Michael Crabb [00:00:59] Welcome to another episode of the Energy Impact Podcast. Our guest today is Jason Cheng, the founder and CEO of CelerateX. Jason, great to have you on.

Jason Cheng [00:01:09] Thanks, Michael. Thanks for inviting me on the show, and I'm really excited to be here.

Michael Crabb [00:01:14] Great. I can't wait to hear about all the important work you're doing. But first, tell us a little bit about you. Where are you from?

Jason Cheng [00:01:21] I grew up in Australia. I had first generation immigrant parents from Singapore. I studied economics and econometrics. But actually, Australia was a great place to grow up in the '80s and '90s.

Michael Crabb [00:01:37] Where in Australia? In Sydney or in Perth? Those are like...

Jason Cheng [00:01:40] Oh no, Adelaide and then Melbourne and then Sydney. So, I made my way around. In Australia, as you know, you've got fantastic beaches, great weather, lots of sport and it was a great time to grow up. But I'd say just in terms of what led to my initial spark and thinking about the environment, at the time, as you know, the ozone layer was the big topic of growing up there. You had to put on a hat and sunscreen. And as a kid, that's the last thing you wanted to do, right? But it was very clear from an early age that when you had this link between human actions, CFCs, the hole in the ozone layer, skin cancer and sunburn, that was a very direct cause, but also led to quite a lot of people around my age understanding about the environment and getting involved.

Michael Crabb [00:02:41] Interesting. I don't feel like it was as talked about here in the States the same way. But do you think Australia... I mean, it's a particularly outdoorsy sort of culture. Do you feel like that's different than other people that you talk to around the world?

Jason Cheng [00:02:56] Yeah, well, I think the hole was almost directly over Australia and the Antarctica, so we got the brunt of it.

Michael Crabb [00:03:03] Okay.

Jason Cheng [00:03:05] And I think also, the other side of it growing up was there was a solution. They had the Montreal Protocol, which was when the world banded together and decided to phase out CFCs. And so, not only you had a human made problem, but you also had a human made solution. So, it actually gave people, in particular, my generation, hope that you can actually change these things, which I think is a really good success story. As you say, it's not really talked about that much today, but it is a good example for the challenges that we face going forward.

Michael Crabb [00:03:40] Yeah, that makes sense. And then, you said econ, econometrics. How did that dovetail into your outdoorsy nature? Why not engineering or policy?

Jason Cheng [00:03:53] Well, it didn't at all dovetail.

Michael Crabb [00:03:58] Was it forced by your parents and that was what everyone was doing? What was the route?

Jason Cheng [00:04:02] Well, it was quite different, actually. My father was a doctor, so for a long time I was going to be a doctor until... As you know, in Year 11, you have to cut up a rat, and I decided this is not what I wanted to do for the rest of my life. My mother was an entrepreneur. She'd been buying, building, and then selling businesses for a very long time, and I saw that. But actually, I liked economics because again, it had this impact of having ideas which could have system wide effect for improving human welfare and human behavior. And so then, I really wanted to be an economist, so I studied economics.

Jason Cheng [00:04:41] Then over summer, I was enrolled in my honors year. I applied for a job that I'd heard of when I was traveling in Sydney for holiday. It was an economist job. I applied and didn't get the job. It was filled internally, and they said, "Well, we have this other opening in investment banking, so why not go try that?" I said, "Well, what is that?" And they said, "We can't explain it to you. You just have to go and apply and do it."

Jason Cheng [00:05:09] I got the job and so I just terminated the honors year and then went straight into work at that point in time. And so there it was, launched into the heady world of hostile takeovers, which was great training for a 20-year-old because you are all of a sudden around boards of directors, CEOs, CFOs. And very few jobs, I think, give you that exposure at such a young age to the corporate world.

Jason Cheng [00:05:44] I think in takeovers, you learned one thing. I mean, hostile takeovers were all the rage back in those days. And the good thing was that the result was very clear. Within four or five months, you either won or you lost or you increased the offer price, but you had to be... Well, I think what I learned was all about what adding value really means. Because everyone talks about it, but in a hostile takeover, you often have to innovate a new strategy or unlock some value or do something differently in order to to win. And the market is to judge whether it worked or not. And so, the results are very clear. It's not about adding more capital because it's an advisory role. So, you have to create something and innovate in order to be successful at your job. And so, bosses are always saying, "Okay, it's about how you add value to a situation."

