At the helm of the new energy industry: In Račice, they turned from gas to hydrogen and wind

Hospodářské noviny
4th April 2023
by Pavel P. Novotný
photo by Honza Mudra

In the former family-owned company 2JCP, technologies for green energy are being developed. Jet Investment and its managing partner Igor Fait have bet on the team around the founder Jan Paces.

A few metres behind the stands of the famous rowing canal in Račice, near Roudnice nad Labem, where top Czech and foreign rowers and canoeists usually compete, a transformation of the current energy industry is taking place literally before our eyes in several inconspicuous production halls.

Does that sound far-fetched? Maybe. But the story of technology company 2JCP illustrates quite faithfully the rapid changes the industry is undergoing. What was once a family-run workshop that serviced the technology of a nearby paper mill and then lived mainly on gas-fired power has evolved into a global manufacturer of unique technologies for modern decentralized renewable energy. With customers in Western Europe and the USA and last year's sales of over CZK 1.6 billion, the company was acquired in 2020 by Jet Investment's fund Jet 2.

Thanks to this merger, 2JCP could afford to buy the Trebic-based manufacturer PBS Industry, controlled by Jet Investment, and produce machine parts for the energy industry. 2JCP fully integrated PBS Trebic and renamed it to 2JCP Trebic. Thanks to this merger, the group has significantly increased its production capacity. Currently, the group has two large production plants in the Czech Republic, smaller sales and development teams in the UK and the USA, and employs over seven hundred people in several countries. 

Modern propulsion for ships

As part of the expansion of the Račice plant, a new production hall was added to meet the growing demand for green hydrogen production technologies. This is a major focus of the company, although it has been mainly in the gas business for the last twenty years.

"Unfortunately, you cannot take pictures of this, it is subject to strict rules," points out Vojtěch Křenovský, CEO of the group, as he shows the impressive construction of a several-metre-long industrial electrolyzer in one of the newer halls, which will be taken over in a few days by a key business partner, Germany's Siemens Energy.

The device will then head to Denmark, where the world's first large-scale commercial green methanol production facility will be built. One that will power Maersk's new giant ocean liner fleet.

"We are the only company in the country with a working electrolyzer with a capacity of tens of megawatts. It produces eight tonnes of hydrogen in 24 hours. That's a huge volume. We have gone down the road of commercializing hydrogen instead of research and development. That's why we are partners with the big players," explains Jan Pačes, the second of the guides, a sales director, minority shareholder and one of the founders of 2JCP. "We can't afford to develop the entire electrolyzer. We do everything around, up to 90 percent of the components are our work. The core of the electrolyzer alone is Siemens', which spent over a billion euros on its development," explains Pačes.

The know-how in the key chemical electrolysis process is thus held by Siemens Energy, which has currently completed a gigafactory in Berlin for the mass production of electrolyzer cores. Still, the entire equipment's production and assembly around the core occur in Račice. The domestic company is expected to supply Siemens with dozens of these devices in the coming years, representing total revenues in the billions of crowns.

According to Pačes, this year alone, projects in the field of green hydrogen should account for over 200 million crowns. Overall, the share of the hydrogen business in the company's revenues is growing at the expense of the previously dominant natural gas power business.

"It still accounts for slightly more than half of revenues... We are still dealing with gas-fired technologies, mostly upgrades of small decentralized sources or sources on the premises of large industrial manufacturers. Many decarbonization projects are still on the market where you replace coal with gas. Although they are decreasing," says Pačes. The company made over CZK 1.6 billion in 2022 and expected growth of just under CZK 2 billion this year.

"But the company is growing much faster. The year-on-year growth is due to divesting part of the Trebic production, which did not fit in with our future direction," explains Vojtěch Křenovský, director of 2JCP. At the end of last year, the part for the production of gas burners, managed by the subsidiary PBS Power Equipment, was purchased by the French group Babcock Wanson.

From Kožený to Fait 

The roots of the company go back to 1992 and are mainly connected with the current commercial director and the largest minority shareholder, Jan Pačes, a native of nearby Štětí. That year, the company was founded by his father Jaroslav and his uncle. The giant paper mill in Štětí, which bore the name of the Sepap paper holding, had just announced a tender for outsourcing technical maintenance, and the gentlemen won it.

Let us recall that the paper mill was a hotbed of the controversial privatization speculator Viktor Kozeny. He and his Samerik partners took control of them in an indiscriminate battle with the Swedish strategic investor AssiDoman (the Swedes did eventually acquire the paper mills, but only a few years later). However, the budding entrepreneurs from Štětí, represented a breakthrough in the energy business. They took over 25 technicians and started the mechanical maintenance of the giant plant. For the first four years, they were based on the premises of the paper mills.

Although Jan Pačes was just over 20 years old and had just studied finance at the University of Economics in Prague, he immediately got involved in the family business. When his father withdrew from the company in 1994, he took over his place as owner. In 1999, his uncle left the company, and his maternal cousin Ota Raiter joined the ownership structure. He also retained his share in the company to this day. Together, they managed the company on and off until 2020.

