Project finance hits four-year high ----Number of deals down in every asset class ----YieldCo listings keep public markets buoyant
London and New York, July 14th, 2015. Clean Energy Pipeline, the online financial news and data service dedicated to the clean energy sector, today releases its preliminary analysis of venture capital, private equity, project finance, mergers and acquisitions, and public markets activity during Q2 15.
New investment in the global clean energy sector totalled $74.9 billion in Q2 15, a 2% decrease on Q2 14 ($76.5 billion). Despite the annual decrease, investment was still 11% above the average quarterly volume of investment during the past three years ($67.2 billion).
New investment was robust due to a 9% annual surge in project finance to its highest level in the last four years. This was attributable to a small number of large offshore wind and solar deals, rather than a swell of deal activity.
This was the main story of Q2 15. In every asset class, investment was propped up by a small number of large deals despite the number of transactions falling significantly below historic levels.
Project finance reaches four-year high but deal numbers trending down
Clean energy project finance totalled $53.1 billion in Q2 15, a 9% increase on the $48.8 billion invested in Q2 14. In fact, Q2 15 was the largest quarter for clean energy project finance in the last four years. Despite the annual increase, the number of project finance deals declined 13% annually to 453 deals. This is more than 10% below the average quarterly number of deals during the past five years (522).
"Of course it's great to see the volume of investment in clean energy projects hit a four-year high but of equal importance is that, for the second consecutive quarter, the number of deals was more than 10% below historical averages," commented Thomas Sturge, Head of Research at Clean Energy Pipeline. "Two quarters don't necessarily signal the beginning of a trend, but there are signs that project finance deal flow in established markets is starting to dry up."
The increase in investment volumes was a caused by a small number of large offshore wind farms reaching financial close. These include Race Bank ($2.6 billion), Veja Mate ($2.1 billion), Rampion ($2.0 billion) and Nordergründe ($452 million). Investment was also boosted by two large deals in the solar sector - Ouarzazate 2 and 3 ($2 billion) and Silver State South ($1.2 billion).
YieldCo listings maintain public markets deal activity
A series of secondary offerings by existing clean energy YieldCos and the IPO of new fund 8point3 Energy Partners, the joint YieldCo of First Solar and SunPower, meant public market listing activity remained robust in Q2 15. Clean energy companies and funds raised $4.7 billion through a combination of IPOs, secondary offerings and convertible notes last quarter, an 11% decrease on the $5.3 billion invested in Q2 14, but 18% above the quarterly average volume of funds raised since the beginning of 2013 ($4.0 billion).
YieldCos accounted for approximately half ($2.4 billion) of all funds raised in Q2 15. In addition to 8point3 Energy Partners' IPO ($420 million), TerraForm Power ($688 million), Abengoa Yield ($670 million), NRG Yield ($288 million), TransAlta Renewables ($159 million) and NextEra Energy Partners ($109 million) all completed secondary or convertible note offerings last quarter.
Other notable public market listings include SunEdison's $900 million convertible note offering and the IPOs of Siltronic ($429 million) and Enviva Partners ($230 million).
Large portfolio acquisitions keep M&A buoyant
Some 250 acquisitions of clean energy companies and projects totalling $12.0 billion were announced in Q2 15, a 23% decrease in value on the 312 deals totalling $15.5 billion in Q2 14. However the number of announced deals dropped to its lowest level since Q1 13.
The value of M&A activity remained robust despite the decrease in the number of transactions due to a handful of acquisitions of very large portfolios of solar projects. For example, United Photovoltaics Group acquired 17 operating solar PV projects located in China totalling 930 MW from Hareon Solar for $1.4 billion in May, while Abengoa Yield acquired in the same month a 371 MW portfolio of CSP projects located in Spain and South Africa from parent company Abengoa for $669 million.
Venture capital significantly below historic levels
Venture capital and private equity funds invested $1.1 billion (excluding private equity buyouts) in the global clean energy sector in Q2 15, in line with the $1.1 billion invested in Q1 15 but less than half the $2.3 billion invested in Q2 14. The sluggish first half of the year means venture capital and private equity investment is on track to record its lowest annual level in 2015 since Clean Energy Pipeline began tracking investment in 2008.
Companies securing notable funding rounds include Brazilian solar developer SGP Solar, which raised $107 million from undisclosed European funds; efficient power conversion technology company Transphorm, which secured $70 million in a funding round led by KKR; and grid-scale energy storage company VionX Energy, which secured $58 million from undisclosed investors.
About Clean Energy Pipeline
Founded in 2005, Clean Energy Pipeline is an independent provider of online financial news, data and research globally. Clients include governments, multinational and privately owned companies, investment banks, law firms, venture capital private equity and hedge funds in over fifty-five countries. In addition to its online news and data service, the company offers customized research and organizes senior executive forums.