VB/Research's CleanTech & Renewable Energy Review 2Q10

2Q10 venture capital and private equity investment in Clean Technology and Renewable Energy exceeded $5.0 billion, despite a 30% decline in early stage VC activity

Category: Investment, Renewable Energy

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July 12, 2010 (Investorideas.com renewable energy /green newswire) - VB/Research's Clean Energy Research results released.

• 2Q10 venture capital and private equity investment in Clean Technology and Renewable Energy exceeded $5.0 billion, despite a 30% decline in early stage VC activity
• M&A deals valued at over $14.5 billion were transacted in 2Q10, with the total number of completed deals at historically high levels.
• IPO news in the sector was dominated by Chinese companies, who accounted for 75% of new issues this quarter
• "The market lacks pre-credit crunch exuberance but has recovered significantly from the moribund levels of 2009."

Global venture capital and private equity investment:

Global investment in Clean Technology and Renewable Energy companies by venture capital and private equity funds exceeded $5.0 billion in 2Q10. Although this represented a 4% decline on the previous quarter, it remains marginally ahead of average quarterly venture capital and private equity investment ($4.9 billion) since 2Q08 and 45% above the corresponding period last year.

Venture capital accounted for c.43% of total investment ($2.2 billion) this quarter, a similar total to 1Q10. Interestingly early-stage VC investment declined by 31% in 2Q10 while late-stage VC investment surged by 63%. VC activity in Europe bucked the overall trend growing by over 40% this quarter. This was largely due to two European companies, Fonroche and Think Global, raising over $100 million collectively. With these transactions stripped out, VC activity in Europe was similar to last quarter but over 20% below 2Q09.

Four deals accounted for over 25% of total VC investment in 2Q10, each of which involved companies that had recently been awarded government loans or grants. Brightsource Energy Inc, a developer of large-scale solar plants, was the most notable beneficiary raising $150 million of Series D funding on the back of $1.37 billion of loan guarantees provided by the Department of Energy in February this year.

Private equity investment remained flat in 2Q10 against 1Q10 underpinned by a resurgence of development capital activity (+23%). This compensated for a 9% decline in buyout investment during 2Q10, which at $1.6 billion, remained c.15% below average quarterly buyout investment levels. On a more positive note, development capital and buyout investment in 2Q10 increased by 33% and 52% respectively compared to the corresponding period last year. Notable private equity deals in 2Q10 included Montagu Private Equity and Global Infrastructure Partners' buyout of GreenStar, a UK-based waste management and recycling business, for c.$200 million.

Corporate VC activity remained robust with corporates, utilities and industrial groups including Alstom SA, Total SA, Israel Corp., GE Capital and Intel Capital Corp., investing in 26 companies through their venture capital divisions.

Douglas Lloyd, CEO of VB/Research commented: "VC and private equity investment in 2Q10 was stable with activity tracking statistical averages recorded during the past two years. The market lacks pre-credit crunch exuberance but has recovered significantly from the moribund levels of 2009." Lloyd added: "The main beneficiaries of this upturn are more mature companies seeking late-stage VC funding or development capital, particularly those that have received government support."

M&A

Corporate M&A activity remained robust in 2Q10, marginally surpassing the prior quarter in terms of completed transactions (152) and total transaction value ($14.5 billion). The quarter was notable for the lack of large deals – only two $1 billion+ transactions were completed - with the largest being BASF's acquisition of Cognis GmbH, for $3.8 billion. There was also no movement in the average transaction size, which has been hovering at the $100 million mark since the start of the year. In terms of activity by sector, wind and solar remained joint clear leaders accounting for 43% of completed transactions in 2Q10. Energy efficiency (16%) claimed third spot.

Wind farms are currently being acquired at an average of $1.8 million per MW which is in line with 2009. However, solar plants are being sold at a discount compared to last year with a recorded average of $2.5 million per MW versus $3.1 million in 2009. This is largely due to overcapacity in Spain and Germany combined with regulatory uncertainties.

Douglas Lloyd added "Looking forward we expect M&A transaction activity to remain strong. Overcapacity and fragmentation, particularly in China, among wind component and solar module manufacturers is expected to drive consolidation. In parallel, with public markets remaining fragile, M&A remains the only viable exit option for financial investors."

Project Finance

New financial investment in renewable energy projects worldwide totalled $29.6 billion during 2Q10, a marked increase on the $20.4 billion invested in 1Q10. China accounted for a significant proportion of overall activity during the period.

Collectively wind (45%) and solar (29%) almost accounted for 75% of total activity in the sector in 2Q10. The largest project was the $1.9 billion financing of the Gibe III Hydro Power Project, a 1,870MW hydro project located within the Gibe - Omo River Basin in Ethiopia. The largest wind project this period was the Collgar wind farm in Australia with a combined $680 million received from UBS, ANZ, WestLB AG and National Australia Bank amongst others.

Public markets

During 2Q10 CleanTech and Renewable Energy indices suffered along with the rest of the market. The CleanTech Index and First Trust NASDAQ Clean Edge Green registered decreases similar to the FTSE 100 (c.-14% each). Many other sector-specific indices suffered more substantial losses: First Trust ISE Global Wind Energy: -26.4%; Ardour Solar Energy Index: -25.7%; Market Vectors Global Alternative Energy: -19.8%; and WilderHill New Energy Global Innovation Index: -19%.

The result was some high profile casualties. Solyndra, a US-based designer and manufacturer of solar photovoltaic systems for the commercial rooftop market, cancelled its IPO plans despite receiving a $535 million loan from the DoE in March 2009. China's second-largest wind turbine maker, Xinjiang Goldwind Science & Technology Co, also shelved its c.$1.2 billion IPO in mid June, making it the fifth Hong Kong IPO to be postponed in the past month.

VB/Research tracked 16 IPOs in 2Q10 totalling $1.1 billion. This represented a 28% drop in value compared to 1Q10, when 18 IPOs were recorded. China provided three of the top five public market transactions and a total of 12 IPOs in 2Q10, as equity capital markets continued to show strength in the region. North America provided the remaining top two deals including the $226 million oversubscribed IPO of Tesla Motors Inc., the electric car manufacturer.

For further information on this press release please contact:

Douglas Lloyd:
+44 (0) 207 251 8000
douglas.lloyd@vbresearch.com

About VB/Research

VB/Research's Clean Energy pipeline division is a leading global source of subscription-based data, research and business intelligence on venture capital and private equity funds and their investments, M&A and the public capital markets in the Clean Technologies and Renewable Energy sector. Clean Energy pipeline™ has been active in the sector since 2005 and employs 30 analysts and journalists in various locations worldwide.

The Clean Energy pipeline online platform provides access to subscription-based data and business intelligence including: proprietary actionable intelligence on companies and investors; VC/PE, M&A and IPO transaction data including multiples; statistics and analytics; and a global directory of professionals active in the sector. Clean Energy pipeline™ also provides customised market and industry surveys, research and organizes senior-level networking events.

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