Tilt Capital holds first close for debut energy transition fund

The vehicle has a EUR 250m target, which it expects to reach in 12-18 months with potential interim closes, Tilt CEO and co-founder Nicolas Piau told Unquote.

Simmons & Simmons is providing legal advice on the fund.

Tilt was founded in 2018 by Nathanaël Krivine, Nicolas Lepareur and Nicolas Piau, all of whom have previous experience in the energy sector. All three previously held roles at French energy company Engie.

"We launched TiLT in April 2018 and got our certification from the French financial market authority in June 2019," Piau told Unquote. "We launched the marketing of the fund in September 2019 and had a very good start with a strong commitment from the EIB and the EIF. We had 14 institutional investors in our data room, we were well positioned in France, and then Covid struck and we had the lockdown in mid-March 2020. That was really tough – it completely killed the momentum and risk aversion increased dramatically, which is always a bad thing for new entrants in the sector."

The GP announced a strategic partnership with Siparex in September 2021, following which it was established as Siparex's Energy Transition platform. Siparex owns a 60% stake in Tilt, Piau said.

"In late 2020, when we saw we could not close the fund before the end of the year, we started discussions with other potential asset management companies, and Siparex was introduced to us via a common LP," Piau said. "We have access to their historical LPs and this has really helped the momentum of the fundraise."

TCF 1 is an Article 9.3 fund within the Sustainable Finance Disclosure Regulation (SFDR). "We don't call ourselves an impact fund, we are a sector-dedicated growth capital fund, but we exhibit some impact characteristics," Piau said. "25% of our carry is indexed based on the performance of our portfolio – if the companies we invest in don't reach certain targets that are audited by certain parties, we don't get access to a portion of the carry. It will be invested in a foundation, probably financing ESG research programmes or ESG education. You need to align your interests with those of the entrepreneurs in your companies."

Russia's invasion of Ukraine has put a spotlight on global energy markets. "First and foremost, it is a real humanitarian catastrophe in all aspects," said Piau when asked about the situation. He added that the crisis has not increased interest in the fundraise, but that it has changed the way that people view energy.

"Over the last 10-15 years, there was a view that the energy transition would be done by developing more and more renewables – but people are realising that transitioning from a system that has been there for 150 years to a system of decarbonisation means that you need to invest in all sorts of areas," Piau said. "These include energy security and affordability. Energy is not just about developing infrastructure and renewables, you need to change the whole system. We need to be less dependent on energy in general, focusing on networks and consumption. Sadly, I do think that the situation in Ukraine has pointed out that energy will ways be a geostrategic topic in whatever we do, but energy is often a great enabler of partnerships."

Investors
TCF 1 currently has a core group of French and European LPs, including Siparex, Piau said. According to a press release, LPs in the fund include the European Investment Fund, Bpifrance, and institutional investors including banks and insurance companies. Private investors and family offices have also made commitments to the fund.

The fund has a classic 2% management fee and 20% carry structure, Piau said.

Investments
TCF 1 will invest in French and European SMEs involved in the energy transition, focusing on two themes: energy efficiency; and the energy system's flexibility in production, networks management and consumption. Its investments are likely to include companies focused on renewable heat, decentralised renewable energy, power electronics, and optimisation of energy consumption, according to the statement.

The fund aims to make 12 investments, with an expected equity ticket range of EUR 15m-20m and EUR 5m-30m available per company overall. TCF 1 will invest for minority stakes of 10-40%, taking a board seat and generally taking a lead or co-lead role. The fund can invest alongside other PE firms with complementary knowledge or skills, Piau told Unquote.

"We're in advanced discussions with three companies and in constant discussions with around 10 others," Piau said. "Renewable heat and waste heat recovery has tremendous potential and we are looking at a company in this area. These system are typically found in internal combustion engines, where the heat is dissipated and energy is lost, but you can recuperate that heat and produce electricity. It can be used in industries including paper mills, cement, steel, heavy duty transportation, and power."

The GP is also in advanced discussions with two companies involved in solar energy applications, Piau said. "We are also looking at other topics, such as industrial energy efficiency solutions, as well as energy management, and energy optimisation for electric vehicles."

Asked if the GP is looking to hear from advisers with potential deals, Piau said: "We would absolutely welcome advisory approaches. We have been in the sector for 20 years as a team, so we have a network advisers, banks and consultancies, but we would welcome enquiries and ideas."

People
Tilt Capital Partners – Nathanaël Krivine, Nicolas Lepareur, Nicolas Piau (co-founders).

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