Why NGP Invested in Noveon Magnetics
In Q1 2023, NGP led a $79 million growth equity investment in Noveon Magnetics, the only high-performance rare earth magnet manufacturer in the U.S.
Rare earth magnets are critical enablers of the energy transition – but China controls the supply chain
Rare earth magnets enable the strongest, most efficient electric motors and generators, which are essential components in electric vehicles, wind turbines and a broad range of electrified industrial machinery. Electric motors currently consume over half of all electricity in the U.S. Global demand for rare earth magnets is expected to more than double over the next decade to support broad decarbonization and electrification of the economy.
Today, China controls over 85% of the mined-to-manufactured rare earth supply chain, which poses a major risk to U.S. energy transition ambitions and national security. The desire by both government entities and corporations to mitigate supply risk should drive demand for U.S. rare earth magnet production, and Noveon will be one of only a few domestic producers in this decade based on current announcements. Given the strategic importance of Noveon’s technology, the U.S. Department of Defense has issued over $35 million of grants to the company after vetting the technology.
Noveon’s proprietary technology creates a substantial moat, enhanced by its multi-year time-to-market advantage over competitors and U.S. manufacturing capabilities
Noveon’s proprietary magnets represent the first significant innovation in rare earth magnet technology in the last 15+ years and the first high-performance magnets manufacturable from 100% recycled material. Noveon developed a patented technology and production process to cost-effectively produce high-performance rare earth magnets from either mined alloys (the traditional approach) or directly from recycled end-of-life magnetic materials. Importantly, Noveon’s ability to use end-of-life materials may allow for better margins than traditional magnet manufacturing and can mitigate exposure to upstream pricing and supply chain risk.
Noveon has completed extensive qualification processes with a number of high-volume customers, having first engaged with customers over three years ago to ensure offtake at initial commercial production. At close, Noveon had already constructed its first commercial scale manufacturing facility in San Marcos, Texas and is currently ramping production from its first line.
Noveon’s management team is uniquely qualified to execute the business plan
Noveon is led by a diverse, purpose-built team of magnet experts and engineers that have worked together over the past decade to innovate, develop and commercialize Noveon’s proprietary magnet and manufacturing technology. The team’s domain expertise is both exceptional and rare in the Western hemisphere, which we believe is a clear competitive advantage for Noveon.
NGP is proud to partner with Noveon Magnetics
We’re excited to support the Noveon team as they grow production to power an electrified, low-carbon future and strengthen our domestic supply chain.
“Noveon has a proven capability of sustainably manufacturing superior rare earth magnets, which are an essential component in a wide variety of industries—especially those focused on the beneficial usage and generation of electricity,” says James Wallis, Partner at NGP. “We’re proud to partner with Noveon to help them scale their operations and provide their customers a reliable, high-quality supply alternative.”
Learn more about Noveon Magnetics: https://noveon.co/
NGP is a premier private equity firm that believes energy is essential to progress. Founded in 1988, NGP is moving energy forward by investing in innovation and empowering energy entrepreneurs in natural resources and energy transition. With over $20 billion of cumulative equity commitments, we back portfolio companies focused on responsibly solving and securing the energy needs of today and leading the way to a cleaner, more reliable, more affordable energy future.
For more information, visit www.ngpenergy.com.