June 27, 2022 – On today’s podcast we welcome special guest, ESGEN CEO Andrejka Bernatova. ESGEN runs a $280 million SPAC focused on accelerating the shift towards a low-carbon sustainable future.
On the show, Andrejka discusses:
- How she went from coming to the US at the age of 15 alone, with no knowledge of English, carrying $100 in her pocket to later getting a job on Wall Street
- How investment banking experience helped her as a CFO
- Her thesis behind the shift to a low-carbon future
- What is in store for the oil and gas sector
- And more
Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.
Julian Klymochko: Welcome Andrejka Bernatova from ESGEN to the show. How are you today?
Andrejka Bernatova: I’m doing well. Thank you, Julian.
Julian Klymochko: Yeah, it’s awesome to have you on. Read a bit about your story, which is super interesting. You came to America at the age of 15 by yourself with no knowledge of English, carrying a hundred dollars in your pocket. Tell us about this experience.
Andrejka Bernatova: Well, hello everyone. First of all, and it’s a pleasure to be on this podcast. Very excited. I am actually speaking to you all today from my hometown or really village actually, where I came from and yes, your right, Julian. I came to the U.S. at the age of 15. And really this was shortly after the fall of the Berlin wall and you know, the post communist transition in Eastern and central European countries. And you know, it was a very interesting story. It was sort of a coincidence. I walked home from school one day and I saw a poster advertising. Study abroad in America with the beaches of California and the Twin Towers actually at that time. And so, I sort of visualized myself. That’s where I wanted to be.
And you know, growing up in a country or region where you essentially couldn’t cross the borders, you know, 50 miles away from you. Because we were behind the iron curtain. It really incentivizes you to explore that much more when you actually can go and see the world. So, I wanted to go all the way to America. I actually spent about eight months raising money, going from one businessman to another, raising $10, $50. Actually, the guy who gave me the most was actually, I think about thousand dollars was the most that I got, but it was really $10, $50 bucks that I raised. And over the course of eight months, just biking before school and after school, when I was 14, you know, in snow and rain and heat and bought myself airline ticket, went on exchange program to the U.S. And it was just absolutely transformational for me. I was an exchange student in New Hampshire. I was hoping to be in New York City, ended up in the middle of the forest in New Hampshire with the most fabulous exchange family. They really turned me from sort of not having dreams to dreaming big, absolutely transformational. And they’re my family to this date. I see them very often and they really were able to witness and appreciate you know, transformation. They’ve seen in me since 15 until my age now,
Julian Klymochko: And that formative experience raising money at the age of 14 to provide for that journey is perhaps a great segue to the capital markets, which of course, you know, is all about raising money, finding investors, et cetera. You did end up on Wall Street after school, with experience at firms like Credit Suisse, Blackstone, Morgan Stanley, what attracted you to the capital markets and how did you transition from an exchange student to working on Wall Street?
Andrejka Bernatova: Yeah, you know, I was fortunate to go to Harvard. I studied government there and I realized after, you know, four years at the wonderful institution that Harvard is that I had no skillset. You know, my dream was always to change the world and make it a better place. And so, I worked at the World Bank, and I worked for the President in the Czech Republic. And after these couple of internships, I realized I actually need a hard skillset. And so that’s really what drove me to Wall Street. I realized I need to, you know, have my way with numbers. I never opened Excel spreadsheet until I started at Credit Suisse as an analyst. Probably the worst analyst of the history of Credit Suisse because it took me much longer to actually realize how Excel works.
But it was that real drive. One, for a real skillset and really making sure that I can support myself to be very honest, you know, I couldn’t call my parents to pay my credit card or to pay my phone bill ever in my entire life. And so, it was the ability to really provide myself and get a hard skillset that drove me to these firms. Now, the one thing I learned from that experience was you know, I always wanted to be surrounded by the smartest people I possibly can. I don’t know how I got into, you know, Harvard, I don’t know how I got into the boarding school before then. I don’t know how I got to, you know, Credit Suisse or Blackstone, but somehow, I did. And I was always surrounded by people who are better and smarter and even at this point and even more so at this point, you know, my goal from a daily sort of interaction perspective. So that’s what drove me to Wall Street.
Michael Kesslering: And then once you’re on Wall Street, you’re in investing banking. What drew you to the energy sector?
