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Solar sector sees drop in funding, M&A activity in Q2: Report

According to reports, second quarter funding and mergers and acquisition activity for the solar sector across the world has slipped slightly.

Total global corporate funding in the solar sector, including venture capital (VC), private equity (PE), debt financing, and public market financing raised by public companies, came in at $6.3 billion (Rs 37,810 crore), compared to $7 billion (Rs 42,013 crore) in Q1 2014.

The quarter also saw two initial public offerings, including a securitisation deal, according to Mercom Capital Group, a clean energy consulting firm. While corporate funding came in at $6.3 billion, $432 million came via VC funding and $1.3 billion via third-party funds, the agency said in its report.

Speaking to Business Line, Priyadarshini Sanjay, Managing Director, Mercom Communications said third-party funding activities are prominent in the US and the UK, “where investment bankers like Credit Suisse and Goldman Sachs tend to invest in solar rooftop installations, where the initial costs are very high. These are quite different from either VC or PE”.

Third-party residential and commercial solar funds continued to attract significant attention, with more than $1.3 billion raised in Q2 2014. Globally, SunPower topped the list, raising $492 million in three different funds. Investors included Google, Admirals Bank and Hannon Armstrong Sustainable Infrastructure Capital.

Sanjay added that there were several notable Indian transactions during the quarter. In the case of venture capital funding, Simpa Networks, a distributed energy solutions provider, raised $2.2 million (Rs 13.2 crore) in funding, while AK Surya PowerMagic, a provider of solar-based irrigation services for farmers, raised $0.5 million (Rs 3 crore) in funding from Intellecap Impact Investment Network and Infuse Ventures, IIM Ahmedabad’s clean-tech focused fund.

In the case of public market financing, Welspun Renewables Energy, a renewable energy project developer, announced that Asian Development Bank (ADB) purchased a 25 percent stake in the company for $50 million (Rs 300 crore) and DEG, the subsidiary of German government-owned development bank KfW, subscribed to the compulsory convertible debentures of the company, valued at $37 million (Rs 222 crore), taking the total amount raised by the company to $88 million (Rs 522 crore).

In terms of project funding, Welspun Renewables Energy, a renewable energy project developer, raised $24 million (Rs 144 crore) from GE Energy Financial Services for a 151 MW solar PV project in the state of Madhya Pradesh. CaptureSolar Energy, a solar project developer, raised $125 million (Rs 750 crore) from PG Concept, a Cyprus-based PV solutions provider, for a 75 MW solar PV project in Pune, Maharashtra.

The report noted that global VC funding, including PE and corporate VC, in Q2 2014, totalled $432 million in 21 deals, up from $251 million in 26 deals in Q1 2014, mostly due to three large deals. Solar downstream companies attracted most of the VC funding this quarter, with $388 million in 10 deals.

Raj Prabhu, CEO, Mercom Capital Group said, “It was a solid quarter for the solar sector in terms of fundraising. VC funding was up, public markets remained strong, and we are seeing new and innovative financial structures. Residential and commercial solar funds continue to raise record amounts.”

The largest VC and PE deal in Q2 2014 was the $150 million raise by Sunrun, a provider of residential solar power systems. Investors included Foundation Capital, Accel Partners, Sequoia Capital, Madrone Capital, and others.

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