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Episode 15: Hans Kobler

This week we sit down with Hans Kobler, CEO and Managing Partner of Energy Impact Partners. The conversation is about how Energy Impact Partners is working with sixteen global energy companies, including major utility companies like Southern Company, National Grid, and Excel Energy. This represents a cumulative $263 billion in market value. We discuss the culture change happening in those utilities leading to investments and pursuit of energy innovation.

Hans leads EIP’s investment board positions in private and public companies and advises corporations on private equity strategy. He has developed leading programs on advanced risk assessment techniques in equity investing and strategic co-initiatives. Mr. Kobler holds a Master’s degree in Aerospace Engineering from the Technical University of Munich, and an M.B.A. from the University of Texas at Austin.

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Transcript

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Jon Powers:

Welcome back to clean capital’s Experts Only podcast. Today. We’re going to be talking to Hans Kobler, the CEO and managing partner of Energy Impact Partners. Hans has had an incredible career across the industry, and now is working within Energy Impact Partners, representing 16 global energy companies, major utilities like Southern Company, National Grid, Xcel Energy. A representative of accumulative 263 billion market value, and helping them invest and find innovation. It’s an exciting time in the industry. And we’re going to talk with Hans about culture change that’s happening today within those utilities, and how they’re really helping to help them find the path forward in this transformational time. Hans, thanks so much for joining us in today’s Experts Only podcast.

Hans Kobler:

Yeah, pleasure being here.

Jon Powers:

You’ve had quite an incredible career, that’s touched the industry on many different verticals. As an investor, as an advisor, as an operator, you’ve sort of been worked extensively across the space. I would definitely want to get into those different verticals, but I want to talk a little bit about your background. I read that you started an aerospace engineering at the technical university of Munich, and then later I went to get an MBA at the University of Texas. Were you born in Germany?

Hans Kobler:

Yeah, I grew up in a small town outside Munich.

Jon Powers:

What’s the name of the town?

Hans Kobler:

It has 800 people. It’s an hour and a half from Munich. It’s called Tristan.

Jon Powers:

Oh, yeah. I was stationed over in Germany, up in Gees in Germany, just north of Frankfurt for a couple of years.

Hans Kobler:

We stick to English. I presume.

Jon Powers:

Yes. That’s good. For everyone’s safety, that’s a good idea.

Hans Kobler:

Yeah. Yeah.

Jon Powers:

I was in the army at the time, so I was very good at ordering beers in German, but not much more. So how did you jump from, from the aerospace side, to getting an MBA at University of Texas?

Hans Kobler:

Yeah, actually, I entered the PhD program to make matters worse.

Jon Powers:

Oh, wow.

Hans Kobler:

And I realized fairly quickly that it’s not meant for me. So I actually never worked a day in my life in engineering. And I went straight to business school here to pursue more of the business side of things, which attracted me more at the time.

Jon Powers:

Well, that’s worked out well for you. How did you enjoy the jump from Germany to Austin, Texas?

Hans Kobler:

Oh, very much so, I met my wife there. We went back to Germany for a year and both realized that we really like it here. And came here almost 20 years ago, now. And settled down and called this home now. So it’s great.

Jon Powers:

That’s amazing. So in that process, what has stoked your interest in innovation? And, of course, you’ve had a very heavy focus on technology and energy. What sort of led you there?

Hans Kobler:

I went to consulting after business school, and advised bigger companies and smaller companies on changing business models and strategy. And started working with private equity guys in doing due diligence for them at Bain. And through that, I joined GE’s equity group as the Chief Strategy Officer. And as part of that role, we had to figure out a way how to use venture capital productively with strategic partners for the benefit of the operating business. And, of course, we got very much involved with innovation and changes across many industries. From the internet to medical, to ours. And I found it fascinating to really look ahead, look over the horizon, what are the new things that are coming and haven’t left since.

Jon Powers:

Have you seen some of the core lessons learned? I think at GE, you’re working at one of the strongest institutions, obviously, we’ve ever had here in the US, from a private sector perspective. And working across venture capital, looking at innovation, how did you sort of wrestle with being part of that major organization and really trying to drive innovation at the same time?

