Silicon Valley fuel cell startup Bloom Energy is looking to raise another $160 million in convertible notes, and has closed on $130 million of that round, according to a report in the Wall Street Journal’s Venture Capital Dispatch. The fourteen-year-old company has already raised $1.2 billion, and had been expected to have already held an IPO by now.
Fuel cells are large devices that take a fuel (usually natural gas or biogas) and oxygen and run these substances through a chemical reaction (using a catalyst and stacks of materials) to create electricity. It’s set up like a battery (with an anode, a cathode and an electrolyte) but it generates energy, instead of storing energy like a battery does.
Companies and utilities can buy the fuel cells (or buy the power from the fuel cells) to run their services without connecting to the power grid. Using natural gas and biogas as a fuel they can also lower their carbon emissions footprint and meet internal sustainability goals, or state or federal mandates.
Bloom Energy has managed to sign up a considerably large amount of customers for a startup selling energy hardware, and they’ve been particularly successful in the Internet and telecom markets in California. Google, eBay, Apple, Adobe, AT&T and others have purchased Bloom Energy’s Bloom Boxes, or energy servers, as they call them. So have big corporations like Coca-Cola and Walmart. Bloom Energy has said that it has over 130 MW of its units installed in the U.S. as of August 2014.
But the issue has been that Bloom Energy has needed to lower the cost of making its fuel cells to become profitable, and that can only happen when it manufactures its tech at scale, which requires a lot of financing to do. They’ve also had to develop newer generations of the fuel cell where the stack (the piece where the core chemical reaction happens) lasts longer than early versions.
According to the article, Bloom’s convertible notes would convert to preferred stock in the event of an IPO of at least $25.76 per share. Investors were offered shares at $25.76 per share, at a valuation of $2.7 billion, starting back in 2011, said the report.
While the investors in this new round weren’t disclosed, previous investors in Bloom Energy include Kleiner Perkins, NEA, DAG Ventures, GSV Capital and Credit Suisse. Bloom Energy also closed an important financing deal with power company Exelon last year to finance the deployment of 21 MW worth of its fuel cells (over 100 individual fuel cell units).
Some critics have been skeptical of exactly how much Bloom Energy’s Bloom boxes can reduce carbon emissions compared to the power grid. Bloom has also aggressively taken advantage of state subsidy programs to operate.