Solar technology M&A financing seeing shift in strategy
New York, US (PRWEB) May 03, 2013
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Mergers and acquisitions (M&A) of companies involved in the development and manufacture of solar energy technology are undergoing a major shift, as companies seek to avoid being burned by risky technology deals.
Mercom Capital Group has published its most recent report on funding and M&A activity for the solar sector so far in 2013, and determined that funding is being refocused on ‘downstream’ companies, further along the supply chain, which are being seen as safer bets.
The report has highlighted the fact that global venture capital (VC) investments in solar firms started slumping in the third quarter of 2012 and continued to fall. In the first quarter of 2013 some 26 deals were carried out, with a value of $126 million, compared to 27 deals with a total value of $220 million in the last quarter of 2012. Raj Prabhu, Mercom’s chief executive, said that the latest quarter had seen the second lowest amount of VC funding for solar companies and deals since 2008 – but that money was being spend on downstream companies, such as solar lease companies.
“Downstream companies received the most VC funding of all categories,” Prabhu explained as the report was published. “After being burned by solar technology investments, especially thin film, we are finally seeing VC investments shift away from technologies and towards downstream/lease companies that are benefiting from record low panel prices.”
During the first quarter of 2013, solar lease companies raised $75 million in VC funding, spread over eight deals, while six deals for thin film companies amounted to $25 million.
Specific M&A activity in the first quarter of the year saw 15 transactions take place, reaching a total value of $306 million. The deals fell into three specific categories: the purchase of distressed assets or companies; the purchase of key technologies and IP, and the purchase of downstream players to acquire project pipelines or create captive markets for upstream products. Solar cell manufacturer, Goldpoly New Energy Holdings, was the purchaser in the largest disclosed M&A transaction by dollar amount, buying the power plant developer China Merchants New Energy Holdings in a non-cash transaction deal worth $273 million, dominating the quarter and seeing a series of smaller deals make up the total sum.
The smaller deals that were carried out during the period indicated that photovoltaic panel manufacturers and developers are still sought after by larger construction companies and building suppliers. The pressure for new buildings to be equipped with energy efficient and renewable energy features has not abated. Building materials supplier, Travis Perkins, added solar panels to its stable of goods, with the $12.5 million acquisition of photovoltaic wholesaler and distributor Solfex. Proton Power Systems, which has previously focused on developing hydrogen fuel cells and electric hybrid systems, also ventured into solar technology by buying out solar energy storage company SPower Holding in a deal worth $6.7 million.
In terms of the ‘downstream’ deals that Mercom noted, three $100 million transactions took place during the first quarter of 2013 among third-party finance or solar lease firms, providing funding for the development of residential and commercial projects. SunPower struck a $100 deal with US Bancorp for domestic installations using their technology, while Bosch Solar Energy also engaged in a $100 million deal with subsidiary, aloe solar, for commercial and residential solar projects. The third deal saw OneRoof Energy announce plans to make a $100 million investment in residential solar projects with Morgan Stanley subsidiary, MS Solar Holdings.
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