Solar VC value drops while volume climbs

Values and volumes of solar sector venture capital activity are moving in different directions with values picking up but volumes dropping.

Global funding and M&A activity in the solar sector has dropped off during the first quarter of 2012, with VC deal values falling from $511 million (£322 million) in the final three months of 2011 to $329 million.

Findings from Mercom Capital Group show that during the first quarter of 2012, the $329 million recorded was made up of 34 deals, an increase of five transactions on the previous quarter and the highest ever recorded in the solar industry. However the value total is the lowest since the end of 2010.

In its research, the clean energy communications and consulting firm found that M&A activity in the solar sector totalled $5 billion from 15 deals (down from 16 in the previous quarter), despite only four transactions having a disclosed value amount.

A spike from $187 million to $5.3 billion is attributed to the $4.7 billion acquisition of Solutia by Eastman Chemical Company.

Raj Prabhu, managing partner at Mercom Capital Group, says that while VC’s interest in the solar sector remains strong, appetite for risk appears to be lower. The average funding round in the first quarter of 2012 was $10 million, compared with $18 million in 2011.

‘To add to the current over capacity problems, policy changes and lower tariff announcements in some of the largest solar markets, such as Germany and Italy, will all contribute to an uncertain 2012,’ Prabhu adds.

‘We can expect a more cautious approach to investing in the solar sector this year.’

As well as the VC and M&A activity, the first quarter of 2012 saw 11 new cleantech and solar-focused investment funds launched, committing $5.7 billion.

Of the 34 deals closed, 56 different investors participated with the US being the dominant country for VC investments through its 80 per cent contribution.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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