Jason Cheng [00:06:41] I think a lot of that filtered through into when we formed the private equity group, that it should be more than just adding capital. It had to be about how you add value to a situation. And I think the other aspect to that training was you really had to be creative and innovative. Whatever you did, the market saw it, and then you couldn't do it again, right? So the next takeover, you had to come up with something new or else nothing would work. So there was this constant pressure to be creative and innovative or you didn't get paid, basically.

Jason Cheng [00:07:19] But I was in the Energy and Natural Resources team, because that was about 30% of the Australian Stock Market at the time, and TMT, telecoms, media, and technology, partly because my family was involved in that area, but also, I think DCF modeling was common to both natural resources and telcos at that time. And I think that also gave me quite a good perspective.

Jason Cheng [00:07:45] In those days, it was the old economy, natural resources and then the new economy, the first internet boom, and it seemed like the two would never meet and they're almost contradictory if you're involved in both at the same time. But I think today when you look at energy transition, you really need to understand innovation and technology as well as the energy sector. And I think a lot of people we come across understand energy but don't necessarily understand technology and innovation. And similarly on the tech side, there aren't a lot of people that understand the energy market in particular. So that also, I think, fashioned the way that we came to our own strategy within energy transition. I hope that gives you a bit of an evolution of our thinking.

Michael Crabb [00:08:33] I've got like four or five lines of questioning, but I'm going to start with first one and then we'll take down the boxes. I think you said this quite quickly. Did you stop your schooling to take this job? You said, "I'm not going to finish," or, "I'm not going to do..." There was something that you said like, "Oh, I'm just going to get on with it."

Jason Cheng [00:08:51] No, I graduated, but in Australia you can do an extra year, an honors in research, which I was going to do, but I didn't. So I just graduated with a normal degree.

Michael Crabb [00:09:03] That's so funny. I have a similar story. I was doing my master's degree in engineering and had an internship that I loved and just said, "I'm going to get on with it." I just caught that in your story. Okay, so you said, "Okay, I'm going to jump in. Econ's cool, but I'm going get into LBO modeling." How did you know where to begin? I mean, did they have a cohort in training and did you have some mentors that helped you out? Walk us through that process.

Jason Cheng [00:09:36] Well, the training was very different, I think, to what it is today, because in those days it was really two person teams. It was a boss and a junior.

Michael Crabb [00:09:47] You were right on the front lines.

Jason Cheng [00:09:48] Exactly. So you did everything. You did the modeling, the valuation, negotiation strategy, the structuring, dealing with the media, all that stuff as well together with one other person. So yeah, it was great exposure. They did have a silly formal training program like all the big investment banks do, and that did help quite a lot because I was more economics than finance. But it was a a great time. It was at Schroders, and with some of the smartest people that I met. Most of them had studied classics, actually, so they were trained all internally from doing ancient Greek and Latin to knowing how to model by the end of six months.

Michael Crabb [00:10:30] I do have a theory that any non-finance degree brings a perspective. Like, what you talked about. Being a little bit creative and always having to think about the next thing. You can teach anybody algebra, right? And not to diminish the actual deep finance. But yeah, I have a bias that having those other perspectives is super valuable.

Jason Cheng [00:10:50] Absolutely.

Michael Crabb [00:10:50] I don't want to spend too much time here, but what was your coolest structuring deal? What is the one that you remember the best from that time? I'll take you all the way back.

Jason Cheng [00:11:06] Too difficult to say, I think. There was one two-tiered structured bid where at different acceptance levels you get different offer prices, the idea was to try and cascade acceptances. But effectively, what you ended up doing was dropping the bottom tier and going to the upper tier as the raise in your offer price. I think it was maybe a bit too nuanced at the time, but that was the idea.

Michael Crabb [00:11:31] Yeah, there's a real fine line, I think, from innovating and getting overlevered. Like, if you get too innovative, you're probably mispricing risk. Not innovative enough, you're not competitive.

Jason Cheng [00:11:49] Absolutely.

Michael Crabb [00:11:50] Okay, so you're on the front line. You're seeing all these unique transaction structures. And then, you sort of glossed over creating a private equity fund. Is that Kerogen, or is that a precursor?