For the first four years, the company was exclusively employed in maintenance for their primary client. Gradually, however, it added manufacturing and servicing various equipment for local industrial and energy plants, such as the power plant in Mělník or the sand plant in Roudnice.

"When my uncle left in 1999, I started looking for customers abroad, and that's how we got into the gas power industry. It became our main business. At first, we were an assembly plant of other people's ideas, then in 2004, we set up offices in the US and UK and recruited top talent and engineers with experience. As a result, we have become solution providers, i.e. suppliers of complete solutions; we have gone up a level. And today, we have our research and development for some products," says forty-nine-year-old Pačes, describing the brief genesis of the family business.

The four pillars

In 2017, the first major crisis in the gas energy sector arrived, and thus a significant drop in orders. And the company had to react quickly. "Everyone suffered, especially the turbine manufacturers, to whom we were very much tied. So we were looking for a way to diversify our business. The Green Deal was starting, and we knew that if we wanted to do something long-term, we had to go in this direction," says Pačes, adding that the company's management has identified four main areas for future direction.

The first is the aforementioned production of green hydrogen by electrolysis. The second pillar is the capture and further use of CO₂, the so-called carbon capture. The third major area is to be offshore wind turbine technology. The fourth is the treatment of waste by pyrolysis, i.e. thermal decomposition, where it is indirectly involved, for example, in a significant project with IKEA to treat wood dust generated by cutting furniture boards. This often contains toxic substances from paints and adhesives. Pyrolysis of the dust produces, among other things, pure carbon, which can be used in pharmaceuticals and agriculture, and gas, which can be used as a heat source.

The company already has live commercial projects in all these areas, mostly in cooperation with large Western companies. Nothing remains at the academic stage. "These directions are all innovative, if only because they are completely new. And I see much potential in all of them," says Pačes.

And it was this authentic desire to capture the latest energy trends and actively participate in them that brought Igor Fait, a domestic billionaire and agile investor in the industry and energy sector, the boss and owner of Jet Investment, to the company in 2020.

He had been circling the company before, but the two sides could not reach an agreement for long. However, the vast opportunities in the green decentralized energy sector convinced the owners of 2JCP to sell a large part of the business.

"All these circumstances simply forced us to let a strong investor into the company. At the same time, we believe in the company, enjoy it, and want to stay in it in some way. So we kept 30 per cent," says Pačes. In addition to him and his cousin, their UK business partners also hold small stakes. The 2020 agreement also allows them to sell Jet Investment another 15 per cent. But Paces has no plans to use it in the next few years. The current setup, as well as the cooperation with Jet Investment, suits him.

Igor Fait also speaks with respect about the founders and current management of 2JCP. "We encourage innovation in each of our companies. It is one of the most important criteria when selecting investment targets. And, of course, successful innovation is linked to the successful growth of our companies and, thus, their appreciation and subsequent sale to the satisfaction of our investors. The driving force behind all innovations is the person and the team he has created, and Mr. Pačes is certainly such a driving force at 2JCP," says Igor Fait, founder and head of Jet Investment. However, he has a reputation on the market for being a hard or even ruthless businessman, especially when taking over companies.

"We certainly can't complain about our cooperation with Jet Investment. It's useful to have an outside perspective. We are involved in everyday business, and sometimes it can be difficult for us to step aside and look at things from a different angle," adds Vojtěch Křenovský, who became CEO of the entire 2JCP group just after Igor Fait joined the company and acquired the Trebic plant of PBS. He is not a person appointed by the majority owner but rather a 2JCP alumnus from the Račice plant.

The mechanical engineer from the Czech Technical University in Prague joined the company in 2012 and has been the chief operating officer of 2JCP since 2014. When the company expanded with the help of capital Igor Fait to include a plant in Trebic, he was promoted to head of the entire group, while founder and long-time boss Jan Pačes still handles mainly the business.

Although he bet on the gas a few years ago, the end of Russian supplies to Europe and the Russian market in general does not make him wince. More than 90 per cent of the turnover comes from customers in Western Europe. In the past, the company has been involved in the Nord Stream 1 pipeline, for example, which Gazprom owns 51 per cent of, but only as a supplier of compressor stations for the British Rolls-Royce.

"We have never delivered anything to a Russian customer. On the contrary, the end of Russian gas has given us an incredible boost. Since 2018, hydrogen has been talked about all the time. We've spent a lot of money on it and have scratched our heads about whether it will ever come. Then the war started, and within two months, everything changed. Now hydrogen projects are growing exponentially. We supply equipment for offshore platforms, for example. When we talk to customers in Norway, they say they sold as much last year alone as they did in the 12 years before that," says Paces, whose primary concern - as expected - is the lack of engineers in the labour market. Even so, he says the company is well-placed to keep up with the most prominent European players and help them cope with the dramatic changes in the current energy industry.

An authentic effort to capture the latest energy trends has brought agile investor Igor Fait to the company.

Hydrogen for 200 million - According to Jan Pačes (left), green hydrogen projects should bring in over CZK 200 million this year alone. Photo with Vojtěch Křenovský, CEO of 2JCP Group.

Author: Pavel P. Novotný, photo: Honza Mudra