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Clean tech investment drops dramatically

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cleantech1Clean technology venture investments in North America, Europe, China and India plummeted in the first quarter to about $1 billion across 82 companies, according to the Cleantech Group and Deloitte, the global auditing, tax, consulting and financial advisory services firm.

Cleantech investment in the first quarter plunged 41 percent from the previous quarter, and was down even further, by 48 percent compared to the last year’s first quarter.

Cleantech venture investments have declined for two consecutive quarters since peaking at $2.6 billion in the third quarter last year. This represents the lowest level of venture capital investment in clean technology companies in two years. The average round size has contracted from $20 million in 3Q08 to $12.3 million in the first quarter.

“Cleantech financing is moving into a new phase, characterized by diversified funding sources, as the global recession and liquidity issues impact venture investors. Venture funds continue to invest significant sums, albeit at a slower pace and smaller scale than in the past two years,” says Brian Fan, Cleantech Group’s senior director of research.

Global governments are trying to take up the slack. They are “allocating historic amounts of capital to clean technologies through stimulus packages, loan guarantees and tax incentives, which will enable the cleantech industry to continue to develop,” says Cleantech and Deloitte.

A report titled ‘Towards a Global Green Recovery’ presented at the G20 Summit in London earlier this month estimated that almost $400 billion of about $2.6 trillion in economic stimulus allocations announced so far by G20 nations are earmarked for clean technologies such as renewable energy, improved electrical grids and cleaner cars.

In addition utilities and corporations are increasingly playing a leadership role in developing the sector. “Governments are not the only significant new investors in cleantech…Utilities are also stepping up to fill the funding void and making equity investments in companies,” says Scott Smith, Leader of CleanTech for Deloitte. “Investment plans range from building and operating solar and wind systems to financing third party, shovel-ready projects. These moves underscore cleantech’s emergence as a significant and maturing market that will remain highly relevant—both during and following the economic downturn.”

The leading investment areas from the quarter were solar, biofuels, advanced batteries and electric vehicles:

  • Solar – $346 million
    Deals included Norsun, a Norwegian polysilicon producer, which raised a $72 million round led by Good Energies. Concentrated PV startup SolFocus raised $67 million from Apex Venture Partners, NEA and NGEN. Solar service provider Solar Power Partners raised $47 million, and thin-film startup Sierra Solar Power raised $40 million.
  • Biofuels – $96 million
    Deals included BioMCN, which has developed a process to convert crude glycerine, a byproduct of biodiesel, into methanol. It raised $46 million from Waterland Private Equity. Cellulosic ethanol company ZeaChem raised a $34 million round led by Globespan Partners and Prairie Gold Venture Partners.
  • Advanced batteries – $94 million
    Deals included lithium-ion startup Boston Power, which raised a $55 million round led by Swedish investor Foundation Asset Management. Boston Power’s Sonata batteries were chosen by HP for nearly 70% of its consumer line of notebooks. UK-based Nexeon raised over $14 million from Invesco Perpetual and others for its silicon anode technology for lithium-ion batteries, while Swiss startup ReVolt Technology raised over $13 million for its Zinc-air battery technology for consumer electronics devices
  • Electric vehicles – $78 million
    Deals included Dutch transmission manufacturer Fallbrook Technologies, which raised $25 million from NGEN Partners and Robeco. Scuderi Group raised $20 million for its split cycle internal combustion engine, PHEV manufacturer Bright Automotive raised $11 million from White Pines Partners and Duke Energy, and Smith Electric Vehicles, which manufactures electric trucks and vans, raised $10 million.

Clean technology mergers and acquisitions totaled an estimated 111 transactions in the first quarter, of which totals were disclosed for 25 transactions totaling $3.0 billion. This is down 42 percent from the fourth quarter, which saw 134 M&A transactions, of which 45 were disclosed for a total of $4.8 billion.

Cleantech Group noted four cleantech IPOs in the first quarter, three in China and one in Switzerland. The largest deal was China Singyes Solar Technologies Holdings Ltd, a solar service provider, which raised $8.1 million on the Hong Kong Futures Exchange.

North America accounted for 68 percent of the total, while Europe and Israel accounted for 28 percent, China for 2 percent, and India for 1 percent.

  • Europe: European and Israeli companies raised $281 million in 31 disclosed rounds, down 11% from 4Q08 and down 31% from 1Q08. Despite the overall reduction in amount invested, Europe and Israel increased its proportion of overall global investment to 28%, up from 19% in 4Q08 and 21% in 1Q08.
    The largest deal was a $71.6 million round for Norwegian solar company Norsun, one of the top ten largest deals ever in Europe and Israel, and pulled Norway ($79.2 million in 4 deals) into first position in the country rankings in Europe. The UK was second ($52.9 million, 11 deals) and the Netherlands third (where BioMCN’s $46 million round was the only investment of disclosed value).
  • China: In 1Q09, two Chinese companies, solar equipment company Jiangyin Aikang Solar Equipment Co., and Shanghai Insuring Polymer Materials Co., Ltd. raised USD $21.5 million.
    There were seven M&A deals in China totaling USD $517.5 million; three of these transactions were joint ventures between Chinese companies and multinationals. Cleantech Group noted three cleantech IPOs in China in 1Q09: China Singyes Solar Technologies Holdings Ltd on the Hong Kong stock market, heat exchange manufacturer SmartHeat on NASDAQ, and sustainable fertilizer manufacturer China Green Agriculture Inc. on AMEX.
  • India: In 1Q09, a total of $54 million was invested across 3 deals, out of which one company did not disclose the amount. Jain Irrigation, India’s largest provider of micro-irrigation systems; Sri Biotech, an agri-biotech company and Polygenta all received funding in the quarter. Active investors include IFC, Rabo Equity and Aloe Private Equity. ACME Group, an India-based telecom power solutions company also made an overseas investment of $30 million in California-based eSolar and PAE acquired a strategic stake in Shurjo Energy, a solar panel manufacturer, for $10 million.
    Despite the low investment amount and number of deals recorded in the region, the renewable energy sector in India continues to be very active.  Major Indian companies, such as Tata Power, BHEL and Greenko Group, announced initiatives to ramp up investment in clean energy projects across the country. Several Indian state governments in India also announced policies this quarter to increase the use of solar power and biomass for energy generation.

Cleantech Group’s free download!

Just in time for Earth Day Cleantech Group is offering a free download of its 2008 Annual Review of the Cleantech Sector. It’s publicly available for the first time as a “special gesture” this week. Click here to download the review.

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Written by William DiBenedetto

21 April, 2009 at 10:55 am

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