Jason Cheng [00:12:02] So Kerogen was formed from the same place... This was at J.P. Morgan. The Energy and Natural Resources team there effectively spun out from Kerogen, which is an energy focused private equity firm. And then later on, CelerateX was formed as the energy transition platform of that business. The team had been involved in that first huge wave of growth in energy demand and natural resources demand out of Asia across the 2000s where a lot of the Asian economies were consuming huge amounts of resources globally. The team was in the middle of that trade, if you like. And so, the inspiration for the first fund was really to capture some of these capital flows, identify the infrastructure, the assets, the projects, and the teams which were a bit younger, but could grow rapidly and then feed into that wider energy growth in demand.

Michael Crabb [00:13:07] Amazing. Tell us about that process and evolution.

Jason Cheng [00:13:12] Obviously, at that point in time, the Asian economies were buying a huge amount of resources but also paying very high prices. So at that time, when we could identify...

Michael Crabb [00:13:26] Sorry, what years? You may have said it, but what years are we talking about?

Jason Cheng [00:13:31] That whole wave, I suppose, was early 2000s to around 2007, 2008-ish.

Michael Crabb [00:13:42] Hot market, high oil prices, and developing Asian economies.

Jason Cheng [00:13:47] Yeah, absolutely.

Michael Crabb [00:13:48] Cool. You were in the perfect time and the perfect spot.

Jason Cheng [00:13:52] Yes. Obviously, that changed over time. That was 15 years ago and different trends. And so, energy transition obviously was a theme. We were involved in investing Energy Transition 1.0, which was really partly coal-gas switching in those days and the growth of the energy market as well as the 1.0 renewables growth.

Jason Cheng [00:14:15] That led us into the whole net zero decision. We're investing quite a lot in Europe by this time. And around, I think, 2019, the UK had committed to net zero carbon. At that point in time, we sat down and we thought... We decided to form a dedicated platform which was CelerateX. And the meaning is to accelerate exponentially the path to net zero. So, recognizing that reaching net zero needs speed and scale. But the original rationale for this is we sat down and we thought, "What does net zero mean?"

Jason Cheng [00:15:02] And maybe this goes back to my economist training, but when we thought about net zero being an economy wide transition, that every industry, every company, every piece of infrastructure had to go carbon neutral by a certain date, then you needed economy wide regulation such as carbon pricing or regulation as in phasing out the sale of new ICE vehicles in exchange for phasing in EVs and so on. So we thought, "Okay, this is going to be quite transformational for the whole economy. Not just increasing the proportion of renewable energy, but also fundamentally changing the way we operate, what we procure, the way we consume."

Jason Cheng [00:15:50] So we sat down and thought about this and thought, "Okay, we need a blank sheet of paper approach. What's going to happen to the various different industries? How are they going to transform? Which industries are moving and what skill sets do we need to be able to capture this opportunity?"

Jason Cheng [00:16:10] We also, at that point in time, knew the GE team in Asia as well. They were the only other team that was investing in energy at the time and had very complementary and quite different skill sets. More in manufacturing; we were more heavy industry and infrastructure and large project execution. They had more light industry, manufacturing. They'd been involved in 1.0 as well through hydro, nuclear, wind, and solar, as well as having specific specialisms like aviation and transportation. So, we decided to acquire or merge with them, including adding some senior executives across Europe and the US as well to round out the input.

Jason Cheng [00:17:00] So, we decided additional skill fits, teamed up, formed this new platform, and then the strategy was really about this speed and scale. It's been focusing on the industries or the verticals or the companies that could have an outsized impact on decarbonization as they scale with net zero regulations. And by scaling, they also can generate returns for our investors. So in saying that, we were growth investors with the whole growth in Asian demand. We could see being growth investors with this changing in regulation as well. So, we're always looking for these fulcrums of change where we can have an outsized impact.

Jason Cheng [00:17:47] We're only $2 billion under management, so still relatively small. So we look to punch above our weight in terms of industries that can have that bigger impact, both financially as well as in terms of decarbonization. So that philosophically and structurally led us to where we are at today.

Michael Crabb [00:18:08] Amazing. Go one level deeper then. If you're willing to share, tell us about what are those industries? It sounds like you do maybe proactive, thematic sort of investing a little bit. So what are those industries that you're looking at? What are those sorts of market caps or features that you're looking for in a platform that tells you can identify? The real question is, how do you identify that fulcrum? Because that's where you can create outsized return.

