When the dust settled, 353 transactions had been completed for a reported $13.9 billion—down 6% from the $14.7 billion posted in 2010. While greentech funding rose 4% to $10.6 billion, mergers and acquisitions slumped 29% to $3.3 billion.
Contributed by | Peachtree Capital Advisors
In 2011, the U.S. greentech market witnessed the rollout of electric vehicles from Chevrolet and Nissan, the shocking demise of thin-film solar manufacturer Solyndra, and another year of stalled progress in the area of U.S. energy policy. When the dust settled, 353 transactions had been completed for a reported $13.9 billion—down 6% from the $14.7 billion posted in 2010. While greentech funding rose 4% to $10.6 billion, mergers and acquisitions slumped 29% to $3.3 billion.
Energy efficiency again enjoyed a stellar year, with electric transportation and efficient lighting technologies propelling the sector to a new high—$3.1 billion in reported transaction value. Less than 20,000 electric vehicles were sold in 2011, but that number figures to rise in 2012 as a multitude of car manufacturers prepare to release electric models.
Contrary to energy efficiency, renewable energies mostly struggled, between plummeting solar prices and uncertainty with the extension of production tax credits (PTC) for wind. Amidst these struggles, solar managed to grow 36% on the strength of follow-on investments in later-stage technologies. But with the bulk of renewable energy funding comprised of late-stage investments, future innovation in the pipeline looms as a concern.
Perhaps of even greater concern was the continued ambiguity surrounding U.S. energy policy. Although not entirely surprising, the politicalization of energy policy in Washington resulted in very little getting done. With elections arriving in 2012, this trend will likely persist for the foreseeable future.
Although solar mostly made headlines for the wrong reasons this year, starting with the Solyndra collapse, M&A and investments in the sector quietly rose 36% to $4.3 billion. French conglomerate Total bought a 60% stake in solar manufacturer SunPower for $1.4 billion, and BrightSource Energy, EPG Solar, SunRun, Stion, Suniva, and MiaSole each completed funding rounds that eclipsed the $100 million mark as late-stage funding dominated the capital raising environment for solar.
However, it would be remiss to highlight the positive takeaways without mentioning the many ominous developments that clouded the sector. In September, Solyndra declared bankruptcy after receiving a $535 million federal loan guarantee only two years earlier. News of its collapse brought solar into the media spotlight and called into question the wisdom of funding solar companies (and moreover, all cleantech companies) with taxpayer dollars.
Solyndra was not the only company to encounter difficulties in 2011. A 40% drop in solar panel prices created enormous pricing pressure and sent numerous solar companies, including Evergreen Solar and Stirling Energy Systems, into bankruptcy. Publicly-traded solar companies faced these same pressures and, as a result, their stocks dropped precipitously in tandem with their margins. Shares of First Solar, for example, tumbled more than 74% on the year.
Despite the string of calamities that struck solar in 2011, reasons for optimism remain heading into 2012. solar continues to experience explosive growth—photovoltaic solar installations exceeded 1 GW in the U.S. for the first time in 2011—and the companies that survive the ongoing shakeout will be well-positioned to capitalize upon this growth. Falling solar panel prices have also attracted a number of power companies to move into the sector, bringing solar one step closer toward mainstream adoption.
In April, the AWEA reported that wind accounted for an impressive 35% of new U.S. power capacity over the past five years—a testament to the overall development of wind in the U.S.
Unfortunately, M&A activity in wind proved much less successful, as numbers dipped across the board. After posting 35 transactions for a reported $4.8 billion in 2010, those figures tumbled to 24 for $1.6 billion in 2011. Both M&A and investments in wind fell by more than 50%, and the outlook going forward may actually worsen if the aforementioned PTC expiring at the end of 2012 is not soon renewed. The PTC has played an integral role in the proliferation of wind deployments, and historically, lapses in federal tax credits have crippled wind installations—the last three lapses causing installed capacity in the following year to drop an average of 81%.
The uncertainty surrounding this situation has already affected the sector. For example, after failing to solicit a buyer for the project, NRG Energy abandoned its much-ballyhooed 200 MW Bluewater Wind offshore wind farm project in December, citing the PTC situation as a primary factor.
While investors have in the past few years pulled back from bioenergy, focusing instead on electric transportation, bioenergy showed this year that the sector is far from dead.
Headlined by the first-half IPOs of KiOR, Gevo, and Solazyme, reported deal value in bioenergy rose 6% to $1.5 billion, while deal volume dipped 22% to 42 transactions. Although all three IPOs ended the year trading below their opening prices, the IPO parade in bioenergy should continue in 2012 as Fulcrum BioEnergy, Coskata, Elevance Renewable Sciences, and Mascoma each filed for IPOs in the second half.
Fulcrum, a garbage-to-biofuel company that has yet to generate revenue, also led a 37% surge in bioenergy investments with two rounds of funding totaling $175 million—a number matched by gasification-based biofuel company Sundrop Fuels. Additionally notable investments included Mascoma’s $50 million raise in January and Harvest Power’s $51.7 million round in March.
Energy efficiency vaulted ahead as the most active sector in greentech last year, and this year held that distinction once again. In total, the sector posted 102 transactions for a reported $3.1 billion—24% higher than in 2010—with corporate and venture investment declining 14% to $2.0 billion but M&A growing more than sixfold to $1.1 billion. Electric transportation and efficient lighting remained prominent investment and acquisition themes, accounting for eight of the ten largest deals in energy efficiency.
Car sharing company Zipcar raised $174 million through its IPO in April, but like its BIOPOWER counterparts, saw its shares decline over the course of the year. Meanwhile, electric car maker Fisker Automotive raised a whopping $348 million across four different raises. Not to be outdone, competitor Coda Automotive raised $223 million between two rounds of funding. Both companies plan to release models in 2012 after the Chevy Volt and Nissan LEAF hit the market in 2011.
Efficient lighting was led by Cree’s acquisition of outdoor light company Ruud Lighting for $525 million. Lighting companies Soraa and Bridgelux also raised respective rounds of $85 million and $60 million as LED technology (along with CFLs) seem destined to replace incandescent bulbs.
Corporate M&A was a major smart grid theme in 2011, but much of this activity occurred outside of the U.S.—GE, Schneider Electric, and Toshiba each made multi-billion dollar acquisitions of international companies.
As a result, reported deal value in the U.S. plummeted 66% from $1.3 billion in 2010—a number inflated by ABB’s billion dollar Ventyx purchase—to $433 million this year. A corollary 28% drop in deal volume to 21 transactions indicated an overall decline in 2011 smart grid activity.
Notable acquisitions included Schneider Electric’s $268 million acquisition of energy procurement firm Summit Energy, Johnson Control’s $32.3 million purchase of EnergyConnect, and Siemens’ acquisition of its longtime smart grid software partner eMeter for an undisclosed amount.
Meanwhile, SmartSynch raised $25.7 million in February and Silver Spring Networks raised $24 million from EMC in December as it prepared for an upcoming IPO in 2012.
Peachtree Capital Advisors, Inc. is a Pasadena, CA-based investment bank providing M&A advisory services to growth and middle market technology, digital media, and green technology companies both in the U.S. and abroad. With over 15 years of experience, Managing Director and founder John Doyle has closed and structured more than 25 deals and possesses a strong knowledgebase of financial and strategic buyers in these sectors. If you are interested in learning more about valuation, positioning, preparation, or the merger and acquisition process, please visit www. peachtreecapitaladvisors.com or contact John Doyle at (626) 204-4047.
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