SOLAR TODAY - May 2011

Cleantech Investment Strong for 2011

The new year promises a strong recovery in the sector.

By RONA FRIED, PH.D.

rona fried, Ph.d. is president of sustainable Business.com, the online community for green business: daily green business and investor news, green jobs and green investing newsletter, The Green Investor. contact fried at rona@ sustainablebusiness.com.

The last two years have been tough on young compa- nies that need to raise capital, but 2010 ended strongly and 2011 promises to be even better.

Worldwide cleantech investments peaked at $11.8 billion in 2008, then dropped off significantly to $6.8 billion in 2009. Then, according to Bloomberg’s New Energy Finance, strong growth during the last quarters of 2010 brought total investment for the year to $8.8 billion.

Until the second half of 2010, venture capital (VC) funds had difficulty raising money, and since few companies were sold or had IPOs during the depths of the recession, they weren’t able to collect returns, resulting in many fewer new investments.

Instead, VCs made follow-on investment rounds in their portfolio companies, aimed at keeping them alive during difficult times. They also piggybacked on U.S. government grants and loan guarantees associated with the stimulus bill, which skewed investments into more mature clean-tech companies.

Consult your financial advisor before making any investment.

deals flowing again

In December there were some major deals: Abound Solar (thin film) raised $110 million, Opower (energy management software) raised $50 million, and France’s Europlasma (waste to energy) raised EUR 25 million.

In the early days of 2011, VCs have already made some important investments, boosting optimism for the year. In the United States, Coda Automotive (electric vehicles) raised $76 million, SoloPower (thin-film solar) raised $51.6 million, Oteros (cellulosic ethanol) raised $22 million, and Lincoln Renewable (wind and solar project developer) raised $14 million.

And smaller, earlier-stage companies are finding investors again. The average investment size is hovering around $12 million, according to Kachan & Co., a cleantech analysis and consulting firm. That’s still a high figure, beating average round sizes for U. S. biotech ($8.7 million), medical devices ($7 million) and software ($5 million) companies, based on U.S. National Venture Capital Association data.

IPOs and mergers and acquisitions (M&A) are also up in recent months.

The drivers of cleantech remain intact and will be felt more acutely this year: resource scarcity around oil, rare earth elements, water and commodities generally; the need for energy independence and improved efficiency;and issues around climate change.

“We believe continued growth in Asia and the ongoing push for resource efficiency will make 2011 a record year for cleantech innovation financing,” said Sheeraz Haji, CEO of Cleantech Group.

26 May 2011 SOLAR TODAY solartoday.org

Dozens of venture capital funds have been announced in the past month, including the NER300 Fund in Europe ($12.4 billion), China’s Hony Capital Fund ($1.5 billion) and another $500 million from the California Public Employees Retirement System (CalPERS).

energy efficiency shines

As in 2010, efficiency (including smart grid) will be the dominant investment sector this year, as investors seek less-capital-intensive deals. Rising commodity prices will also benefit companies that recover and recycle materials such as steel and precious metals. The other continuing theme is China, the largest, fastest market for cleantech. Companies that seek investments need to have traction in China.

the largest companies worldwide are sitting on more than

$3 trillion in cash.

Although efficiency was the most popular sector last year with 151 deals, solar received the highest dollar amounts ( 24 percent) on 117 deals, followed by transportation ( 17 percent) and energy efficiency ( 14 percent).

Oil prices are expected to rise in 2011, which would benefit renewables. Kachan predicts a rise in drop-in biofuels, employing bacteria or yeast to make chemically compatible diesel, jet fuel, butanol and bio natural gas that can simply be dropped into current infrastructure.

increasing role of corporations

With the largest companies worldwide sitting on more than $3 trillion in cash, they are increasingly participating as clean technology investors and acquirers. In recent weeks, General Electric (NYSE: GE) invested $200 million in a handful of companies and plans to double energy-related R&D to $2 billion a year over the next five years.

GDF Suez ( GSZ.PA) created the Blue Orange fund to invest primarily in waste management. General Electric launched Energy Technology Ventures, funded at $300 million. NRG Energy Inc. (NYSE: NRG) and ConocoPhillips (NYSE: COP) plan to invest in about 30 companies over the next four years. Their first portfolio companies are Alta