in debt since its founding as well as $3.8bn in government support from Germany and Canada to build future gigafactories. But it made a net loss of $1.2bn last year, four times’ higher than in 2022.

Equity on its balance sheet has almost halved from $3.9bn at the start of 2022 to $2.1bn at the end of 2023 while it also has $3.8bn of convertible debt. It had cash and cash equivalents of $2.1bn in 2023, down $400mn in a year.

Delays at the factory started with the Covid-19 pandemic, but intensified after two workers died in Skellefteå in 2023, causing an almost total halt in production that particularly affected deliveries to Scania, the Swedish truckmaker.

This year has also been punctuated by the mysterious deaths of three seemingly healthy Northvolt workers, who died away from the factory. A police investigation is under way, but Northvolt has said it has found no evidence of foul play or any connection between the deaths.

Beyond the tragedies is a sense of a start-up having over-extended itself. As well as the plant in Skellefteå, Northvolt has been planning another factory in Gothenburg in a joint venture with Volvo Cars, and new gigafactories in Germany and Canada, all of which could now be delayed.

Northvolt has halted a plan to build a factory in Sweden producing cathodes, a key battery component, and put its energy storage solutions plant in Poland up for sale.

Advanced research into batteries for aeroplanes in the US has been stopped while it is pausing its cathode and recycling work in Skellefteå.

“They were trying to do too many things at the same time, they had too many plans,” said Lysdahl. “If you look at how the Chinese, Japanese and Koreans have built it up, they only do cell production first, not everything all at once.”

Ironically, Northvolt’s pausing of its work on materials means its dependence on China and Korea will increase, as suppliers there have a virtual monopoly in the cathode market.

All this comes against a backdrop of slower demand for electric vehicles. Volvo this month abandoned its plans to sell only EVs by 2030 while VW is considering closing German factories for the first time.

Northvolt insiders say that this is complicating its current, much-delayed fundraising as customers are scaling back their own need for batteries. It has imposed a ban on expenses and unnecessary travel as it seeks to conserve cash.

But the start-up has been trying to combat rumours swirling around Sweden about its financial position and more.

This week, it was forced to deny that it might not pay salaries this month, insisting that it needed its workers for the ramp-up. Insiders say any job cuts will be lower than the 20-30 per cent of staff that might be expected at a mature company, although the exact number is still to be confirmed.

For now, the eyes of carmakers, European policymakers and rival battery manufacturers are firmly on northern Sweden and whether Northvolt can pull it off.

“What does Europe want to be?” said another person close to Northvolt, before adding: “I want my kids to grow up somewhere where there are a lot of jobs.”

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Middle of the road

The EU’s new competitiveness tsar Teresa Ribera believes avoiding a trade war is as important as developing Europe’s car industry, as Brussels weighs up whether to slap punitive tariffs on imports of Chinese electric vehicles.

Context: Brussels has announced preliminary tariffs on Chinese car imports. It says they are needed to protect European manufacturers from being undercut by electric vehicles that are unfairly subsidised by Beijing.

Pedro Sánchez, Spain’s prime minister and Ribera’s former boss, said last week during a visit to China that his country was “reconsidering” its position on the tariffs, which will come into place unless a majority of EU capitals oppose them. Madrid had previously supported the tariffs. Germany has been lobbying member states to oppose the measures.

“The main message . . . is that it is important to avoid a clash, a trade war,” Ribera told the FT when asked about her personal views on the tariffs. She was appointed as the commission’s new executive vice-president in charge of a clean, just and competitive transition for the economy on Tuesday.

“We need to identify the best tools for how we can develop the car industry in Europe but are also effective in terms of avoiding this trade war,” she said. “This is something that is already being assessed by the commission services and the trade people.”

Ribera, arguably the second most influential person in the incoming commission after president Ursula von der Leyen, will oversee both the EU’s industrial revival and manage its green transition, as well as serving as the bloc’s antitrust chief.

“My impression is that the European car industry knows that the race is there, the technology race,” she said. “We must ensure we can count on a proper level playing field in Europe in respect of the trade rules and at the same time avoiding a clash, a conflict, a trade war with other countries.”

Northvolt’s battery factory in northern Sweden was meant to symbolise Europe’s green fightback against China and the US. Instead, the start-up is in danger of turning into an emblem of Europe’s inexorable decline.

The investor said its intention to buy more shares shows its long-term commitment to Campari and its full support for the company’s growth strategies

Davide Campari-Milano’s CPR -7.48%decrease; red down pointing triangle controlling shareholder Lagfin said it plans to buy shares in the Aperol maker valued at up to 100 million euros ($111.2 million), saying the company’s market price doesn’t reflect its true value.

The move followed news that Matteo Fantacchiotti, chief executive of the Italian liquor maker, resigned from his role for personal reasons, just months after taking the helm.

Lagfin said late Wednesday that the purchases will be carried out in coming days subject to market conditions. Lagfin owned 51.4% of Campari’s ordinary shares and held 82.5% of its voting rights at the end of August, according to Campari’s website.

The investor said its intention to buy more shares shows its long-term commitment to Campari and its full support for the company’s growth strategies.

Campari’s shares have fallen in recent days to levels last seen in 2020, during the Covid-19 pandemic. The stock closed 7.5% lower on Wednesday on news of Fantacchiotti’s departure and is down nearly 32% since the start of the year.

Like many of its peers, Campari benefited from positive trends during the pandemic, when consumers purchased beverages to drink at home, but the industry faced more normal consumption patterns lately and the company has cautioned on soft markets, distribution challenges and increased price competition in its core markets.