Jason Cheng [00:18:37] Sure. The thematics are clean power. So, things like geothermal, floating offshore wind. We're looking at SMR nuclear, those sorts of things. More on the baseload and higher uptime. We're looking at renewable fuels, chemicals. Then there is the battery ecosystem, and we've identified that as a supply chain bottleneck for energy storage as well as EVs. And then finally, the transformation of the traditional energy sector and to decarbonize. So, looking at how you can repurpose oil and gas facilities and infrastructure into hydrogen, carbon capture, those sorts of things.

Jason Cheng [00:19:24] They're kind of some of the thematics that we're looking at at the moment. But you're right, what we've focused on historically... And this was true for the GE team as well... Being deep sector specialists. Our focus is really looking at the trends and the opportunities. Not too early, not too late, but probably a couple of years ahead of, I suppose, the wider market. Identifying those opportunities, looking at where to play within the value chain. Which geographies are most attractive at any one point in time? And then, speaking to all the various players in that particular space and getting to know them, strengths, weaknesses and so on. Or, in some instances a company doesn't actually exist. And so, we have to back a management team to build one.

Jason Cheng [00:20:16] Typically, you're right. We're usually knocking on people's doors before they're knocking on our doors as a result. And if you're early or earlier to a particular theme, then you're generally able to find the higher quality assets and the higher quality teams and work with them to define the strategy going forward than competing with everybody for the same assets.

Jason Cheng [00:20:46] So, one is the themes, but I think the other important thing is the people as well as the quality of the assets. And in terms of the people, obviously there's a whole range of considerations, but we're always looking, I think, fundamentally for three key things. One is excellence, two is passion, and the third one is compassion. And what we mean by that, by excellence, we're always looking for to work with the best people. If you've got the best assets, the highest quality assets, you do very good work. In terms of passion, the targets that we set ourselves, the targets that they set themselves to scale and to grow and to have this amount of impact. It's not an easy task, so if people are passionate about what they do and they're really enthusiastic about it, then reaching those objectives and targets is a lot easier.

Jason Cheng [00:21:41] And the third one, compassion. That's really about the way people work. The way people work together with the stakeholders, mutual respect, taking into account other people's interests, be they within a firm, treating employees fairly, suppliers, customers, regulators, investors like ourselves. Because in order to scale an industry, particularly a newer one, you need an ecosystem. You need support from the whole ecosystem, the supply chain, the regulators, the local community in order to scale rapidly. If you're trying to do it alone, chances are you're going to be a lot slower and you're going to have a much more difficult path. So, having that broadly partnership approach is really important for us.

Michael Crabb [00:22:27] Amazing. And how do you evaluate? A lot of people talk about the team, right? I mean, that's a common refrain. I love that you've identified the actual traits and are able to speak so succinctly to them because that means it's really a part of your process. But how do you evaluate that? I know some investors have EQ tests, right? They have a psychologist on staff. Do you have a list of questions that you ask over the diligence process? Does your team come together and rank how they think the team measures up on those metrics? What's the process to evaluate that?

Jason Cheng [00:23:11] A lot of it is obviously track record and reputation and due diligence, but really it comes to working together. Before we make an investment, there's usually quite a long period of due diligence where we're understanding what is the strategy for the business, how we can add value to it, how we can de-risk it, how we can partner with them. And so, it becomes a joint discovery exercise. And if you're working together with someone or a team over a period of time, you kind of get to understand how they think, how they operate, how they work. Are we all aligned on the objectives?

Jason Cheng [00:23:48] And for us, it's also important that we add value, as I mentioned before, to a company so that it's not just about capital. We will look for the areas where there is risk in their business model which we might have seen. Again, given that we're a private equity firm, a lot of it's a repeatable process. So, usually the problems that they've encountered, we've seen before in some other context or some other country. It might be revenue growth or a government offtake arrangement or it could be some regulatory interface issue or a bolt-on acquisition or an investment that might be needed in the supply chain to de-bottleneck their processes. There'll be some area that we can work jointly together on and identify.

Jason Cheng [00:24:40] And so, by the time we invest, we all know what we're doing and we know how to do it. We're aligned, and then we move forward on it. So I think partly it's being sector experts. You generally tend to know a lot of people, and so there's a reputation effect there, as well as just practically working together with people.

