Total funding in the solar energy sector amounted to more than $4.3 billion spread across 66 transactions in the second quarter of 2012, with strong results in venture capital funding, debt funding, and corporate funding in particular, according to a Mercom Capital Group report.
Mercom’s 2Q solar energy market research results are especially encouraging given reports “of solar companies downsizing or going out of business seemingly every day.” That was the case for venture capital (VC) funding in Q2, for example, which at $376 million in 32 transactions was slightly higher than in Q1. The average size of VC investments in the solar energy sector has been dropping consistently since 2010, “with large VC deals becoming rare,” Mercom points out in its “Solar Funding and M&A Q2 2012” report.
$3.2 Billion in New Solar-Focused Investment Funds, Decline in Large-Scale Project Funding
Also indicative of solar energy’s solid long-term fundamentals, 13 new clean tech and solar-focused investment funds with total capital commitments of more than $3.2 billion were announced in Q2, according to Mercom’s count. Ranking at the top of the list were Frankfurt-based Prime Capital’s $750 million Prime Renewables, which is targeting investments in Europe; US-based private equity firm Denham Capital Management, which is allocating as much as $600 million of capital in its Denham Commodity Partners Fund VI for renewable power companies; and Kleiner Perkins Caufield & Byers’ (KPCB) 15h venture fund, dubbed “KPCB 15,” which is focusing on making investments in early-stage digital consumer and enterprise, green technology, and life sciences companies.
Large-scale solar power project funding declined slightly quarter-over-quarter, totaling $1.4 billion in 13 transactions in Q2 as compared to $1.5 billion in Q1. Seven of the 13 large-scale solar power project funding announcements in Q2 were for solar PV, a combined funding total of $638 million. Concentrated solar power (CSP), also frequently referred to as solar thermal power, accounted for $543 million, while large-scale project funding for thin-film PV projects totaled $200 million.
The top large-scale solar power project fundings included the Moroccan Solar Agency, arranging $315 million of funding for its 160-MW Ouarzazate CSP project; the $172 million financing concluded by Luxcara for its 60-MW Briest Solar PV Park in Germany; and Sempra Energy raising $130 million for its 92-MW Copper Mountain 2 Solar Project. Other noteworthy Q2 solar power project financings were Abengoa raising $125 million for its Solana CSP Project, and Canadian Solar raising $122 million for solar power projects in Ontario.
The US accounted for the single-largest portion of large-scale solar power project financing in Q2, with five large-scale solar power projects funded for a total of $416 million in Q2. India ranked second with three project fundings concluded, and Israel third with two. Morocco ranked second in terms of dollar amounts at $315 million, and Israel was third, with $178 million having been raised to finance solar power projects in the second quarter.
Debt funding for solar energy spiked quarter-to-quarter in Q2, reaching $2.3 billion in 15 transactions compared to $239 million in six deals in Q1. Masraf Al Rayan invested $1 billion in debt securities of Qatar Solar Technologies, China Development Bank loaned $324 million to Yingli Green Energy, and China Development Bank and others extended Yingli another term loan of $237 million in Q2.
Investors, VCs Turn to Downstream Solar, Balance-of-System Investing
Looking at venture capital (VC) activity, “CIGS (Copper Indium Gallium Selenide) and solar lease companies continue to be popular with investors,” in Q2, according to Mercom. Top among VC deals were Nanosolar raising $70 million for its CIGS PV manufacturing and solar lease company SunRun raising $60 million.
Following other investors, VC firms are investing more in downstream solar companies. “Solar downstream companies are slightly ahead in VC funding with $251 million compared to $239 million raised by CIGS companies,” as of mid-year, Mercom reported.
“Since 2011, most solar VC investments have gone to thin film companies with $835 million, and with panel prices falling more than 60 percent over the same period, solar downstream companies have been an attractive play,” the report authors’ wrote. “In this quarter we are finally seeing VC investments catch up, with downstream receiving the most funding. Balance-of-system (BOS) companies also represent a significant opportunity for investment, innovation and cost reduction. With the fall in PV prices, BOS is now the largest slice of the solar system pie, but VC investments in BOS have been surprisingly low.”
Solar Bankruptcies, Insolvencies, and M&A
Turning to solar energy mergers and acquisitions (M&A), Mercom tracked a total of 14 transactions in Q2, with only six disclosing a transaction total of $325 million. That’s a big drop when compared to Q1’s 14 M&A transaction total, which totaled nearly $5 billion.
Also on the downside, Mercom recorded 13 bankruptcies and insolvencies in Q2. Seven were thin-film companies. Another 16 companies announced restructurings and downsizings. Among the major bankruptcy announcements were those of Germany’s Q-Cells, Colorado’s Abound Solar, the German-US Solar Trust of America, and organic PV pioneer Konarka Technologies.
In contrast, solar project M&A increased in Q2, with 19 transactions totaling $437 million completed. That compares to 27 transactions totaling $423 million in Q1. Transaction amounts were disclosed for only eight of Q2’s 19 transaction total, Mercom reported.
Canadian Solar, acquiring 16 solar PV projects with a combined capacity of 200-MW for $181 million, topped the ranks of solar project M&A transactions in the second quarter, followed by Wattner’s $65 million acquisition of the Torno I, II, and III solar power plants, with a total capacity of 24 MW.
Also included among Q2’s top solar power project M&A transactions were Luxcara’s $61.6-million acquisition of EDF Energie Nouvelle’s 12-MW Beguey PV plant, NextEra Energy’s $50-million purchase of the proposed 1-GW Blythe Solar Project from Solar Trust of America, and ForVEI’s $43.8-million acquisition of Solaria’s 8-MW PV plant for $43.8 million.