The federal government’s $15-billion green financing program has done its first deal. The Canada Growth Fund (CGF) is investing $90 million in Eavor Technologies, a Calgary-based geothermal energy firm that’s been rolling out its system in other countries.

The Liberal government revealed plans for a new clean-capital agency in the April 2022 budget. The CGF is designed to help bridge the up to $125-billion annual gap in spending on projects and firms to get the economy to net zero by 2050. In March, Ottawa announced it would outsource management of the program to the Public Sector Pension Plan Investment Board (PSP Investments).

Eavor uses underground heat to generate electricity, building a loop between two wells, then running a proprietary fluid through the system. Founded in 2017, Eavor had previously raised US$186.5 million, according to PitchBook data. The CGF’s new stake in the company takes the form of Series B equity; investors in the round’s earlier closes included BP Ventures and Vienna-based OMV. 

Previous Eavor backers have included Singaporean sovereign wealth fund Temasek, the venture arms of resource giants BHP and Chevron, and BDC Capital. Federal agency Sustainable Development Technology Canada awarded the firm $6.7 million in April 2019.

At an announcement in Calgary attended by Deputy Prime Minister Chrystia Freeland and CGF CEO Patrick Charbonneau, Eavor CEO John Redfern said the public money will help fill a gap left by a shortage of Canadian institutional investors. 

While public agencies including the BDC and Export Development Canada have backed Eavor, Redfern said, there was “no investment from Canadian VCs.” 

“Instead, we had to go on a bit of a world tour—to the U.K. for BP, to Australia for BHP, to Austria for OMV, to Japan for Chubu Elec… even to the U.S.,” he said. American tech giant Microsoft has also backed the company. 

“Over half a billion in funding in total, and nothing from the towers behind us,” Redfern said, referring to Canadian energy companies’ downtown Calgary headquarters. 

The CGF funding is meant to help Eavor roll out its technology faster, and hire to continue developing it. While the firm built its demonstration facility near Rocky Mountain House, Alta., its early major commercial deployments have been abroad. The company is working with the U.K.’s KCA Deutag to build a 65-megawatt loop near Geretsried in Germany. In March, the European Innovation Fund awarded Eavor €91.6 million ($133.3 million) for the €268.2 million project, which is set to begin pumping in December 2026.

The Liberal government had promised that the CGF would begin investing in the first half of 2023. 

Funding Canadian cleantech innovators to commercialize and scale is one of the CGF’s areas of focus. But the program’s prime function is to crowd private-sector capital into clean projects by accepting below-market returns or assuming more of the risk. Green firms have long complained that institutional investors shy away from financing decarbonization installations. 

“We are looking to make good deals happen, and today’s transaction is proof of concept,” Charbonneau said at the announcement. While Eavor is a straightforward equity investment, the CGF will also use more complex financing instruments, including concessional debt and “contracts for difference,” which pay out to producers of green outputs like hydrogen when market prices fall below a set rate. 

The program had previously attracted attention for reportedly rejecting a deal with the Pathways Alliance, a six-firm group of oil and gas producers championing a carbon capture and storage project in Alberta. 

On Wednesday, the PSP Investments subsidiary managing the CGF for Ottawa formally announced it would name Charbonneau as its CEO—an appointment The Logic reported in July. Charbonneau previously led PSP Investments’ infrastructure business from London. 

Update: This story has been updated with comments from the announcement.