Solar venture capital investments fall by almost 50%

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Investments plunged to US$992 million in 2012 compared to US$1.9 billion the previous year, representing the lowest amount since 2007, reports consulting firm Mercom Capital.

Venture capital (VC) financing, the investment in early-stage, high-potential, growth companies, in Q4 2012 was US$220 million. The leading VC deal in this quarter was concentrating solar thermal company BrightSource Energy with US$83.6 million.

BrightSource also led the way in the downstream category, which benefitted from low module prices. The total investment was US$269 million. The top five VC funding deals in 2012 were BrightSource Energy,  for US$83.6 million, SolarCity, a solar lease firm, for US$81 million, CIGS company Nanosolar for US$70 million, solar lease company Sunrun for US$60 million, and MiaSolé, a CIGS company, for US$55 million.

Thin-film companies saw the largest amount of VC funding in 2012, although the total fell 47% to US$314 million compared to almost US$600 million in 2011.

“The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies,” commented Raj Prabhu, Managing Partner of Mercom Capital. “With the drastic fall in crystalline-silicon PV prices over the last two years, most other technologies have struggled to compete.”

Corporate mergers and acquisitions (M&A) in solar amounted to US$6.7 billion in 52 transactions compared to US$4 billion in 65 transactions in 2011. Notable M&A transactions were Korean conglomerate Hanwha Group’s acquisition of German PV manufacturer Q-Cells for US$322 million, a price tag that included the assumption of US$272 million in debt, the US$275 million acquisition of Oerlikon Solar, a thin-film manufacturer, by Tokyo Electron.

Active project investors in 2012 included the Development Bank of Southern Africa with 10 transactions, HSH Nordbank with six, International Finance Corporation with five followed by Export Import Bank of the US, KfW Entwicklungsbank and Union Bank with four transactions each.

Announced debt funding in 2012 came in at US$6.9 billion in 34 deals, compared with US$19.9 billion in 41 deals in 2011. The largest debt deal in 2012 was the US$1.6 billion credit facility received by Chinese developer Sky Solar by China Development Bank. Loans, credit facilities and framework agreements announced by Chinese banks to Chinese solar companies have reached US$52.6 billion since 2010.

Furthermore, Mercom tracked 35 solar companies that filed for insolvency or bankruptcy protection over the course of 2012. More than 70% of these companies were active in manufacturing and all but a few were based in Europe and the United States. Thin-film manufacturers accounted for nearly 40% of the bankruptcies.

“The diminished funding activity is not a true reflection of the health of the solar sector, because the demand side of global solar installations has continued to grow,” said Prabhu. “Global solar installations look set to grow by around 10-12% this year.”

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