Mercom Capital: Downstream dominates as solar investment levels rebound in Q3 2014

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Mercom Capital has released its third quarter 2014 report on funding and mergers and acquisitions in the solar sector, which finds rising levels of investment across the board. “Whether you look at VC, debt or public markets, it was the best fundraising quarter since Q1 2011,” says Mercom Capital CEO Raj Prabhu.

As in previous quarters, much of this funding went towards downstream companies. Out of US$326 million in venture capital funding, downstream companies attracted $205 million. Similarly, the IPO for SunEdison’s yieldco TerraForm Power represented over half of the $987 million in public markets financing.

However, these numbers are dwarfed by the capital that China continues to offer to its solar industry. During the quarter Chinese banks made $7.3 billion available in loans, credit lines and other forms of debt. This includes China Minsheng Bank’s $3.3 billion line of credit to Shunfeng, and developer Hareon accessing $3.2 billion between a loan and a credit line.

In China as in the West, much of this is going downstream, and Hareon plans to use this $3.2 billion for project development activities. It is unclear whether Shunfeng will direct its available capital towards its manufacturing, which includes subsidiary Wuxi Suntech, or towards project activity.

This shift is part of a multi-year trend. In 2011 Chinese banks made over $32 billion available to PV manufacturers, but this activity cooled and moved downstream in 2012 and 2013. In the beginning of 2014, the government ordered banks to step up their lending for project development, as part of policies intended to move the market from large-scale projects to distributed generation.

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