Michael Crabb [00:25:00] That's interesting. I'm going to challenge one aspect of that. And this is not always true, but in this disruptive step change environment that we're in, how do you weigh experience and historical perspective versus in everything you mentioned to take something new? It takes a new way to think about it. Instead of business as usual, marginal price commodities requires a different lens or looking at a problem in a different way. And so, how do you include that aspect against this excellent slash experience sort of metric?

Michael Crabb [00:25:47] I don't know the right answer. This is a question that fascinates me because I've seen it go both ways. They've experienced it, they've seen all the holes, they can look around the corner. Or, experience where they're literally just standing in the hole and they can't get themselves out. You know what I mean?

Jason Cheng [00:26:01] Yeah, yeah. Innovation and change is one of these things that has to be in the DNA somewhere. Because if you're able to adapt, if you're able to pivot and move with the market, then you've got a business that is agile but can also last over a long period of time. So, you do need a certain level of expertise, particularly in execution, to be able to do that. You also need to be able to think broadly. So, it's almost being ambidextrous, I think is the answer. You need to be both. You need to be good at execution, good at what you're doing, understand the market environment, but have an open mind, a learning attitude to being able to evaluate different information, new experiences, new technologies and evaluate them without prejudice.

Jason Cheng [00:26:54] You can take a particular idea or technology in a team sense to the best idea it can possibly be and then evaluate it in the cold light of day and say, "Well, does it work? Does it not work? Try it out." And then when you try it out, you have to execute with excellence. But then when you're getting the feedback, then you need to have the open mind to say, "It worked," or, "It didn't work. We can learn from this. Fail fast and let's not spend a lot of money with this particular thing. It's data that we're gathering," rather than, "It's a failure. We're going to stop."

Jason Cheng [00:27:31] Excellence for us means you don't want an error in the model. That type of mistake is not the type of mistake that you want. But if you're trying out a different approach or different business model because you're pushing the boundaries of a particular industry and you try a little bit far, a little bit further than your comfort zone, you get some feedback and you iterate, you change, and you might fail if you go too far and then you reign it back in a little bit, that's the kind of experimentation or failure, if you like, that we should welcome and encourage.

Michael Crabb [00:28:08] Yeah, this is a framework that I'm testing out, so I don't know if it's the right way to think about it. But I was talking about this with a mentor of mine. And I compare it to the balance of spending time on getting 1% better or spending time on the 100X business opportunity. And I think, I hypothesized that the right blend in a scale business is 75% getting 1% better and 25% on the step change part of the business. And it's like a day a week or so spread over time, thinking about what could fundamentally change the trajectory of the business, and the rest of it is on what's in front of you, execution. And maybe that's different based on where you are in the company, but that's what I'm hypothesizing and talking to people about.

Jason Cheng [00:29:01] Yeah, and I think you're right. Most of what matters is execution at the end of the day. There are a lot of fantastic ideas out there, but they're either poorly executed or... Actually, usually they're poorly executed. So as you say, those incremental improvements, ultimately those quantitative changes ultimately can become a qualitative change and a breakthrough. But executing well, implementing the business plan, meeting the objectives... I think, absolutely, you're right on the button there. That should take up the majority of your time.

Michael Crabb [00:29:37] And then, as investors... How many active investments do you have now and what is your ability or impact? How involved are you then in those businesses? Like, quarterly board meetings or monthly? Does it differ?

Jason Cheng [00:29:55] A typical portfolio per fund is six to ten portfolio companies. So, fairly concentrated. We tend to organize by vertical or by platform. And so, we tend to be quite deeply involved in each of those. We can't really take on a huge range of different opportunities because each one requires so much attention. If we are going to be engaged operationally in de-risking a business or helping to add value, than it does require a lot of attention from senior leadership all the way through the organization.

Michael Crabb [00:30:32] Yeah, that makes sense. Okay, cool. Tell us about what you are excited about for the future. Out of all those themes, all those trends, what is the one that you tell people about at cocktail parties because you think it's a big one?

Jason Cheng [00:30:47] Well, it's kind of difficult to pick because we're invested across so many different areas and they're all good. And I don't want to...

Michael Crabb [00:30:54] Okay, I'll rephrase the question so it doesn't feel like you're picking your favorite child. Pick one that you're excited about that you think is not being talked about enough.

