Hi all, I'm very happy to keep the blog alive while Rob is away on his very well deserved vacation. I intend to keep with Rob's spirit in my postings, so it should not be too much of a change for you all.

Adding to Rob's recent postings about water infrastructure, Walter Industries today announced the acquisition Mueller Water Products for $1.9B, broken down into $860M of cash, and $1.05B of debt (Walter Industries will assume Mueller's debt). Mueller Water Products had $1.1B of 2004 revenues, according to this St. Petersburg Times article. To view the press release, click here.

Walter Industries plans to slot Mueller into its U.S. Pipe's subsidiary. This blog has noted before the expectation of increased water infrastructure spending, and that corporates such as GE are gearing up in anticipation of this. Here's what Don DeFosset, Walter's Chairman and CEO, says: "We have been tracking Mueller's growth and compatibility with U.S. Pipe for some time, and we are excited to have the opportunity to bring these businesses together. The complementary fit of Mueller's water infrastructure and U.S. Pipe's water transmission business makes us ideal partners, well positioned to benefit from increased water infrastructure spending in North America."

I'm happy to say that I will be going "off the grid" for a couple of weeks of long overdue vacation starting tomorrow.

But not to worry, my colleague Kjartan Jansen here at Expansion Capital has graciously offered to help keep the Cleantech Investing conversation going during my absence. There might also be a "guest column" or two from other cleantech VCs, depending upon schedules... Many thanks to Kjartan for taking this on...

In the meantime, let me leave everyone with a heads up on a great article and an interesting topic:

You may have already seen it in last week's issue of The Economist, but in case you missed it, here's a great article on biomimetics and its potential.

"Biomimetics" refers to the use of technologies already invented by nature. The most famous example is velcro, as the article describes. But other uses are already being found in agricultural products, in water treatment technologies, and in emerging forms of solar energy technology, among other areas. The article describes some other applications as well. For cleantech investors, technologies inspired by nature can mean breakthroughs that offer less toxicity and better efficiency than incumbent approaches, so biomimetics is an area worth tracking. Most will be very early stage, but with strong potential.

Check out the article, and track these technologies as they develop.

As mentioned before, solid state lighting is making some strong progress and could soon start to make some waves in the overall lighting industry.

Lamina Ceramics, a manufacturer of LEDs for architectural lighting and large screen LCD backlighting, announced that they have raised a $9M Series C. The deal was led by Granite Global Ventures, while existing investors Morgenthaler Ventures and SpaceVest also participated.

Yesterday I had the pleasure of moderating an "investing in clean energy" panel for the VC Task Force, graciously hosted by Heller Ehrman -- a panel which included a great set of speakers: Scott Benner of Heller Ehrman, Ira Ehrenpreis of Technology Partners, Dave Pearce of Miasole, and Elton Sherwin of Ridgewood Capital. A tremendous set of experiences between them.

• Scott is an expert in international energy projects, especially with an international angle, having worked extensively with clients across a wide range of private equity transactions both here and in Asia
  
• Ira is an always entertaining and informative speaker, whose energy investments include PolyFuel (mentioned recently here) and PowerGenix, among others (look for more info out of Technology Partners soon, too!); and he's been playing a leading role with the Cleantech Venture Network for some time
  
• Dave is an experienced "serial entrepreneur" who's made his mark already in hard disk drive manufacturing and the fiber optics industry, and is now making some great progress in the solar world
• Elton, whom I've just gotten to know recently, has made some smart technology investments in the past and is now jumping into cleantech investing with both feet, recently investing in both Comverge and Oryxe
  

It was a pretty intimate (20 or so venture investors, plus panelists), informal, engaging session, with a lot of good comments and questions from the other participants in the room. Without going into any specific comments, I'll just say:

a) There was a strong sense that this is a fast-growing area of interest among VCs, many of whom are just starting to look at the sector now;
b) There was a variety of points of view about the opportunities for a lot of "home run" investments in the space -- some investors view this as a ripe for a next Google, etc., while others look at this as more of a trade-sale-exit kind of industry (not that the two views are necessarily mutual exclusive, note);
c) Much healthy and informative discussion about the drivers and sustainability of the recent growth in the sector, typical stumbling blocks for companies, and different investors' particular strategies and investment criteria

