VCs invest $176 million in solar as project funds boom: Cleantech Group

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The gulf in confidence separating the downstream and upstream solar markets continues to grow as investments in third party lease companies continue to boom, according to second quarter data released by the Cleantech Group yesterday.

Venture capitalists (VCs) invested $1.76 billion in Q2, a 56% increase on the previous quarter, across 214 deals. But the number of deals in the solar category for VC investments stayed flat in the last quarter at 19. The solar deals represent only 10% of the total invested, well below the 2008 peak of around 38%, while project funds in the last quarter attracted $1.73 billion.

Sheeraz Haji, chief executive officer at the Cleantech Group, said: “You have a huge split between the downstream and upstream. There have been some failures upstream, some distressed sales. Ironically, an investor recently told me that MiaSole, which got sold in distress for $30 million is selling incredibly well right to the frustration of one of the investors. But upstream is quite challenged. With companies like BrightSource the economics are difficult because of natural gas and the price of PV – I suspect it's quite hard to raise capital there.

“On the flip side, the downstream is booming. There is incredible interest in downstream solar. We have found that the creditworthiness of these customers is incredibly high so the investor community are incredibly interested in putting 100s of millions of dollars to work.”

Sunrun raised $630 million the most capital in the project funds category, while SolarCity raised $500 million and SolaireReserve raised $260 million.

Contrary to expectations, some solar companies had become the stars of the public markets, outperforming other stocks on the S&P index, Haji pointed out.

SolarCity had performed at 220% above the index and First Solar had performed 199% higher.

“The public markets are opening up a little bit to clean tech startups,” he said. “Tesla and First Solar and SolarCity those three companies have performed exceedingly well and we think that's crucial to opening up the pipeline for other companies that want to go public.

“These clean tech stars went public with a lot of scepticism in some cases and have dramatically outperformed even the smartphone and other tech public companies. They are cleantech stars, but they will be seen as stars of the public markets among all companies. This is very encouraging for the cleantech sector.”

Haji also said that the launch of President Barack Obama's climate plan last week would have a significant impact on the cleantech sector around the world

“Has cleantech turned a corner? We cannot ignore the big announcement from the White House a week ago. It's significant and we have noticed a shift in sentiment in part due to this announcement. For the first time ever, the Environmental Protection Agency will regulate CO2 emissions from power plants. This is a big deal, certainly for the utility sector. We've talked a lot about a carbon tax and carbon trading and could have a very significant impact to help cleantech.

The Department of Defense's 3GW goal for renewables on bases is a “big deal” announced that creates a large market for solar and fuel cells US, said Haji. This week Obama also announced Power Africa, a $7 billion federal initiative to bring renewable power to African countries. General Electric is one of the companies that has committed towards an additional $9 billion in private funding.

“We think Obama's leadership will have an impact across the world not just in the US,” he said.

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