Hans Kobler:

Well, that’s a million-dollar question that I think every large company wrestles with, that every incumbent wrestles with, sort of how to change. Right. Do you build it yourself? Do you buy partner? Do you look elsewhere? Do you cannibalize yourself? Do you change the culture? Do you change the model from the inside? That’s a tough one. I think many corporations and many sectors are wrestling with that on a daily basis. When I was at GE, I think, we had a good balance there, where we say, let’s not reinvent the wheel. But let’s really look outside what other people do, because those amazing companies out of a garage with 10, 20, 30 people, they act more nimble, and they can do things that are very hard for a large company to do. And by investing in them, even just a small stake and sitting on their boards and getting exposure with them, I think large companies, large corporations can learn a great deal to find the new technologies, but also to sort of have an impact on their culture.

Jon Powers:

Interesting. That seems to be a theme that sort of runs across your career. And I’m going to come back to that, is focusing on sort of changing those institutional cultures and pushing them to be innovative. You also jump back and forth between sort of investing on the operating side. Earlier this year we had Brook Porter, formerly a client of Perkinson, talking about his experience doing that. Some of the lessons he’d had learned as an operator, they took into investing, and then, obviously, being able to share those back with the folks that you’re advising now and investing in. Over the course of your career, when you’ve made those jumps back and forth, what are the things you’ve taken away that you’re now able to turn back to and maybe mentor the companies you’re working with, or provide insight to, either operators or investors, because you’ve played on both sides?

Hans Kobler:

Yeah. I made really one jump only. Most of my time in my career, I was a consultant. Telling people what I think they should do. An investor coming to board meetings and telling people what I think they should do. And that’s very different from being in the trenches. I sort of got pulled in almost by happenstance in running a business. We, at the time, had a portfolio of companies, and we did a little roll up of advanced sensor technology companies. And when we tried to hire a CEO, most of the portfolio didn’t like who we proposed. So I said, I’ll do it for a year. And, of course, that year turned into five. And then bought the company public and ran it as a public company for quite some time.

Hans Kobler:

So that was a very unique experience, but I did it once. But I think it’s a very helpful experience. For us that sit on boards and of those little companies, the challenges to actually execute a strategy or to run a business on a daily basis, it’s very different from what you see in the boardroom or what the venture capitals, private equity firms find. So I wouldn’t want to miss it. I like my job today a lot more, but I’m really glad I went through that process, that I can speak really from a different reference point, what the challenges are. And then things come up like the culture of the organization, how you treat people, how you work together, how you organize, how you reward people. And sometimes it’s the little things that matter, and make a big difference.

Jon Powers:

Yeah, absolutely. And I think about some of the investors that we’ve worked with and obviously engaging our board. Having folks that have had that on the ground experience has been critical in helping us think through and better operate. Right. That’s some of the key advice that we can take day in, day out to make sure we’re doing what we need to, to engage our strategies. And how did that leadership role you had in a company prepare you for what you’re doing today?

Hans Kobler:

I think it gave me really a great perspective. I’ve been in the investing business for 20 years plus or minus, and we brought several companies public. But preparing for the IPO, being on the roadshow yourself, and running that 1,000 people. I think it makes it more real when you talk with your CEOs and how you can help them and share some experiences. And I think it also sort of mellows you down a little bit, that what is easily said, or put in a PowerPoint to actually execute it sometimes a lot harder than people think. So I’m very grateful for that experience.

Jon Powers:

Yeah. It’s easy to put targets in the PowerPoints, more challenging to hit those darts.

Hans Kobler:

You have so many CEOs today, they have to fight so many battles, business always change. You come up with the greatest strategy and things change. But then you fight the little problems from who gets which office, or who gets the leather chair. And so keeping the perspective and prioritizing staying focused while doing all that is an important lesson that I think I’m grateful that I went through.