Jason Cheng [00:31:10] Okay. So, renewable fuels and chemicals is an area. When you think about transportation's share of energy and you think about electricity, power, they're about the same in terms of energy consumption. The amount of investment and attention and discussion that goes on around power and electricity is huge, but the amount of discussion around fuels is proportionately very, very small. And when you think of transportation, yes, there is some of it being electrified, as we know, but it needs lots of more solutions. So, we're quite excited by renewable fuels. It's a drop-in. So, sustainable aviation fuels, renewable diesel and so on, cellulosic ethanol. So these things don't require any change to infrastructure or equipment and therefore can save a lot of time, have a carbon impact today, but also save a lot of money.

Jason Cheng [00:32:09] And this is an area where there is proven technology. HEFA technology, for example, which we're invested in. And the mandates out there are huge. I mean, this is a massive growth area. I think the EU indicated something like 85% of aviation fuels have to be sustainable by 2050. And it's just 100X growth in demand over the next years to 2030 from a base of about less than 1% today. So you've got this massive explosion in demand for sustainable aviation fuels.

Jason Cheng [00:32:43] We're invested in one of three in the world who are currently producing from 100% waste. There will be more over time, but when you think about the amount of attention that fuels has had versus electricity... And the margins in fuels is generally higher given that electricity tends to be regulated. You would think that there's a lot more attention to this. Maybe it's just a lag in focus and where the industry's at, because the simple thing is solar, wind, where there's been a lot of capital and attention and experience. So, that tends to be where the discussion lies.

Jason Cheng [00:33:20] But then, you think about what else does a petrochemical complex produce apart from fuels; it's chemicals. Then you think about plastics, polymers, polyurethane, polyester, fertilizers and so on. These industries are absolutely massive and they also need to decarbonize. So, if fossil fuels are going to be taken out of the petrochemical complex and will be replaced with some other sustainable input, then the whole plastics industry is going to change as well. So, it does surprise me how slow that discussion has been even with the petrochemical and chemical industries as well around decarbonization. So these are again, huge times, huge markets, strong regulation backing them and technology which can can scale. So that's one area that we're very excited by.

Michael Crabb [00:34:16] Yeah, fascinating. Are the economics... The economics aren't there today, right? Maybe they are. I know it's such a broad scope of what you just described, so there's probably some areas where it is economic and others where maybe it isn't. But replacing or creating artificial hydrocarbons I still thought was quite challenging. But no, you see it right over the horizon.

Jason Cheng [00:34:43] That's right. So for us, we're taking waste, used cooking oil, agricultural waste, those sorts of things. There are input costs, but they are low because you're taking waste which might otherwise not have a use. You're changing the front end of the refinery, but the back end is fairly similar, the same. And then, producing basically the same outputs.

Michael Crabb [00:35:10] Isn't there energy cost? You can't just use that raw feed stock, right? Isn't there energy cost to break down the cooking oils into the core hydrocarbons?

Jason Cheng [00:35:20] It's a chemical process, so you might be using hydrogen or so on in order to do that rather than electricity. I mean, e-fuels is a different case where you're taking hydrogen and carbon and putting them together.

Michael Crabb [00:35:38] I see, I see. You're using chemicals. I got it.

Jason Cheng [00:35:41] Yeah, this is more on the chemical side. There are subsidies or a green premium that is being paid both under IRA as well as in the EU. And different countries have different regimes, but that does incentivize the production and sale of these fuels in order to meet those decarbonization objectives. I think like every new industry, it does need some support, particularly given the speed and the scale at which it needs to grow. But then over time, costs come down and so on like every other industry. But at this point in time, we're only at the start of this wave; we're not at the end. It's not like we think the regulatory framework's going to change overnight. In fact, it's only going in one direction at the moment.

Michael Crabb [00:36:35] Yeah. It comes back to what you talked about coming from a blank sheet of paper. And I don't know if you even intended it this way, but you said, "Every business, every business." It's the only way to create, otherwise it's giant game theory on who goes first and who pays the green premium themselves will never even start. And I feel like that's the cliff everyone's standing on. And so, you need those government programs.

Michael Crabb [00:36:58] And I think this idea of the transition being fast, effective, and cheap is totally ludicrous. That's just not how economics work. It's not how supply and demand works. If you want it fast and efficient, it's going to be a bit pricey, but that doesn't win votes.

Michael Crabb [00:37:18] You mentioned the UK, as an example, has a very... It wasn't a great report here just this week right on their progress. There's going to be some conflict. It's been very easy to be net zero; it's going to be hard over the next five years. And it'll be interesting to see who's really committed.