All in all, it was a treat to be able to participate

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Today, had the opportunity to cruise the American Water Works Association conference here in SF. Given some of the recent press about water technology investing, I wasn't too surprised to hear from several people I spoke with that I wasn't the first investor-type they'd seen wandering the booths this year... As one exec told me, "I've been going to these things for years, and this is the first year I've seen any VCs, but it seems like I've seen several of them this time. What is that all about?" I think the word is getting out.

While an interesting technology investment area that is getting more attention, this industry remains "low tech" in many ways. There were a lot of large pieces of metal and machinery on the exhibition floor... Admittedly, this conference was aimed at utility customers much more than it was designed for investors, but it was still striking when compared to other industry conferences in other sectors. It does strike the outside observer that there might be a lot of mid- to small-market M&A opportunities to be seen in consolidating a lot of these very fragmented vendors in very mature markets/ technologies...

Regardless, there were also some interesting technological and market developments that were clear to see. The new standards for arsenic in drinking water, due to come into effect in January, are clearly getting a lot of attention both from vendors and customers. New disinfection, filtration, sensor, and other technologies are showing some interesting developments as well. And for what it's worth, I found myself thinking often about machine-to-machine communications while looking at the vendor offerings -- a lot of technology on display that assumed such communications links would be in place, but who's going to provide them? And how?

In all, an interesting conference. Some things to get excited about, and also a good chance to reality check -- nothing like walking through a few displays of specialty hammers, shovels, and fire hydrants to remind you what makes most of the industry really tick.

Without getting into policy issues (not the purview of this site), it's worth noting this article that came out today.

While the public attention and any public policy impacts of such news can only help clean technology investing, an important point to take away from the article (once again) is that business leaders (and their large, acquisitive companies) are starting to move toward clean technologies even in the absence of any policy change. This helps enable successful exits for cleantech venture investors, and lends further momentum to the investment sector in general.

Some good quotes by several leading-light (pardon the pun) cleantech VCs in this nice article about solar PV on CNET News.

Apparently the article was written before word came out last week that Mohr Davidow is backing Nanosolar...

This weekend I stumbled upon (thanks to Hydrogen and Fuel Cell Investor) an interesting debate being carried out in the editorial pages of the Vancouver Sun, discussing the overall potential of the "hydrogen economy."

On the one hand, Jon Hykawy (the Director of Technology Research at Fraser Mackenzie, a Canadian investment bank) argues that "hydrogen is too expensive to become a useful fuel in our modern world". He even goes so far as to make a strongly-implied suggestion that government funding for hydrogen-focused technologies be directed elsewhere.

This was followed a week later by a response from Dennis Campbell, the CEO of Ballard Power, who shoots back that "investing in hydrogen and fuel cell commercialization is a 'no brainer'..." (note: opens a PDF from the Ballard website).

For those interested in the ongoing debate about the hydrogen economy and hydrogen-fueled fuel cells, these two short opinion pieces are a great resource, simply and clearly laying out the arguments that both sides of the debate tend to use.

...It's also interesting to take note of a couple of sub-plots. First of all, as a research analyst with Fraser Mackenzie, Hykawy covers Ballard. Here's a pdf of one of his recent research reports. Ouch. Secondly, while assailing PEM fuel cells as having a long way to go before broad commercialization, and PEM-based companies like Ballard for not having strong financial returns (a criterion he cites for government funding), it's interesting to see that Hykawy seems to feel just as strongly -- but in this case, positively -- about solid oxide fuel cell companies (see here a pdf of one of his recent research reports on Fuel Cell Technologies... interested readers might want to dig into his economic analysis, it's enlightening).