Andrejka Bernatova: Yeah, so I, you know, it was very interesting, a very conscious decision Mike. So, I realized after a few years of Wall Street. I was couple years at Credit Suisse, and I was a couple years at Blackstone Group. And then I went to a sovereign wealth fund called Mubadala based in Abu Dhabi. And I realized all these pieces of the journey. I touched energy and infrastructure, but I never fully focused on it. And so, I decided, again, this was my late twenties, maybe early thirties. I want to be a sector specialist. I don’t want to be a finance generalist. So, there was a very conscious decision and I looked at, you know, really my background. I realized I touched energy infrastructure every step of the way and decided I love it. That’s what I want to do. You know, I had experience actually at Mubadala doing a lot of solar and wind projects. This was at a time actually, when I made that conscious decision to go into infrastructure and energy when you know, the shale in the U.S. and Canada was booming obviously. And so, I wanted to be part of that immense growth and build out of some, you know, very interesting companies. So very conscious decision actually, I didn’t stumble upon it. I decided to be the specialist in a sector.
Julian Klymochko: And then once you had that investment banking experience, you did transition.
Andrejka Bernatova: Mm-hmm.
Julian Klymochko: Into industry, and you had roles with several energy companies, specifically being the chief financial officer. How was that transition from Wall Street to industry and what skill set did your capital markets experience, your investment banking experience provide in that transition to industry?
Andrejka Bernatova: You know, I think Julian, I mean, I think back at my life, and I really believe that you know, the first two years of my career, when I at Credit Suisse were the absolute worst years of my life you know, I didn’t see the sunlight. It was 9:00 AM to 4:00 AM, every single day, weekends, holidays, et cetera. So don’t get me wrong. I never want to have those days back.
Julian Klymochko: [Laugh].
Andrejka Bernatova: Probably the only person on this planet who never wants their twenties back, but it just taught me incredible discipline, you know, to this day, I’m sort of a scary person to work with for some people, because one, I love what I do. So, if you love what you do, you don’t mind, you know, waking up at 4:00 AM and just, you know, being excited and doing something. But the discipline and those two years of just, you know, just plowing through and no matter how much pain you are in, were incredibly important to me and opened so many doors for me. So that’s number one. When I transition into industry, I basically spend the first half a year making sure that people realize that I’m not some, you know, big Wall Street person coming from Blackstone and Morgan Stanley, that I’m, you know, one of the people building the company. And so, I spent the first half a year just you know playing pranks on our chief engineering officer and going out for, you know, lunches and beers with our commercial guys and really making sure that I integrate into the business and make people realize that I’m one of the people. I’m not just some outsider, you know, coming in with a fancy suit on. And what was helpful in that experience is, you know, since an early age, I basically lived in so many countries and I made a really conscious effort to move in different, you know, social strata, in different industries, you know, people from cities, from villages, you know, remote areas, wealthy, very poor, just, you know, very intensely making sure that I dive into very different environments and that sort of, you know, skill set that I, you know, build over decades really of my life, really helped me get integrated into industry and being able to talk to the field guy, being able to talk to the engineers, being able to talk to the scientists, right.
I loved it. I enjoyed it. And honestly, Julian, when I started at Penntex, was the first corporate experience. I felt like this is my place. This is where I need to be. I totally get it. And, you know, to this day, even in [Inaudible 00:9:41] today, that ability to make a connection with many different people and loving it, really enjoying it, actually, not faking it. So, you can tell I’m pretty direct person, was something that I was like, this is me, and this is my place. So, I’m at a conscious effort to really get to know the people and be just a normal person.
Julian Klymochko: And in that transition to industry, and I know many of reformed investment bankers who made that transition, you get a life back, as you indicated. Starting out your career as an investment banking analyst. You believe that work is 80 to 100 hours a week or more. And you think about the normal nine to five as a part-time gig. Now, fast forward to today, you founded a special purpose acquisition company, ESGEN Acquisition Corp. What’s your objective behind this newest iteration that you’re on?