Jason Cheng [00:37:39] Absolutely. But I think generally speaking, policy is all going in the right direction. And every month, every year, there is more and more regulation supporting net zero. We can always complain that this is not going to happen fast enough and that, but I think generally speaking, it's all going in the right direction. And now you have consumers, investors, industry all supporting net zero as well. One of the things is when everybody is talking about the same thing, it's eventually going to happen. Maybe not in exactly the way that everyone's prescribing or in the same time horizon that we would like, but it does feel like it is happening.

Michael Crabb [00:38:20] Yeah, there's definitely momentum. Again, sort of the theme on the telco side, that part of the industry or that part of energy use, I think, is sort of leading the charge on Scope 2 and now even Scope 3 emissions and thinking about that. So, that's got to be an interesting corollary to your background.

Jason Cheng [00:38:38] That's right. Well, putting aside just energy, the composition of energy and thinking about this wider issue of transformation, the whole circular economy is the other aspect of business model innovation that I think also needs a lot more attention and a lot more thought. What do all those non-energy companies do? Apart from just taking more clean energy, how can they change their business models to use fewer resources, to have more of a closed loop, and recycling and making that whole process a lot easier, and/or changing even the way that they sell or produce. So, rental models, infrastructure as a service, those sorts of things which enable recycling and through ownership and control of those assets, having a different business model.

Jason Cheng [00:39:32] There's a lot of business model innovation that also needs to occur in order to reach that net zero target which is in addition to just the pure changing of the energy mix that we talk a lot about. But that's not going to be enough by itself because we also need to consume less energy more efficiently. And so, digital technology and innovation and business model change will be a big part of that to be more sustainable long term.

Michael Crabb [00:40:01] Yeah, I couldn't agree more. And that was part of why I was picking at your experience versus innovation. Because sometimes it's hardest for those folks to think about innovating differently. You know, I still run into people here in the US who think about, "Oh, the way projects get built is I sell a product to a utility and they go build it." My background's all deregulated and independent power producer development efforts. I think that pendulum has swung pretty dramatically.

Jason Cheng [00:40:31] Yeah, I think that is the one advantage in private equity or being a financial investor on the outside. Because you don't have a vested interest in the way things are today. Your interest is in generating returns and finding the most effective way to do that. That might mean an existing business that needs to be discontinued, which might be too radical a thought if you're in the industry to shift resources are another one. But as a financial investor, you can make those sorts of decisions more easily.

Michael Crabb [00:41:02] Yeah, fascinating. Right, it's hard to tell the company that, but you maybe see a different angle of the chessboard, so to speak. Really cool, really cool. Okay, well, I asked you about the theme and it was a good one. What in your team do you feel gives you an edge versus all of the capital providers that are seeking similar types of projects?

Jason Cheng [00:42:26] Well, as I mentioned, we've been industry experts focused on the energy sector for decades now. The team has been together for a long time, 10 years, so it's quite cohesive. We've been through multiple cycles, multiple different themes and trends, and together, the GE team provides a unique skill set. The GE team obviously have their operational value-added approach, Six Sigma and supply chain and all those sorts of things that they're really good at. And so, when we look at a particular industry, it comes with at least a deep sense of both history, contacts, relationships, but also a way forward. And I think that's the thing that the team's very good at, is finding what is the way forward in partnership with these portfolio companies and organizations, how to grow, de-bottleneck, de-risk their projects, their assets.

Jason Cheng [00:43:29] As I mentioned, the things that we look for in portfolio companies are excellence, passion, compassion. I'd like to think that our team walks the talk and exudes the same things and attracts the same sorts of people around them because they have the same values that we do. And then, when organizations with common values come together, then magic can happen. So, we don't work with everybody and not everybody wants to work with us, but the people that do for our particular areas and the verticals that we tend to specialize in, we go in deep and have a strong depth of not only knowledge of that particular industry, but the ecosystem around it and the challenges and the technologies that might be opportunities. We go in deep, and together with that knowledge, as well as, I suppose, the way that we do business, that combination, I think, is at least in the energy transition space not widespread, I would say.

Michael Crabb [00:44:32] Yeah. Amazing, amazing. Well, what a great note to leave it on. I'm very excited to see the different investments and change to the world that team brings.

Jason Cheng [00:44:43] Thank you, Michael. It's been a pleasure to be here, and thanks to all your listeners for tuning in and spending the time.