Jon Powers:

That’s wonderful. I want to go back to sort of the culture change conversation, but really take it and making an impact. I mean, you’re working today sort of across the utility business, where models haven’t changed or hadn’t originally changed for not a full century, because they’ve been around a full century, but a significant amount of time. And the status quo had been moving. Now where we’re seeing massive transition in the utility business. And we’re seeing some really exciting change happening. And many have looked at the innovations coming out of these new areas. And I think, you know better than anyone, some of the utilities have taken them head on, and been able to find ways to incorporate them into business models. Others have struggled. Others have found ways, whether it be looking at storage, solar, micro-grids, wind, energy efficiency to man response. So many challenges for them to wrestle with, and then looking at how do they utilize their own capital to really find and target some of those most innovative ideas.

Jon Powers:

And I think you guys at Energy Impact Partners have really wrestled that in a good way. Just for the listeners, Energy Impact Partners represents a group of 16 global energy companies, including major utilities like Southern Company, National Grid and Xcel Energy, accumulative 263 billion in market value. That’s incredible. So tell us a little bit about, Hans, this mission that you have at Energy Impact Partners and what you’re doing day-to-day.

Hans Kobler:

All right. Well, maybe just a little bit of a background on the industry, sort of the power industry, the electricity industry. It’s just an incredibly important industry for us, for everyone, because it keeps the light on, it keeps the industry going. It allows education wealth around the world. And so being part of that is just a special place to be for starters. Now, that industry hasn’t really changed all that much in 100 years. But has been, and is changing dramatically right now as it has never changed before. Right? As you know, you have the big three Ds. You have clean energy coming up. Your Ds are decarbonized, decentralized and digital conversions here happening, which dramatically changes the entire infrastructure of the AI industry. Which brings us towards a clean environment, but it also requires massive changes in the current infrastructure and the utilities, right in the middle of that.

Hans Kobler:

So they are taking a much more proactive role, where they say, look, we got to do something about this. We know the world is changing. People will have all the things you just mentioned. The solar roof. We have storage enabling, sort of to some degree a disconnect from the grid. But then all those new generation forms, electric vehicles, are inducing a great strain on the grid. So the world will change dramatically, and the utilities know that, and they are getting more and more active into the innovation process. Some of them are starting to do venture capital investments. That’s where we come in and helping 14 of them, either to do it through us, or working with us to beef up their efforts so that they get exposure to those new technologies and business models that they can use in some form to improve their business.

Hans Kobler:

And they’re also working hard on changing their cultures, several of our partners, National Grid and others are really changing that whole approach and image, so that they’re prepared for this new world. And we as EIP, we can play a little part in helping them get there, makes us really proud.

Jon Powers:

So fill me a little bit on how this got started. I mean, obviously most utilities have generally been conservative, as you said, there’s been an exciting culture change happening. How were you able to convince them to pool their money in this way? And was it something that had been in the works for a series of years? Did it come out of a series of conversations that were being had? Add some color on how you were able to launch this?

Hans Kobler:

So our approach goes literally back 20 years to the work I and my team did in the late 90s at GE, where we were some of the pioneers of strategic equity investing. GE always had a wonderful and very lucrative capital arm.

Jon Powers:

Right, right.

Hans Kobler:

But at some point, Jake Welsh gave the mandate that, so it’s great that you all make money, but do something to help the operating businesses be more successful by being their eyes and ears by scouting new technologies, business models, by avoiding that they reinvent the wheel in R&D, or by having more influence on the supply chain, by sitting on the board and being an investor and maybe make a profit in reducing the risk of M&A. So that’s kind of was the principle model. And we did that back then very successfully in several industries from medic systems to internet, with NBC, to power technology, which I was running at the time.

Hans Kobler:

And rather than working with the GE power systems, or GE research, we now work with 16 global energy companies. What was intriguing to the utilities, or our partners was to one extent that we combine it in a way that the best of both worlds, the best of strategic approaches and financial approaches under one roof, because we can bring the team and the financial alignment to do this successfully. But in addition to that, they were really liking the ability to collaborate with other peers that are not competitors, so that they exchange information and compare notes. So when we go after sectors that are priorities for our partners, such as electric vehicle charging, or storage, or custom engagement, cybersecurity. We typically bring together the experts from our partners in a room and analyze the segment collectively.