Andrejka Bernatova: So, a couple of important sorts of key points. As I mentioned, I was, you know, part of the oil and gas shale growth, and that was an incredibly exciting time. And we’ve built some very cool companies. We took them public you know, we sold them, we made a lot of acquisitions. We raised a lot of capital. We frankly made mistakes, right. But we learned a lot from that experience. And so about three now, probably four years ago. I sort of looked at the universe. I looked at the, you know, going back to Mike’s question, why focus on energy and infrastructure. I took a step back and I do this exercise sort of every two or three years, by the way. And I wanted to recalibrate and wanted to see where is the energy infrastructure world going? And so, I went on a little private road show, if you will, with all sorts of investor, private, public, small, big, infrastructure guys you know, hedge funds, private equity, GPS, LPS, et cetera. And I spoke to about 80 investors at that time and asked them a question, what do they think about energy? What they think about infrastructure? Over my lifetime. I care about the next 30 years, not about the next 10 years. And there was a very unilateral sort of you know, sound or voice that was saying the transition energy is really becoming a very prevalent movement. I was in solar and wind about 12 plus years ago at Mubadala. And I love that space. And when I sort of, you know, did a little bit of that investor feedback and frankly, some soul searching too.
I mean, I really believe that you know, transition energy, I have three little kids and my sons are asking me, you know, why don’t I drive an EV? And why my car is not autonomous? And you know, why our house is so big, and it should be more efficient and, you know, et cetera. So, those are real questions, right. That’s who we are catering to, is to my kids’ generations. And so, I sort of opened my eyes and I realized, you know, this is kind of interesting. This seems like smoking cigarettes in the eighties, right. If you watch any movies, I was just watching some of our old communist movies in the, you know, Czech Republic and everyone smoked a cigarette, that was very normal. You see the house of Gucci; everyone smokes a cigarette there. That is not normal, that is not socially acceptable anymore.
You know, throwing out trash in the streets, that is not acceptable anymore, right. Versus that was acceptable 20 years or 30 years ago. And I believe the same is happening to energy, transition or energy. It’s not going to be socially acceptable to be wasteful, it’s going to be socially acceptable and priced on to really be preserving our planet. So, you know, I wanted to be part of that movement. And I wanted to add the skillset I have from traditional energy. And I wanted to be the conduit between traditional energy and new energy. So, it was a personal decision, and it was also a feedback from sort of the investor base, that very broad investor base that I investigated. Then why ESGEN? I spent three years, you know, I was a CFO at a transition energy company. I was also advising a number of companies in the space from grid arena to autonomous driving, to, you know, EV charging, across commercial capital structure issue, IPO preparedness, et cetera, including some de-SPAC situations.
And I realized there is just an incredible growth in this space. There is an incredible need for capital. And you know, the companies are in a stage where they need the expertise that we’ve built and frankly, the oil and gas sector, and they, you know, may need to avoid some of the mistakes that we make in a very similar sector. I believe the oil and gas sector is just the most translatable skill set into transition energy because it is the technology meets capital. And that’s very unique, you know, they’re not necessarily, you know, other sectors that are as comparable plus, it’s very entrepreneurial, right. Oil and gas is very entrepreneurial as well as transition energy. So, these three criteria were essentially you know, key ingredients for me to say, this sector needs me. I fundamentally decided to go into the space. And three, I believe that the SPAC capital, if used in the right manner is a very efficient way to bring some very interesting and very impactful companies to the public arena. So that’s why I decided, one for transition energy and two for SPAC as the vehicle to do that.
Michael Kesslering: And is it those reasons why you think that a SPAC vehicle is just a lot better way for these energy transition companies to go public versus, an IPO or a direct listing?
Andrejka Bernatova: Yeah, that’s a great question, Mike, you know, I’ve prepared four companies for a public avenue, two went public, ultimately. An IPO is a very long process. You get all the employees very excited, as much as you may think that you are filing confidentially, everyone will know. At best, will have to wait, but really in a realistic scenario, you may never be able to access the public markets. So yes, I do believe that the de-SPAC vehicle is just a much more efficient way for high growth companies. There may have just got on the really important contract. And they need to cater that contract, and that’s what we see quite a bit, actually, Mike is, you know, we are not focused on companies that are early stage pre revenue style companies.
