Investors seek value in energy efficiency and service companies
Investment in the clean energy sector grew in the first six months of 2007, both on the public markets and in venture capital and private equity investments, according to figures released today by New Energy Finance, the world’s leading independent analyst of the sector. The focus of investment shifted noticeably towards the energy efficiency and service sectors.
Public market investment in clean energy companies was up by 22%, from $6.3bn in H1 2006 to $7.7bn in the first six months of 2007. There were deals worth almost $3.1bn in the first quarter, rising to $4.6bn in the second quarter.
A higher percentage of the money raised on the public markets went to market debutants, with 48.7% of transactions by value, or $3.7bn, being IPOs, rather than secondary offerings, against 30% in H1 2006. It was also notable that while half of H1 2006’s 20 IPOs listed on AIM in London, in H1 2007 only seven of the 22 IPOs were on AIM, with the US being the prime beneficiary. Although there were fewer deals in total this half, the average amount of money raised, at $168.2m, exceeded the year-ago figure of $94.2m. While the first half of 2006 saw strong activity in biofuels, in 2007, the most popular sectors were solar and energy efficiency. Venture capital and private equity investment (VC/PE) in clean energy was also up in the first half of 2007, at $5.4bn, compared with $4.8bn in the same period last year. For the second quarter, there was a notable decline in private equity (later stage, leveraged-type deals), which contributed only $710m, significantly down on the first quarter’s $2.5bn in a sign that the sector may be suffering from higher interest rates and criticism of buy-out groups which has following the recent spate of enormous deals.
However, earlier stage venture capital was up slightly on the first quarter at $581m, with much of the activity ($269m) in first round Series A investments, as investors scramble for new technologies to back.
The most active sector was solar power in both public markets and VC/PE. Nine deals on the public markets raised $1.3bn, led by two Chinese companies floating on the New York Stock Exchange in a continuation of a trend started by Suntech in 2005. Integrated PV manufacturer Tianwei Yingli raised $319m, while LDK Solar Hi-Tech raised $469.8m to expand production capacity. In VC/PE, the $258m raised was a long way down on Q1’s record $599m. There were two big private equity investments in capacity – Energy Photovoltaics, the US maker of amorphous silicon thin-film PV modules and integrated systems, raised $77.5m, while crystalline silicon PV module maker Advent raised $70m to ramp up its production line. The second quarter also saw financing activity gain momentum in the solar service sector, with Tioga Energy, a third party PV project finance arranger, raising more than $10m from US VC firms while France’s PV plant developer and operator Solaire Direct raised $8.2m. In biofuels, there were signs of growing interest in algae as a feedstock, with Livefuels raising $10m of private money, although UK-based Biofuels Corp’s $80m debt-for-equity swap illustrated the precariousness of many investments in the sector. The nascent marine energy sector also saw a burst of activity, with $15m flowing to Marine Current Turbines to help develop the world’s first commercial tidal turbine, Australian wave energy group Oceanlinx raising $10m and Aquamarine Power raised an undisclosed amount of seed funding for its wave converter from founder Allan Thompson and another director. On the
public markets, a NASDAQ IPO raised $100m for Ocean Power Technologies. Another important theme, predicted by New Energy Finance at the start of the year, was the spate of transactions by energy efficiency companies. Private deals were led by Arcadian Networks, the telecoms carrier that provides services to utilities and other ‘dispersed asset’ industries, which raised $90m in venture capital. On the demand side, Silicon Valley electric car maker Tesla Motors raised $45m, and in energy-smart buildings, Ice Energy, a young Coloradobased company focusing on energy storage and advanced cooling and refrigeration products, closed a $25m funding.
On the public markets, Comverge, the US group that provides hardware and software for demand-side efficiency measures in residential buildings, such as load control programmes, demand response, remote meter reading and intelligent thermostats, raised $110m in its wellreceived IPO, while EnerNOC, which makes software systems that help utilities manage distributed energy networks, also debuted, with a $111.8m offering. Eaga, a residential energyefficient product supplier raised $59.8m from an IPO on the London Stock Exchange. Geographically, the US remained far and away the global leader for VC/PE investment, with $579m of disclosed deals in Q2, compared with $114m in Europe. In the past, Europe has made up for its smaller VC/PE market with plentiful activity on the public markets, but the second quarter saw 12 deals in the US, worth $1.5bn against 11 deals in Europe that raised $994m, suggesting that the US is regaining some advantage in public markets activity. It was also notable that Asia and Oceania saw seven deals that raised $556.3m, suggesting that the region is beginning to catch up with its North American and European counterparts. Michael Liebreich, CEO and Founder of New Energy Finance, commented: “This has been a strong half-year for the clean energy industry and its investors. The sector has shown sustained growth, with generally strong fundamentals. What is particularly notable is that these investment
figures are not based on a flood of me-too deals. After the biofuels shock last year, when the surge in corn prices destroyed the economics of many proposed projects, investors are being much more discerning. They are thinking about some of the less obvious plays, such as energy efficiency, the grid infrastructure and services. They are having to work hard
About New Energy Finance:
New Energy Finance is a specialist provider of analysis to the world’s leading investors in renewable energy, biofuels, low-carbon technologies and the carbon markets. The company’s research staff of 50 (based in London, Washington, New York, Beijing, Shanghai, New Delhi, Tel Aviv and Perth) tracks deal flow in venture capital, private equity, M&A, public markets and asset finance around the world. New Energy Finance covers all sectors of clean energy: renewables (wind, solar, marine, geothermal, mini-hydro); biomass & biofuels; energy architecture (supply- and demand-side efficiency, smart distribution, power storage, carbon capture & sequestration); hydrogen & fuel cells; carbon markets and services. Services include the New Energy Finance Briefing, New Energy Finance Desktop, Newswatch
daily news service and Focus Reports on sectors and countries. New Energy Finance copublishes the world’s first global clean energy market index, the WilderHill New Energy Global Innovation Index (ticker symbol NEX). New Energy Finance’s subscription-based Insight Services providing deep market analysis to investors in Wind, Solar, Biofuels, Biomass, China, VC/PE, Public Markets and the US. The company also undertakes bespoke research and consultancy, and runs senior-level networking events. New Carbon Finance, a division of the company, provides analysis and price forecasting for the European, global and US carbon markets.
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