Swedish startup Aira has secured €200m in debt financing from BNP Paribas to fund the rollout of heat pumps to customers. The climate tech is the latest in a string of domestic energy tech suppliers to secure non-dilutive funding to develop their businesses.
Aira was founded in 2022 by Vargas, the Swedish investment firm and company builder that’s also behind climate tech unicorns Northvolt, which produces batteries, and H2 Green Steel, which creates more climate-friendly steel.
Aira’s new €200m debt vehicle will be used to sell heat pumps to consumers in Germany via monthly payment instalments, starting at €80 per month. Aira is also active in the UK and Italy but this debt facility won’t service customers in those regions.
“We know that the biggest barrier to heat pump adoption is the high upfront costs, and feedback from our customers confirms that existing processes at retail banks for a heat pump loan are cumbersome and time consuming,” says Ane Launy, CFO of Aira.
Prior to the debt raise, Aira had raised €180m in equity funding, extending its Series B round to €145m in January this year. That investment was led by Singaporean sovereign wealth fund Temasek — which also put money into H2 Green Steel — alongside Altor, a private equity fund run by Vargas founder Harald Mix, and Swedish investment firm Kinnevik. Before that, Aira had raised €35m.
The rise of asset-backed securities
Aira’s debt vehicle is asset-backed security (ABS): when a customer signs a contract to buy a heat pump, Aira will be able to draw on the debt vehicle to fund the installation. The customer’s loan repayments go towards repaying the debt vehicle.
Aira’s ABS is the first financing facility of this scale dedicated specifically to heat pump securitisation.
The company is among a cohort of companies offering green energy tech to consumers in Europe — and they are increasingly turning to ABS.
In Germany, where Aira will start its monthly subscription model, other startups in the wider sector include solar installation company Enpal, heat pump and solar panel supplier 1Komma5 and Zolar, which just supplies solar panels.
In March, Enpal secured a €1.1bn ABS facility from Barclays Europe, Bank of America and Credit Agricole CIB, to offer financing solutions to its residential customers. In April, Zolar raised a €100m debt vehicle from BNP Paribas to do the same.
Instead of launching its instalment payment service, last week British energy provider Octopus Energy — which is by far Europe’s best funded energy startup — signed a deal with buy-now-pay-later provider Zopa. The deal means Octopus’ customers can pay for solar panels via instalments paid to Zopa.
The potential of heat pumps
Switching households over to heat pumps could bring important climate gains. Heat pumps source warmth from the air outside or ground, amplify the heat and pump it into the building. They need electricity but are far less emissions-intensive than gas-powered heating.
According to 2021 research from the European Union, residential space heating accounted for 18% of the bloc’s emissions — in large part from gas-powered boilers.
Aira says it could help households save up to 40% on their heating costs while simultaneously reducing household CO2 emissions by more than 75%.
Some European countries, like Sweden, have all but ended their reliance on gas-based heating — in large part because 43% of its households have a heat pump, according to the European Heat Pump Association. It’s a different story elsewhere in Europe: in the UK, just 1% of homes have a heat pump.