We believe they still need to mature in the private arena, but we are focused on the companies that got that big contract with a very blue-chip company. And that blue chip company will be looking to that company to really be able to grow with them. And in order to do that, of course you need your product, but you also need capital. And so, yes, I do believe that the SPAC vehicle is an extremely valuable vehicle to take them public. Now, I think that there’s a huge differentiation in the SPAC universe and we’ve obviously seen that over the course of the past you know, even few months. The differentiation is enormous, so I think that it’s really important for the companies that are considering a de-SPAC transaction is, to partner with the right folks with people who’ve gone through that exercise before. Who’ve been operators before, who are aligned with the company, who are not there for just to, you know, for the quick transaction and kind of move on with their lives.
So that’s the thesis that we have. We really want to be partners for long term, both from a capital perspective, but as well as, you know, governance, helping folks you know, with commercial contracts, with M&A, with governance, with, you know, board members, obviously building our back office, that’s obviously our bread and butter. So being there for them. So, I think if you just provide the SPAC as a shell and you really don’t have experience, you know, that’s relevant to that transaction, I don’t think that’s a useful tool. It needs to be the right SPAC with the right ingredients, the right, you know, capital that’s aligned in the right way that truly can be a partner for your journey.
Julian Klymochko: That’s a really good point because those that don’t have those additional characteristics and value add to the underlying company that they’re bringing public that is very commoditized. It seems with so many SPACs in the market today. So, point noted. I was wondering if you could expand on your thoughts on the current market environment from a macro perspective, how are you seeing things out there?
Andrejka Bernatova: Well, if somebody told me it is going to be so challenging you know, six months ago, I would not believe them. So, it’s certainly you know, very exciting ride there, Julian it’s frankly, a grind [laugh] you know, it’s a lot of work, but that’s great because we are prepared to do that. We’ve looked at about 600 companies.
Julian Klymochko: Wow.
Andrejka Bernatova: As part of our SPAC. We probably talked to 250 companies and so very wide cast. We did that intentionally because we wanted to make sure that we are targeting the right sector and the right type of companies that we promised to our public investors during our road show. It’s obviously very complex. The hurdle for the quality of companies went significantly higher. So those companies that are able to actually make it to the other side and be a successful de-SPAC are those who have very robust revenues who hopefully have EBIDA, who have very strong management that wants to be public for the right reason.
It’s not a spur of the moment situation. And they realize the implications of that, right. They realize, we have to think about meeting our quarterly earnings estimates as basic as it gets, right. And that’s why most of the sector has been a really you know, has been challenged because those companies were frankly not prepared for that at all. It was just too early. So, I sort of like where we are, I mean, today is a bloodshed, every day is, you know, is in the reds and that was necessary. So, from a perspective, in terms of competition with other SPACs that has toned down significantly you know, the conversations that are taking place now are bilateral conversations. They are not these SPAC offs sort of highest bidder takes the company, which never should have happened in the first place. I think all of us in the SPAC universe should have been a little bit more disciplined and should have known better, to be honest. So, I like that you really are now, you know, high grading the SPAC universe. So, we’re not competing with the 600 other SPACs, right. We’re competing with very small amount of high-quality SPACs. So that’s number one, number two, I think, the CEOs and their backers are now realizing that they are in it, also for a long run. It’s not a, you know, quick flip. And so that alignment from evaluation perspective is very interesting. So, violations have certainly come down versus you know, 2021. And I think you need to actually align your own capital. In addition to the SPAC, you need to be able to bring additional capital to the table that aligns you to be with the company, you know, longer term.
But it’s tough. You have to use many tools at your disposal. You know, the pipe market is extremely thin. You have to think about some, you know, non-redemption tools, et cetera, but certainly you have to think about making sure that you have your own capital in addition to the to the SPAC. And you have good relationship with investors, right. We have a very strong investor base. I think that’s what differentiates us in our SPAC. Many investors who’ve been with us, you know, at least one or a couple times before. And so, we have personal relationships there. And so having that on the other side, on the public side is also, I think, key for a successful de-SPAC. It’s very challenging, but it’s for a good thing. So, the only the best companies are, you know coming to the market.
Julian Klymochko: And that’s the thing about hard things are these ideas, if they’re easy, everyone would do them. And that’s why you bring your unique skill set and forecasts and the sector focus. Now, speaking on that sector, focus, where do you foresee the energy industry going specifically? You mentioned oil and gas, this energy transition. How do you envision that playing out over the next sort of 10 to 20 years?
