The sustained fall in stock prices continues to affect the solar industry, and is a factor cited by one of the largest companies in the industry for a shift in its operational course. However, as many of the executives at these companies will tell you, falling stock prices are not due to any change in fundamentals.
These themes were echoed in Mercom Capital’s Q3 Solar Funding and M & A report, which showed a strong quarter for capital flows into the solar industry, with total global corporate funding rising slightly to US$6.2 billion.
Other than public markets, funding levels rose in most areas, with venture capital (VC) funding at $257 million, its highest level so far in 2015, and debt funding also rising to $4.1 billion. During the quarter, public market financing fell from $2.3 billion to $1.8 billion.
Downstream companies continue to attract the largest share of VC funding, however this quarter polysilicon maker Silicor Materials reported the largest deal at $105 million.
Chinese companies again were the largest recipients of debt financing, representing $2.9 billion of the $4.1 billion raised. There were also three securitization deals announced during the quarter, with SunRun and AES joining securitization pioneer SolarCity for a total of $335 million.
But while securitization is proving popular, residential and commercial solar funds fell to just below $1 billion after two record quarters. Mercom notes that around 20% of the money raised went to loans, with the rest supporting leases and power purchase agreements.
Roughly half of the quarter’s public market financing came from two of the three initial public offerings (IPOs) held. But while TerraForm Global raised $675 million in its IPO, the company’s stock fell sharply thereafter and has remained depressed. By contrast Sunrun’s IPO raised only $251 million, but the company’s stock performance has been more even.
TerraForm Global’s problems are indicative of larger issues in the sector. With yieldcos falling out of favor, their fundraising in the public markets fell by half this quarter to $802 million, noted Mercom CEO Raj Prabhu.
Mergers and acquisitions were also brisk. SunEdison’s $2.2 billion purchase of Vivint Solar was the largest disclosed transaction, however the quarter also saw private equity firm KKR acquire an 80% stake in developer Gestamp Renewables for $1 billion. Additionally contract manufacturer Flextronics took over NEXTracker.
Fewer projects changed hands this quarter, with only 42 large-scale solar project acquisitions totaling $1.2 billion. This is compared to 66 transactions totaling $2.9 billion in the second quarter.