Touching a five year low, the global venture capital (VC) investments in the solar sector were down by nearly 50 per cent in 2012 over 2011 to around $992 million.
According to a study released by the leading clean energy communications and consulting firm Mercom Capital Group in New Delhi on Tuesday, global VC investments plunged nearly 50 per cent to $992 million involving 103 deals in 2012. This was in stark contrast to $1.9 billion raised from 108 deals in the previous year. In fact, the total represents the lowest amount since 2007.
“The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies,’’ Mercom Capital Group managing partner Raj Prabhu said in a statement.
The thin-film companies saw the largest amount of VC funding in 2012, although the total fell 47 per cent to $314 million compared to almost $600 million in 2011. During the past three years, thin-film companies have received the most VC funding, with almost $1.5 billion. “The diminished funding activity is not a true reflection of the health of the solar sector, because the demand side of global solar installations has continued to grow,’’ he added.
Corporate merger and acquisitions (M&A) activity in solar industry amounted to $6.7 billion in 52 transactions compared to $4 billion in 65 transactions in 2011. “It was a buyer's market in 2012 - acquirers were targeting distressed companies with the goal of buying technology or equipment cheap. More than half the 52 M&A deals in 2012 involved solar manufacturers and equipment makers,’’ he said.
VC funding in Q4 2012 came in at $220 million in 27 deals compared to just $72 million in 14 deals in Q3. Twenty-five investors participated in the 27 deals in Q4, and no investor was involved in multiple deals. About 35 solar companies filed for insolvency or bankruptcy protection over the course of 2012. More than 70 percent of these companies were active in manufacturing and all but a few were based in Europe and US. Thin-film manufacturers accounted for nearly 40 percent of the bankruptcies.