Genalta Power is in an aggressive-growth phase. The Alberta-based waste-to-energy power producer increased capacity more than five times in 2014. To keep pace, the company will need hundreds of millions of dollars over the next few years. The man in charge of raising that capital is Craig Parsons. The executive vice president of finance helped Genalta raise $30 million in his first three months on the job. Here, he shares the strategies and philosophies that make him one of the top fund-raisers in energy.
You came to Genalta without having worked extensively in the power sector. Was the transition a hard one?
No, because the job is the same once you learn the basics of the industry. From a financial point of view, it’s not all that important what the business is. I’ve raised money in real estate and in oil and gas. In high tech, my business partner and I raised $10 million in pre-revenue venture capital. Numbers are numbers, and capital is capital. Once you get a handle on the industry’s nuances, you’re off to the races.
Where did your talent for finance come from?
I started on Wall Street as an analyst, but I’ve really been an entrepreneur for 20 years. I was a CFO for an oil and gas company that we took public. I started my own brokerage, and I built and sold a successful technology company.
What was that experience like?
We were a payment-processing business online in an era before PayPal. We grew the company for seven years, and as CEO, I was responsible for raising money and directing the course of the company. We sold the business in 2000.
Graduates from Arizona State University with a degree in corporate finance
Becomes president of Cheque Free Corporation
Founds Now Financial
Begins work as an investment specialist at First Calgary Financial
Receives his MBA in oil and gas and carbon management from the London School of Business and Finance
Joins Genalta Power as its executive VP of finance
You’ve done a lot. What attracted you to Genalta?
I wanted a change, so I got my MBA in oil and gas and carbon management. I wanted to get involved with an eco-friendly business that does something good. I also wanted to work at a company that is in business to make money. I started looking for people in town that were doing good things, and Genalta takes something that’s being wasted—like gas that’s produced from oil production or waste heat from exhaust—and turns it into power. They needed help on the corporate finance side, and they needed someone that could help them capitalize the company. It seemed like a perfect fit.
What sort of environment did you step into?
When I got here in early 2014, the company had already gone from zero in production to 10 megawatts. Since then, in less than a year, we’ve gone to 52. The plants that generate this output are very expensive to build, and capital is critical in order to keep the growth going. In my first year, we raised more than $75 million for capital projects, and $30 million of that came in my first three months. We have also paid down $28 million in debt off the balance sheet.
Why is finding capital so important to Genalta?
It’s critical because we have to get facilities up and running, but it’s especially difficult because we have to get people to open up their wallets and write a check pre-project revenue. But I’ve financed two start-ups, so that has given me a good background to be able to go into a business that’s rapidly grown and do the work that needs to be done.
We have to scale quickly to reach critical mass because there are large development costs and lead times to these projects. Being small in a capital intensive industry is not an option. Projects are $30 million or more up front to build, and a plant takes 12–16 months to complete. Money gets invested with no return until the plant starts generating and selling power, and then it is 20 years of steady cash flow. Our goal is to get up around $1 billion and greater, so the cost to grow isn’t so significant, and with size, cost-to-capital is reduced and access is increased.
You make it look easy. How do you do it?
Part of the secret is a great team. We have excellent accountants, project managers, a CFO, and a CEO that all contribute heavily to what I’m doing. For me to do my job, everybody else in the company has to do their jobs well—even on the project-engineering side and the permits and everything else. We all have to work together.
But what makes it work? How do you orchestrate that participation?
You have to have a good product and a good business model. You need something that will generate long-term cash flow. I wanted to stick close to home, so I approached local contacts instead of large, national banks. Those deals always move slowly and require lots of approvals. We have to move fast. Regional lenders in Alberta have been very receptive. One of the banks we approached had never done a power project, and I prefer to go to banks like that because they get more interested and excited about the opportunity. We’ve done $55 million with two Alberta banks.
We’re around 60 megawatts, and we’ll be pushing 90 in early 2016, so my role is to capitalize this ongoing growth with another $125 million. We want to get to that billion-dollar market cap, and to do that, we need about 200–300 megawatts. The total investment will be about $400 million in capital, but I know we can get there.