Solar VC funding halves in 2012 says report

A new report on funding activity in the solar power sector in 2012 found that global venture capital (VC) investments plummeted by 50 per cent compared to 2011.

According to Mercom Capital Group LLC, which published the report, this represents the lowest total amount since 2007.

Last year’s top five VC funding deals were:

“The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies,” says Raj Prabhu, managing partner of Mercom Capital Group.

“With the drastic fall in crystalline-silicon PV prices over the last two years, most other technologies have struggled to compete.”

Thin-film companies saw the largest amount of VC funding in 2012, although the total fell 47 per cent ($314m) compared to $600m in 2011.

The solar sector’s drop in VC investments is directly related to the struggles of thin-film companies, according to Prabhu.

In contrast, solar downstream companies, especially solar lease companies, have benefitted from low module prices. VCs invested $269m in 25 deals in solar lease companies, the most of any category.

However, Prabhu believes the weaker funding activity is not a true reflection of the health of the solar power sector.

The demand side of global solar installations has continued to grow, and worldwide installations look set to grow by around 10-12 per cent this year, says Prabhu.

Mercom Capital’s report also looked at corporate M&A activity in 2012, which amounted to $6.7bn in 52 transactions, compared to $4bn in 65 transactions in 2011.

The two largest M&A transactions were Eastman Chemical’s Q1 acquisition of Solutia for $4.7bn and
3M Group’s $860 million purchase of ceramics maker Ceradyne.

Other notable deals were Korean conglomerate Hanwha Group’s acquisition of German PV manufacturer Q-Cells for $322m and the $275m purchase of Swiss Oerlikon Solar by Tokyo Electron of Japan.

Prabhu concludes: “It was a buyer’s market in 2012 - acquirers were targeting distressed companies with the goal of buying technology or equipment on the cheap.

“More than half the 52 M&A deals in 2012 involved solar manufacturers and equipment makers.”

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