Hans Kobler:

So they get the benefit of the insights, but they also get to network with a group of trusted peers, where they can very openly exchange ideas and sort of reduce the risk of innovation, which is very important for utilities, because they have an obligation to innovate. But they also have, first and foremost, the obligation to keep the lights on. So mistakes are maybe a little bit more critical for them. And then, I think, the collaborative part is a very powerful component of what we do.

Jon Powers:

So if you talk a little bit about what verticals that you’re looking into and trying to invest in, and then maybe add some color on how are you finding those investments? I mean, you’ve got an amazing advisory board of former secretaries of energy and folks who’ve worked as chief information officers, and CTOs. And when you go to your website and I challenge everyone to do that, it’s energyimpactpartners.com, just an amazing group of thought leaders associated with the work you’re doing. How do you decide what verticals you’re going to, and then how do you find companies that pull into those opportunities or to invest in?

Hans Kobler:

So we try to follow the strategic priorities of our partners. And then within those pick the investments where we think we can make money, that’s kind of our simple value. And in order to find out what their priorities are, we ask them in a simple survey, in an annual survey. We actually just finished one. I’m not sure if the new one is on the website yet, but we had our annual meeting a week ago. And in those services, we first asked them, what’s the primary motivation that drives you? And the theme there is typically around. Look, I want to get closer. I want to have more revenues, right. I want to increase revenues, because they lose revenues when people go on solar and obviously electricity consumption goes down.

Jon Powers:

Right.

Hans Kobler:

So increased revenues, get closer to the customer, and harden the system for this difficult, new digital, decarbonized, decentralized world. That puts a great strain on it. So that’s kind of the overall theme. And then one level below that, we have them rank 50 sub-segments on a scale of five, that’s our GE training. And we put it in dashboards and the likes and sort of pretty much high on top, in the past where things like storage, behind the meter, in front of the meter, EV charging, electrification, big topic, custom engagement, clean energy, wind, solar, big topic, cybersecurity, DMS distributor. So those are kind of hitting the highlights. And we actually publish that on our website. So when you go there, you see the details of that.

Hans Kobler:

But it goes down further, where we look at operational technologies that allow innovation to happen faster. So we have a working group around that. Our culture change things. We look at the whole, how does AI come in here? We probably look at the whole Bitcoin in a working group. I’m not sure we’re going to invest. But, at least, we look at things, and we put in our database, which we share with our partners to see what is coming. Some of the financing models, so we have some financing investments also. So we cover really almost the whole food chain of the electron from cradle to grave and what we like. The most are companies where we can bring more than just money, where we can put our partners in some form to bear by being a customer, being a partner, by helping with the diligence to make a difference and making the lives of our portfolio CEOs easier.

Jon Powers:

Yeah. I think that’s one of the most exciting things about what I’ve heard from talking to some of your portfolio companies, just from folks that I’ve known throughout the industry, who have told me that the value add of Energy Impact Partners is, of course, obviously the capital’s great, but helping them engage with the utilities, which can be significantly challenging for a young company to do. And try to find the folks that are being innovative in those companies. You already know who they are, right. So you’re engaging them, helping coach them, be there. And then some of the folks have talked about the way those utilities have brought them in and brought them in-house and helped them engage their customers in a unique way. And I think that’s really exciting and can be really transformational for those utilities. And, of course, for folks in the startup space, that’s game changing and helping you prove out your worth in scaling. So that’s great work.

Hans Kobler:

Yeah. Absolutely. And not only for young guys, it’s difficult to sell to utility. Let’s face it. And the reason is, that utilities have a great responsibility. So they are fairly risk-averse. And they do testing and sometimes more testing, and they have to follow very strict procurement rules. And the way they get compensated is different from what people might be used from other industries. So selling to a utility is hard, and we view our job as EIP, we want to make that easier for our portfolio companies. And so bringing together, hopefully, what will be the leaders, the innovators in the segments that matter with the key players in the utilities is kind of our mission. And we do that. And that’s the nice thing about having such a broad coalition. We do that not only with one, but with 15 or 16 holding companies that have 50 plus utilities behind them. And that hopefully will make a difference. We’ve seen fairly young funds, but we’ve seen great success with dozens of deals that we were able to broker and hopefully a lot more to come.

