Mercom Capital: VC solar funding activity at record levels

Big funding deals may be a thing of the past but overall VC funding deals remain at record levels, according to the latest quarterly report of solar VC funding activity by Mercom Capital Group. Citing a slow start to 2012, VC funding in the first quarter of 2012 reached only US$329 million, the lowest dollar amount recorded since Q4 2010. However, 34 deals were reported, suggesting VC’s are taking a lower risk approach to the sector, according to the report's authors.

“While VC’s interest in the solar sector remains strong, their appetite for risk appears to be lower as the average VC funding round amount in Q1 was $10 million, compared to $18 million in 2011,” said Raj Prabhu, managing partner at Mercom Capital Group. “To add to the current over capacity problems, policy changes and lower tariff announcements in some of the largest solar markets, such as Germany and Italy, will all contribute to an uncertain 2012. We can expect a more cautious approach to investing in the solar sector this year.”

The report noted that around 60% of the total funding in the first quarter related to just five companies, led by an US$81 million fund raising round by SolarCity.

Despite the dire market conditions in the thin-film sector, three CIGS firms were able to gain additional funding in the quarter, which included MiaSolé, Nanosolar and AQT with a total of US$94 million being raised. According to Mercom Capital approximately US$500 million was raised in 2011 by CIGS-technology based firms, which continued to receive the most amount of VC funding as a technology group.

Overall, the first quarter saw 56 different VC investors participate in 34 deals, dominated by US-based VC firms.

Venture capital firms that recorded multiple rounds included Black Coral Capital and Firelake Capital Management. The United States continued to be the dominant country for VC investments, accounting for about 80 percent of all VC funding in the first quarter.

M&A activity

Not surprisingly, due to the PV industry's woes, Mercom Capital noted that the first quarter of 2012 experienced merger and acquisition activity in the sector valued at US$5 billion in a total of 15 transactions.

However, the biggest tranche was attributed to the US$4.7 billion acquisition of Solutia by Eastman Chemicals. Other significant M&A transactions included the US$275 million acquisition of Oerlikon Solar by Tokyo Electron and Andrem Power’s US$274 million acquisition of 3W Power.

However, today the deal was said to have halted due to the German Federal Financial Supervisory Authority (BaFin) prohibiting the publication of the offer document filed by Andrem Power.