In its latest Solar Funding and M&A quarterly report, Mercom Capital Group has found that solar VC funding dropped from US$376 million, or 32 deals in Q2 2012, to just $72 million, or 14 deals in Q3. The U.S. was said to be the most active VC funding market, having participated in 12 of the 14 deals (or $62 million). Australia and Israel comprised the remaining two.
The company said deal sizes were also noticeably smaller. At $15 million, CPV company, SolFocus represented the biggest VC solar deal in the quarter, followed by Solexel with $11.5 million (of which SunPower is an investor), and Draker, with $8 million.
"This was the first sub-$100 million quarter for solar VC funding since 2008. It is a very challenging market, particularly for upstream companies – good exits have become rare and M&A deals are more and more resembling distress sales," commented MD, Raj Prabhu. Overall, the company says it has "tracked" 22 solar bankruptcies, and 42 restructuring and downsizing announcements in 2012.
At the end of Q3, it found that the lions share of VC funding for 2012 was directed into downstream companies ($258 million, or 20 deals), and thin film companies ($246 million, or 14 deals). Mercom went on to say that since 2010, over $1 billion of VC funding has been funneled into thin film companies, specifically those dealing with CIGS technology.
However, it added, "While these deals may have made sense in years past, the quick and steep fall in of c-Si prices have put crushing pressure on thin film companies especially, along with CSP and CPV technologies."
Solar mergers and acquisitions (M&A) for the quarter were led by "distressed sales". A total of 12 transactions, worth $393 million were recorded.
Hanergys takeover of Miasolé for just $30 million, for instance, was said to highlight the current industry turmoil it initially received $500 million in VC funding. Q.Cells, meanwhile, was acquired by Hanwha Group for $322 million, or $50 million cash, plus $272 million debt assumption; and JA Solar acquired a 65% stake in Hebei Ningjin Songgong Semiconductor Co, a subsidiary of Japan-based M.Setek, for $39 million.
In terms of solar project M&A activity, 17 transactions worth $777 million were recorded in Q3 2012, up from $437 million across 19 transactions in Q2. "Top solar project M&A transactions included the two PV plants (92 MW total) acquired from GCL-Poly Energy by Consolidated Edison for $266 million, followed by Avivas acquisition of the HomeSuns solar rooftop systems portfolio (23 MW total) for $156 million," explained Mercom.
While the overall VC funding landscape has darkened, a "bright spot" has been identified in solar leasing. Mercom said that around $2 billion has been raised via residential and commercial lease funds this year, approximately $1 billion of which occurred in Q3 2012 alone.
It named SolarCity, SunRun, SunPower, Sungevity, OneRoof Energy, Clean Power Finance, and Enfinity as notable companies active in third party financing. Meanwhile, investors in these firms include Credit Suisse, Rabobank, Wells Fargo, Citi, and U.S. Bancorp.
China Development Bank
For Q3 2012, solar debt funding sequentially fell to $225 million in six deals, down from $2.3 billion in 15 deals.
Mercom named China Development Bank (CDB) as being particularly active in this field, after it provided Canadian Solar with $93.8 million for projects in Ontario; and Suntech with $32 million, together with local branches of Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank. Yingli Green Energy, meanwhile, received $324 million from the CDB, and $237 million from CDB and "others" in the form of loans, credit facilities, strategic financing and/or framework agreements.
Overall, Mercom said CDB has become the single largest provider of debt lending, having loaned around $37 billion to Chinese manufacturers since 2010.
In terms of large-scale photovoltaic project funding, Q3 2012 saw 15 announcements worth $1.1 billion. Of this, thin film projects accounted for $57 million. The table below details the top three projects funded in the quarter:
Amount ($ million)
LS Power (Centinela Solar PV Project )
Long-term finance (170 MW)
Prudential Capital Group, Sovereign Bank, Union Bank, Rabobank Nederland, Canadian Imperial Bank of Commerce, NordLB
Union Bank Canada Branch, Mizuho Corporate Bank, CIT Financial
(Toul 3 Solar Plant)