Renewables policy may be a mess. Company stocks may be depressed. But there are segments of the clean energy business showing healthy prospects.
Mergers and acquisitions are a vibrant part of the renewable energy business for at least the next year. That’s the word from Raj Prabhu, managing partner of Mercom Capital Group, who recently spoke to me about global solar and wind activity.
Mercom just released reports on the solar and wind energy businesses, which showed a vibrant amount of activity from the venture capital community, and in mergers and acquisitions.
“One thing we have seen is that capital is being put into the wind and solar sectors, but on the stock markets, these renewable companies have not fared very well,” Prabhu said.
“There is weakness, but it depends on what these companies have, if there are assets to be acquired by somebody who is bigger or more powerful.”
In the U.S., the wind market could go above 10 gigawatts this year, as uncertainty of an extension would cause developers to rush projects to completion.
Challenges aren’t limited to the U.S. “Europe is going under huge turmoil. Even with all that they continue to support renewable energy. But what is the breaking point?” Prabhu asked. Many countries are contemplating cuts to their subsidies as well.
“But we have seen lending for projects. We’ve seen some very large billion-dollar announcements on offshore wind. Most of those have come from private banks,” he added.
Initial public offerings may be moribund, but several deals are getting done.
“There is pretty good M&A activity within projects. As soon as a project gets to a certain phase, we see a lot of people come into the project to invest or buy a piece,” Prabhu said.
And despite being seen as a “mature” industry, wind worldwide saw significant venture funding.
In 2011, venture capital (VC) funding for wind energy continued to increase over previous years, totaling $369 million in 14 deals, compared to $277 million in 11 deals in 2010, and $198 million in 20 deals in 2009. Wind power start-up ReNew Wind Power’s $202 million raise was the top VC funding deal. Boulder Wind Power and Wind Energy Direct were second and third highest, with $35 million and $29 million raised respectively.
Project-specific funding also was higher than previous years, reaching nearly $11 billion - $1.6 billion more than in 2010.
M&A activity amounted to $1.7 billion in 17 deals, the largest being the $724 million acquisition of wind gear maker Hansen Transmissions, a subsidiary of Suzlon, by ZF Friedrichshafen. The $596 million acquisition of Brazilian wind power operator Jantus by CPFL Energia was the second largest deal of 2011. Wind component companies accounted for $1 billion and wind downstream companies for $700 million in 2011 M&A activity.
On the solar side, both VC and M&A activity were strong in 2011.
VC investment in solar totaled $1.9 billion in 111 deals in 2011—the highest number of deals ever in a single year. By comparison, there were 65 VC deals in 2010, 84 in 2009, 93 in 2008, and 71 in 2007.
Other highlights included:
Thin-film technology raised the most VC funding ($595.5 million in 17 deals), beating downstream companies ($339 million in 26 deals), crystalline-silicon PV ($338 million in 20 deals), concentrated solar power ($308 million in 13 deals), and concentrated PV ($129 million in 10 deals).
The solar thermal power company BrightSource Energy raised $201 million in Series E funding, making it the largest single VC investment of 2011. Stion, a manufacturer of high-efficiency thin-film solar modules, came in second when it announced a $130 million.
The third and fourth highest VC fundraising rounds were by thin-film solar panel maker MiaSolé ($106 million, Series F), and solar cell developer Suniva ($94.4 million, Series D) respectively.
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