London - July 5, 2012 (Investorideas.com renewable energy newswire) Clean Energy pipeline, the online daily financial news and data service dedicated to the clean energy sector, today releases its preliminary analysis of venture capital, private equity, project finance, public markets and mergers and acquisitions activity during 2Q12.
Global clean energy investment remained sluggish in 2Q12, with venture capital & private equity investment and project finance activity both falling quarter-on-quarter. Project finance totalled $34.6 billion, its second lowest quarterly level during the last two years, while venture capital and private equity investment (excluding buyouts) reached $1.9 billion, its lowest quarterly level since the beginning of 2009.
Similarly IPO activity continued to languish – clean energy companies only secured $1.1 billion through IPOs globally in 2Q12, in line with the $1.1 billion figure recorded in 1Q12 but significantly below the 2011 quarterly average of $2.9 billion. European and US IPOs are becoming extremely rare, with only one non-Asian company completing an IPO in 2Q12.
"The global clean energy sector is right in the middle of a major storm combining policy uncertainty in the US , low natural gas prices across North America, feed-in tariff cuts in Europe , a slowdown in Chinese wind installation levels and an ongoing sovereign debt crisis in the Eurozone," commented Douglas Lloyd, CEO of Clean Energy pipeline. "All these factors explain the disappointing investment levels recorded this quarter.
"Despite the challenging environment, there are reasons to be optimistic," continued Lloyd. "It is highly encouraging for the offshore wind sector that two landmark non-recourse project debt finance deals closed this quarter. There are also signs that certain clean energy sectors are still attracting the venture capital community, with investment in biomass and biofuels companies doubling this quarter."
Project finance posts modest decrease but offshore wind demonstrates bankability
Global clean energy project finance totalled $34.6 billion in 2Q12, an 8% decrease on the $37.7 billion recorded in 1Q12 and a 22% decrease on the $44.3 billion raised in 2Q11.
The substantial year on year decrease was caused by a slowdown in wind project finance activity in China due to the government's reduced installation targets for 2012, a fall-off in USA wind project financing as the production tax credit expiration nears and falling subsidies in Europe . Ongoing turmoil in the Eurozone also continues to reduce the liquidity of European project finance banks, which historically have been the largest lenders to renewable energy projects worldwide.
On a more positive note, two large ($0.5 billion plus) European offshore wind farms completed financings this quarter.
M&A activity hits two-year low
Global clean energy M&A activity totalled $9.2 billion in 2Q12, under half the $21.9 billion transacted in 1Q12 and approximately a quarter of the $39.2 billion recorded in the corresponding period last year. The decrease means that clean energy M&A activity has reached its lowest quarterly level since 3Q10, in terms of both the number and total volume of announced deals.
The main reason for this decrease was a marked reduction in announced deals. Only 179 clean energy M&A transactions were announced in 2Q12, 30% below the 2011 quarterly average of 256. An absence of large deals also hurt total deal volumes. Only three $500 million plus deals totalling $4 billion were announced in 2Q12, significantly below the nine totalling $12.9 billion that were announced in the previous quarter.
The one sector that proved particularly attractive to buyers in 2Q12 was energy efficiency. Energy efficiency M&A totalled $3.5 billion in 2Q12, a 52% increase on the 2011 average quarterly M&A volume of $2.3 billion. This increase was underpinned by Melrose plc's $2.3 billion acquisition of advanced utility metering company Elster Group SE.
Venture capital & private equity investment falls to three-year low
Global venture capital and private equity investment in clean energy (excluding buyouts) fell for the third consecutive quarter to $1.9 billion in 2Q12, a 14% decrease on the $2.2 billion recorded in 1Q12 and 42% below the $3.2 billion recorded in the corresponding period last year. Venture capital and private equity investment is now at its lowest level since the beginning of 2009.
The substantial year-on-year decrease was caused by a substantial decline in investment in solar and energy efficiency companies, which have historically been the largest recipients of clean energy investment – venture capital and private equity investment in solar fell 61% year-on-year to $355 million in 2Q12, while energy efficiency investment fell 41% to $360 million.
On a more positive note, investment in bioenergy companies (biomass and biofuels) grew to $422 million in 2Q12, almost double the $228 million recorded in the corresponding period last year. This included a $144 million Series C round for Sapphire Energy Inc., and a $110 million financing round for Harvest Power Inc.
Public markets activity posts modest recovery but non-Asian IPOs remain rare
Clean energy companies secured $2.2 billion on the public markets globally in 2Q12, covering IPOs, secondaries and convertible notes. This is a significant increase on the $1.2 billion secured in 1Q12 but well below the two-year quarterly average of $4.5 billion.
As in previous quarters, the clean energy IPO market was dominated by Chinese companies – six of the seven IPOs completed in 2Q12, representing 98% of all funds raised via IPO, were secured by Chinese clean energy companies. In contrast, only one non-Asian clean energy company listed on the public markets in 2Q12.
"The dearth of IPOs in North America and Europe can be explained in part by the poor performance of recent clean energy flotations. US agricultural biotech company Ceres and US biofuels producer Renewable Energy Group, which both listed in 1Q12, are currently trading at 32% and 23% respectively below their listing price. This does not inspire confidence among institutional investors," added Lloyd.
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