Andrejka Bernatova: Yeah, so it’s, you know, my thesis actually, Julian has not changed for the past three years. It is only has gotten stronger. So, you know, obviously oil basically $120 bucks and gas is basically $10 bucks, I would’ve never thought that would ever happen, especially, you know, the gas prices, but I’m sitting right now you know, in the Czech Republic. I went across Europe. I was in Spain and Austria earlier this month. And it is absolutely amazing to be in Europe. It’s, an enormous wind, and solar field everywhere. And I go pretty frequent. I go once every year. So, I sort of see the incremental changes are just enormous. Now what you see in specifically in Europe and, you know, probably Asia too is my guess is sort of you know, on the ground is the geopolitical situation that we have you know, happening at this point is turning the green movement into a security movement. So today is obviously, you know Putin is on the agenda and that’s the threat. Tomorrow it can be, you know the Middle East, the day after it could be south American Countries and the day after it could be the United States, right. And so, wherever you look, if you’re sitting in Europe or in Asia, you are dependent on someone that you absolutely cannot control.
Julian Klymochko: Right.
Andrejka Bernatova: So, and you know, what’s really interesting is, obviously there’s a lot of, you know, Europeans as well as obviously U.S. and globally, there has been an enormous push from governments, which you’ve seen over the past two year, you know, for green movement, greening, essentially, decarbonization, what you’ve seen in the past couple of years, including the United States obviously. You’ve seen decarbonization in the commercial arena. What you are really seeing now is, I wouldn’t even call it decarbonization. I need energy independence from an end customer level. So, I give you an example, my parents are about to retire and they’re going to their entire pension savings. And they are going to buy themselves essentially a heating system that makes them self-sufficient, but also by coincidence greener, right. Because they can’t obviously pay the enormous gas bill that they’re about to be hit with next year or not have access to heat this winter. So, what the end consumer in Europe and Asia is looking at, operating expenses are so enormous all of a sudden with the commodity prices, my risk from a security perspective is completely unpredictable from a day-to-day perspective. And not just today, anytime in the future, even in Ukraine [Inaudible 00:25:55].
So, what are they doing? They’re just plowing Capex into being self-sufficient. And the byproduct of that is having actually greener sources of energy, obviously. So, I’m a huge believer of you know, you have pushes essentially from all perspectives, and I’m not even talking about the social perspectives of my, you know, kids obviously finding it, unacceptable that I’m driving a gasoline fueled car. So, all these pushes, but what is economic and the security pressure that’s on end customers in Europe and Asia that are super charging the green energy growth.
Julian Klymochko: So, you have this energy transition thesis, your experience, you launched this SPAC, ESGEN Acquisition. Talked to 250 companies, looked at 600, so very active, any sort of insights, opportunities, challenges in terms of running this SPAC for the past few months?
Andrejka Bernatova: You have to have a lot of stamina. So, I used to run ultra-marathons and I have to tell you that taught me so much. So, you know, I run this Marathon des Sables, it was 180-mile ultra-marathon in the Sahara Desert. And I mentioned that because, you know, when things get tough, I look back at the day three when I was pretty sure that I was going to die, you know, alone in the Sahara Desert. And that was my choice to do that, that I’m like, you know what, we’re just going to keep on going, and it’s tough, but you know, we’ll make it happen. So, I’m actually very optimistic. I am glad the market is bleeding because, you know, hopefully when it will come to the market, it’s going to look better, and it needed that. I don’t like sort of, you know, going into a hyped environment. So, it’s been incremental, you know, incredibly challenging because the bar is higher, and the environment is tougher. And that’s what we like, because we run ultra-marathons, we don’t run marathons and we don’t, you know, run 400 meters. And we ultimately believe that you know, there are companies that are really neat and that will add a lot of value being in the public market.
Julian Klymochko: Well, that’s a great attitude. I love the tenacity and determination drive that you have in terms of running ESGEN, so thanks so much Andrejka for coming on the show today, we’ll be monitoring your story closely here and wishing you the best of luck. Thank you for sharing with us today.
Andrejka Bernatova: Thank you, Julian. Thank you, Mike. Appreciate it.
Julian Klymochko: All right. Take care.
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