Clean energy investment set to grow following robust third quarter

Online financial news and data service Clean Energy Pipeline on Wednesday released its preliminary analysis of venture capital, private equity, project finance, mergers and acquisitions and public markets activity in the third quarter of the year.

The company’s review shows that new investment in the global clean energy sector totaled $64.8 billion between July and September, a 3% decline from the second quarter ($67 billion) but an 11% increase compared to the same period last year ($58.4 billion). Project finance climbed to $41.8 billion, a seven-quarter high, and the number of public markets issuances reached a three-year peak. Clean Energy Pipeline says 2014 is poised to register the first year-on-year growth for total new clean energy investment since 2011.

"Despite a marginal quarterly decrease in clean energy investment in 3Q14, it is increasingly likely that new investment levels in 2014 will surpass 2013," said Clean Energy Pipeline CEO Douglas Lloyd . "This is welcome news for the industry following annual declines in investment in both 2012 and 2013."

Project finance reaches seven-quarter high

Total clean energy project finance reached $41.8 billion in the period — a seven-quarter high and a 2% uptick on the $41.1 billion invested in the second quarter and a 17% increase on the $35.6 billion invested in the third quarter of 2013.

A 15% quarterly surge in investment in Asia to $14.6 billion contributed directly to the increase, according to the report. Investment in Chinese solar projects more than doubled to $5.4 billion, resulting in part in the overall investment increase in Asia.

Investment in Japanese renewable energy projects was also up — some $1.8 billion were invested in the third quarter, the highest quarterly volume ever recorded, according to Clean Energy Pipeline.

Investment was boosted by the $867 million loan led by Bank of Tokyo–Mitsubishi UFJ, Mizuho Bank and Sumitomo Mitsui Banking Corporation to fund the construction of the 231 MW Setouchi City solar PV project, which is expected to be the largest in Japan when operational.

Number of public market deals reaches three-year high

Some 31 public market deals were completed in the third quarter of 2014, the highest number since the second quarter of 2011. Clean energy companies raised $3.6 billion on the public markets globally in the period through a mixture of initial public offerings, secondaries and convertible notes, resulting in a 13% increase on the $3.2 billion secured during the third quarter of 2013.

Yieldcos continued to raise capital on the public markets in the quarter. Two yieldcos raised a combined $1.2 billion last quarter, a 30% increase on the $945 million quarterly average secured by yieldcos since the beginning of 2013.

In addition, two solar companies completed notable IPOs in the period. Residential solar installer Vivint Solar raised $330 million through an IPO on the New York Stock Exchange while Chinese solar backsheet manufacturer Hangzhou First PV Material secured $265 million through an IPO on the Shanghai Stock Exchange.

M&A value falls but deal numbers remain steady

Clean Energy M&A activity totaled $11.4 billion, a 33% decrease on the $17.1 billion transacted last quarter. The number of announced deals remained robust at 263, in line with the quarterly average of 274 deals during the past three years.

Yieldcos continued their acquisition spree, although they were less active than over the last 18 months. In total, yieldcos announced acquisitions valued at $805 million in the period, a 28% decline on the average quarterly value of yieldco acquisitions since the beginning of 2013 ($1.1 billion).

Venture capital and private equity activity remains quiet

Venture capital and private equity investment in clean energy (excluding buyouts) totaled $1.5 billion in the quarter, representing a 4% increase on the $1.4 billion invested in the 2013’s third quarter.

The solar sector received the greatest amount of investment in the period, accounting for 25% of total venture capital and private equity investment. Notable solar deals include the $110 million secured by residential solar company Sunnova (from undisclosed investors) and GlassPoint Solar, which secured $53 million from Oman’s State General Reserve Fund, Royal Dutch Shell and existing investors Chrysalix Energy Venture Capital, Nth Power and RockPort Capital.