Clean energy project investment overcomes headwinds with record quarter

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Q3 2011 saw a surge in wind farm and solar park financings, as well as in merger and acquisition activity, despite the unfolding European financial crisis and a slump in clean energy share prices

London and New York, 13 October 2011. Asset finance of utility-scale renewable energy projects, such as wind farms and solar parks, jumped to a record $41.8bn in the third quarter of 2011, according to the latest authoritative figures from research company Bloomberg New Energy Finance.

The most eye-catching feature of the Q3 asset finance numbers was offshore wind, with investment secured for three large offshore wind farms in the North Sea, totaling more than 1GW in capacity and $6.3bn in investment. There were also big financings for photovoltaic, solar thermal and biofuel projects in the US, for a geothermal installation in Indonesia, and for onshore wind projects in Brazil and China.

Overall financial new investment in clean energy – including not just asset finance, but also equity raisings on public markets and from venture capital and private equity funds – was $45.4bn in the third quarter of 2011, up 9% on the second quarter of this year and 16% ahead of Q3 2010. The record quarter for financial new investment remains Q4 2010, at $51.5bn.

This healthy result for investment in Q3 contrasted vividly with the performance of clean energy share prices, which fell by some 35% during the quarter, based on the performance of the WilderHill New Energy Global Innovation Index, or NEX, an index made up of 95 clean energy stocks worldwide. On 4 October, the NEX hit its lowest point since 2003; it under-performed wider indices such as the S&P 500 by a wide margin during the quarter.

Michael Liebreich, chief executive of Bloomberg New Energy Finance, said: “Over the past three years we have seen extraordinary falls in the prices of clean energy equipment – wind turbines and solar photovoltaic panels. As these figures show, this has driven up installation rates and asset investment levels. However, there is still not enough demand to soak up significant over-supply, so prices and margins have remained under pressure and manufacturers’ share prices are being crushed. The industry has swung between being a buyer’s market and a seller’s market a few times in recent years: right now, you would love to be a developer with access to funding, but not a supplier. Eventually things will come back into balance. Of course the furor in the US over the failure of Solyndra hasn’t helped clean energy share prices.”

Analysis by Bloomberg New Energy Finance, based on actual contract data, shows that the average price of PV modules has fallen by a third since autumn 2010, and by 70% since the middle of 2008, while wind turbine prices have fallen by 20% since 2009. These moves have made renewable energy technologies much more cost-competitive with fossil-fuel power sources, but have been painful for the supply chains.

The third quarter of 2011 was a record one not just for asset finance, but also for merger and acquisition activity in clean energy. M&A, including corporate and project acquisitions and refinancings, reached a total of $25.9bn, up 31% on the second quarter of this year and 59% on Q3 2010. The Q3 2011 figure was also marginally ahead of that for Q4 2010, the previous record.

Among the big acquisition deals in the latest three months were EDF’s purchase of the 50% it did not own in its renewable energy offshoot, EDF Energies Nouvelles, for an enterprise value of $7.9bn, and Toshiba’s takeover of Swiss electronic-metering company Landis+Gyr for $2.3bn.

Liebreich said: “The acquisitions we are seeing are only partially driven by consolidation. The low valuations for clean energy companies are giving industrial groups and utilities the opportunity to move in on a sector that they know will enjoy growth over the medium to long term.”

While asset finance dominated the total for new investment in clean energy in Q3, it was a relatively quiet quarter for capital commitments from venture capital, private equity and public market players.

VC/PE investment in specialist clean energy companies was $2.2bn in the third quarter of this year, down 27% from Q2, although 55% up on the figure for Q3 2010. The US dominated this type of investment in the latest quarter, the biggest deals being a $175m private equity round for biofuel company Sundrop Fuels and a $150m round for fuel cell developer Bloom Energy.

Public market investment in specialist clean energy companies was just $1.4bn in Q3, down 62% from the previous quarter and 71% from the equivalent three months in 2010. Companies found it very difficult to launch IPOs or secondary issues in the face of the turbulence in financial markets. Among the few that succeeded was Chinese solar company Beijing Jingyuntong Technology, which raised $394.8m in an IPO in Shanghai.

The biggest asset finance deals of the quarter were the $2.7bn financing of the Global Tech 1 offshore wind farm, off the coast of Germany, and the $1.8bn financing of the Djursland Anholt offshore wind project, off Denmark. The largest solar financing was $1.6bn for the High Plains Ranch II and III PV portfolio in the US.

Bloomberg New Energy Finance will be publishing its annual figures for total investment in clean energy in 2011 (including small-scale renewable energy projects and government and corporate R&D) early in the New Year. In 2010, this figure was a record $243bn worldwide.

For further information:
Angus McCrone
Bloomberg New Energy Finance
+44 203 216 4795
amccrone1@bloomberg.net

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Publication Date: 13 Oct 2011

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