The investment makes it the second largest equity holder in LanzaTech, after Silicon Valley-based Khosla Ventures who remains the largest shareholder in LanzaTech. Other New Zealand investors include Sir Stephen Tindall’s K1W1 fund.
NZ Super Fund has about $27 billion under management. Its largest portfolios are in global equities (62 percent) and fixed income securities (12 percent). Its global investments include shares in Apple, Microsoft, Nestle,Exxon, Johnson and Johnson and Procter and Gamble.
Its portfolio of $3.5 billion New Zealand investment includes over $1 billion in the local sharemarket, as well as investments in a range of other assets including Kaingaroa Timberlands, Z Energy, Metlifecare, Datacom and rural farmland. The Fund is also invested, through external investment managers, in small, privately-owned companies, property developments and social infrastructure. Its private equity holding make up 3 percent of its total investment portfolio.
The NZ Super Fund has around two-thirds of its assets invested passively, in line with global market indices. It makes active investment when it has a high level of confidence and over the long term, the investment will be better than investing passively.
LanzaTech's NZ roots
Founded in New Zealand in 2005 and now headquartered in Chicago, LanzaTech turns waste gas from steel mills into ethanol and other high value fuels and chemicals.
In early November, LanzaTech,announced it is working to recycle CO2 emissions into omega-3 rich fatty acids with a research team from India's IOC-DBT Center for Advanced Bio-Energy Research (an entity co-funded by India’s Department of Biotechnology and Indian Oil Corporation Limited).
LanzaTech has been operating two 100,000-gallon per annum demonstration facilities in China that convert waste flue gas from Baosteel and Shougang steel plants into ethanol. The company is currently developing larger-scale commercial facilities with construction expected to begin later this year.
LanzaTech has been voted the No.1 hottest company in Bioenergy and the No. 5 hottest company in Renewable Chemicals and Materials, in America's annual Biofuels Digest Hot Rankings. It is one of a handful of companies to make the top 10 in both lists.
The annual rankings, which recognise innovation and achievement in fuels and integrated biorefinery development, are based 50 percent on votes from an invited panel of distinguished international selectors, and 50 percent on votes from subscribers of The Digest. Overall, more than 100,000 individual company ratings were received from panelists and voters.
LanzaTech estimates its carbon fermentation process can be applied to 65 percent of the world’s steel mills, allowing the fuel to be scaled up for worldwide use.
The company has been working with Richard Branson's Virgin Atlantic to trial and develop low carbon fuel that it says will be produced at a cost comparable to conventional jet fuel.
“LanzaTech is one of the most exciting companies New Zealand has produced, with significant global potential,” said Nigel Gormly, NZ Super Fund Head of International Direct Investment. “We’re proud to continue the New Zealand connection and to be able to assist in LanzaTech’s ongoing growth.”
LanzaTech CEO Jennifer Holmgren said: “as we continue on our path to commercialisation, we are tremendously excited to include the NZ Super Fund as one of our investors. Our roots and hearts are in New Zealand, and this investment will allow us to expand and develop our global platform, increasing our ability to play a part in New Zealand’s energy future.”
The LanzaTech investment is one of a series of ‘expansion capital’ investments made by the NZ Super Fund in recent years, providing capital to privately-owned, early-stage companies that are seeking to grow, but are not yet ready to list on the public markets.
Growing NZ Super Fund's expansion capital
NZ Super Fund's investment size and returns as at Oct 2014
While only around 1 percent of the overall NZ Super Fund is invested in expansion capital, Gormly says it is appropriate that it is part of the mix. “The Fund is well diversified and expansion capital’s risk/return profile is a good match for growth-oriented investors with a long time horizon.”
Previous NZ Super Fund expansion capital investments include stakes in United States companies Bloom Energy and Ogin, Inc. In New Zealand, the Fund invests in expansion capital via investment managers Pencarrow Private Equity, Pioneer Capital Partners and Waterman Capital.
Gormly said the Fund was also attracted to LanzaTech because of the exposure it provides to the waste-to-energy sector. “We are actively diversifying into alternative and non-conventional energy, alongside traditional energy investments.”
Sir Stephen Tindall, one of LanzaTech’s first investors, said: “LanzaTech has been highly successful and the NZ Super Fund’s investment is a key step in continuing the company’s progress and global expansion. We have been involved with LanzaTech from the outset and take great pride in its success - LanzaTech has an important social contribution to make in reducing air pollution and at the same time turning waste gas into valuable products.”
LanzaTech’s first commercial plant is targeted for operation in 2016.
The investment will be managed by the NZ Super Fund’s in-house team.