VC funding down 50% in 2012


According to the Mercom Capital report, the 2012 cleantech figure is the lowest since 2007. Venture Capital (VC) funding in Q4 2012 was $220 million in 27 deals though compared to the 14 deals in Q3 which amounted to $72 million. 25 investors participated in the deals in Q4 and no investors were involved in multiple deals. Concentrating solar thermal company BrightSource Energy lead the VC deal in the quarter with $83.6 million.

More than 140 investors participated in 2012, the most active ones in terms of deal numbers being New Enterprise Associates with four followed by Black Coral Capital, Firelake Capital Management, Kleiner Perkins Caufield & Byers and SunPower who participated in three deals each. The top 5 VC funding deals in 2012 were BrightSource Energy, a CSP company, for $83.6 million, SolarCity, a solar lease firm, for $81 million, CIGS company Nanosolar for $70 million, solar lease company Sunrun for $60 million, and MiaSolé, a CIGS company, for $55 million.

"The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies," commented Mercom Capital Managing Partner Raj Prabhu."With the drastic fall in crystalline-silicon PV prices over the last two years, most other technologies have struggled to compete."

Thin film struggle and downstream

Even though the total amount fell by 47% to $314 million, thin film companies saw the largest amount of VC funding in 2012. Prabhu noted that the drop in VC investments is directly related to the struggle of thin film companies, especially those involved in CIGS.

In 2011 thin film companies had almost $600 million. 85% of the total amount in thin film, or $274 million was dedicated to CIGS. Mercom Capital reported that thin film companies have received the most VC funding with more than $1.5 billion in the past three years. CIGS accounted for $1 billion.

Downstream companies have been benefitting though from low module prices. Solar lease companies especially have seen VC investments of $269 million in 25 deals, the most of any category as Mercom Capital's report stated.

Bankruptcies and insolvency

35 solar companies filed for insolvency or bankruptcy protection over the course of 2012 according to Mercom. More than 70 percent of these companies were active in manufacturing and all but a few were based in Europe and the United States. Thin-film manufacturers accounted for nearly 40% of the bankruptcies.

Merger and Acquisition

There were 12 corporate M&A transactions in Q4 2012, amounting to $953 million with only six transactions disclosing amounts.

The two largest M&A transactions in 2012 were Eastman Chemical's Q1 acquisition of Solutia for $4.7 billion, and 3M Group’s $860 million purchase of ceramics maker Ceradyne, whose Solar Energy division produces fused silica crucibles.

Also noteworthy is Hanwha Group's $322 million acquisition of Q-Cells which included the assumption of $272 million debt as well as the $275 million acquisition of Oerlikon Solar by Tokyo Electron.

"It was a buyer's market in 2012 – acquirers were targeting distressed companies with the goal of buying technology or equipment on the cheap," commented Prabhu. "More than half the 52 M&A deals in 2012 involved solar manufacturers and equipment makers."

Large-scale and debt funding

Large-scale project funding transactions are also included in Mercom Capital's report, including investors and project M&A transactions.

Active project investors in 2012 included the Development Bank of Southern Africa with 10 transactions, HSH Nordbank with six, International Finance Corporation (IFC) with five followed by Export Import Bank of the U.S., KfW Entwicklungsbank and Union Bank with four transactions each. Some of the active acquirers of projects in 2012 were investment funds who acquired more than 20 projects including the likes of The Carlyle Group, BNP Paribas Clean Energy Partners, ForVEI and Capital Dynamics among others. Other active investor groups were project developers, utilities, independent power producers and insurance companies.

Announced debt funding in 2012 was $6.9 billion in 34 deals, compared with $19.9 billion in 41 deals in 2011, and $35.7 billion in 29 deals in 2010. The largest debt deal in 2012 was the $1.6 billion credit facility received by Sky Solar, a Chinese developer of solar projects, by China Development Bank. Loans, credit facilities and framework agreements announced by Chinese banks to Chinese solar companies have reached $52.6 billion since 2010.

A bright spot

Amongst the myriad of downs in the sector, SolarCity, a venture-funded company, raised about $95 million in net proceeds. The other notable U.S. VC-backed solar IPO was Enphase Energy, whose debut at the end of March marked the first solar IPO in the United States since 2010.

To get a copy of Mercom’s market intelligence reports, visit this link.

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