SOLAR TODAY - May 2011 - Innovative Design

investing | green stocks report
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.
Consult your financial
advisor before making
any investment.
Cleantech Investment Strong for 2011
The new year promises a strong recovery in the sector.
The last two years have been tough on young companies
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 cleantech
companies.
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.
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 lesscapital-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
Continued on page 75 ➢
26 May 2011 SOLAR TODAY solartoday.org Copyright © 2011 by the American Solar Energy Society Inc. All rights reserved.