Jon Powers:

And it helps overcome one of the biggest barriers to clean tech venture that’s been out there. I mean, one of the reasons I think we saw such a drop in capital being put in the space was young companies struggled to really have the long game that’s needed to engage those utilities, right. And get implemented, whether it be a generation system, or a smart grid system. Those are really complicated regulatory regimes they’re entering into, and knowing the long term play, doesn’t always map to traditional venture capital. I think you see now, a breakthrough, and some of the other players coming in to try to play along. I think your ability to engage and help with the utilities can be really game changing for those new technologies.

Hans Kobler:

We’d like to think so, but it’s a vast industry. It’s one of the largest industries in the world, but it also has a lot of challenges.

Jon Powers:

Right.

Hans Kobler:

You have the laws of physics that are not very forgiving in our world. You cannot really FedEx the electrons, so you still need to work with the grids. And then you have the regulators that have a great deal of say, who the winner is going to be. And so you throw all this together. Then I think the right approach, or the only approach almost is working really with the incumbents, with the utilities to collectively figure out what the right answer is. And the answer might be different in different states and POCs, but working together, I think, has a higher chance of success.

Jon Powers:

So just two final questions, one looking across the horizon, what area most excites you? You mentioned AI, is there a specific sort of area that you get excited for and are really looking into, as sort of being the next big thing?

Hans Kobler:

Oh, well, we have several sectors. I think the AI is one of them. Applying smarts and logics to be smarter about the timing and the consumption patterns. I think there’s a huge potential in that. I think the whole mobility, transportation, electrification, there’s huge potential in that. Studies just came out that there will be $5 trillion that needs to be invested in the electric vehicle or infrastructure, when we move towards electric vehicles, which is nonstop. So that whole dimension opens an incredible opportunity to do something good for the environment. To be smarter about the grid, so I think that is exciting. And then-

Jon Powers:

And that builds new demand for the utilities as well.

Hans Kobler:

Incredible amount of new demand, but also better demand, smarter demand, more flexible demand. And then, of course, we have the move towards clean energy, which is great for the environment, combined with storage, which is part of the pattern that I talked to before. I think, those are all exciting areas for all of us here.

Jon Powers:

Yeah. It’s a great time, I think, in this transformative time in the industry, for sure. So I always ask a final question, and you’re the first guest I’ve had on that was born internationally. So looking back across your career, if you could go back and sit down with yourself in Germany, when you were coming out of high school or finishing up school in Munich, what piece of career advice would you give yourself?

Hans Kobler:

Say the last thing, again.

Jon Powers:

What piece of advice would you give yourself? If you had a chance to sit down with yourself for a beer coming out of college, what would you tell yourself?

Hans Kobler:

Do what you care about and where your heart is, because then it’s easier to be good at it and make a difference. Yeah. It starts probably with the micro area, pick an area that you care about. And then do something that you enjoy doing, and then follow that path. And I think good things can happen.

Jon Powers:

That’s great. Hans, thank you so much for taking the time today and look forward to seeing you up in New York City here soon.

Hans Kobler:

Yeah. Stop by. A pleasure talking with you.

Jon Powers:

Absolutely.

Hans Kobler:

Take care.

Jon Powers:

Thank you. What an interesting conversation. Hans, obviously, is seen a lot across this industry, and we’re going to be tracking and watching what energy impact partners does for a long time to come and seeing the impact firsthand in what we are pursuing in this energy space. So first wanted to thank producers, Emily Connor and Lauren Glickman for their support. And thank you all for listening. Again, if you have ideas, please go to cleancapital.com, check out our new website. Give us your input on the podcast. And looking forward to continuing the conversation. Thanks.