London - October 4, 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 3Q12. For the first time, this analysis also includes investment in small-scale (sub-1 MW) renewable energy installations.
Global clean energy investment suffered in 3Q12, with project finance, venture capital & private equity (excluding buyouts) and public markets activity all falling to their lowest quarterly levels since 1Q09. Project finance totalled $27.3 billion in 3Q12, a 28% quarterly decrease, while public market listings fell 43% quarter-on-quarter to $1.2 billion. In comparison venture capital & private equity investment (excluding buyouts) performed well, posting a 6% quarterly decrease to $1.7 billion. The one positive was the total volume of M&A activity, which surged 65% quarter-on-quarter to $16.2 billion due to a series of large deals in the recycling and waste and energy efficiency sectors.
"Investment activity was disappointing but not unexpected last quarter. It's a brutal environment to raise capital when you factor in major policy uncertainty and low natural gas prices in the US, feed-in tariff cuts in Europe and an overall crisis of confidence in the global financial markets," commented Douglas Lloyd, CEO of Clean Energy pipeline. "A 30% drop in project finance in Asia last quarter, which had been propping up global investment volumes in recent quarters, didn't help."
Project finance slumps to three-year low
Global clean energy project finance fell to $27.3 billion in 3Q12, the lowest quarterly level since 1Q09. This represents a 28% decrease on the $37.8 billion recorded in 2Q12 and a 52% decrease on the $56.7 billion invested in the corresponding period in 2011.
The main issue in North America is the impending expiration of the production tax credit, which caused wind energy project finance in the USA to fall 62% quarter-on-quarter to $1.8 billion. The only region to experience an increase in project finance was Africa , where total investment increased 3% quarter-on-quarter to $1.2 billion.
On a more positive note investment in sub-1MW projects increased to $23.6 billion in 3Q12, a 26% rise on the corresponding period last year. This is a largely a result of ongoing reductions in solar module prices, which account for the majority of sub 1MW renewable energy installations. Feed-in tariff cuts have also been significantly less severe on small scale installations than for utility-scale projects in most of the major renewable energy markets.
M&A boosted by mega deals
Global clean energy M&A activity totalled $16.3 billion in 3Q12, an impressive 68% increase on the $9.7 billion transacted in 2Q12 but a 30% decrease on the $23.2 billion recorded during the corresponding period last year. There was a 7% uptick in the number of announced deals to 212 in 3Q12, up from 198 announced in the previous quarter. The sizeable quarterly increase in total deal value was due to four $1 billion dollar plus deals aggregating $6.3 billion being announced in 3Q12, compared with two with a combined value of $3.4 billion last quarter.
Large M&A deals were particularly dominant in the recycling and waste sector – 16 companies in this sector were acquired for a combined $4.5 billion in 3Q12, the highest quarterly level ever recorded. This increase was underpinned by Star Atlantic Waste Holdings' $1.9 billion purchase of Veolia ES Solid Waste Inc., and Waste Connections Inc's $1.3 billion acquisition of R360 Environmental Solutions.
Large acquisitions of companies with a footprint in the energy efficiency sector also continued apace in 3Q12, the most notable example being Blackstone Group's $2 billion purchase of Vivint Inc., a US-based developer of home monitoring and automation equipment.
Venture capital & private equity hits new low
Global venture capital and private equity investment in clean energy (excluding buyouts) fell for the fourth consecutive quarter to $1.7 billion in 3Q12, a 6% decrease on the $1.8 billion secured in 2Q12 and a 60% decrease on the $4.2 billion tracked in the corresponding period last year. Worryingly for early-stage clean energy companies, venture capital investment in Series A-C rounds fell to a mere $382 million in 3Q12, the lowest quarterly volume since 2009.
The large year-on-year decrease was caused by an absence of large solar deals. Only $108 million was invested in solar companies globally in 3Q12, a tenth of the $1.1 billion invested during the same quarter last year. Venture capital and private equity investment (excluding buyouts) in solar is now at its lowest quarterly level since early 2006.
On a more positive note certain clean energy sub-sectors bucked the trend. For example investment in advanced materials and green transportation companies grew 45% and 98% respectively quarter-on-quarter to $199 million and $307 million in 3Q12.
Public markets activity hits lowest level since 1Q09
Clean energy companies secured $1.1 billion on the public markets in 3Q12, through a mixture of IPOs, secondaries and convertible notes. This is under half the $2.1 billion secured in the previous quarter and a quarter of the $4.8 billion tracked during the corresponding period last year. As in previous quarters, Chinese companies dominated the clean energy IPO landscape – three out of the five IPOs completed in 3Q12, representing 92% of all funds raised, involved Chinese companies.
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