New Investment in Global Clean Energy Sector Rises by 14 Pct

Clean Energy Pipeline has released its preliminary analysis of venture capital, private equity, project finance, mergers and acquisitions and public markets activity during 1Q14 in the clean energy sector.

New investment in the global clean energy sector totalled $61.0 billion in 1Q14, representing a 14% increase on the $53.4 billion invested in the corresponding period in 2013.

“New clean energy investment was encouraging in 1Q14, marking a welcome change from recent press releases where we have been reporting year-on-year declines,” commented Douglas Lloyd, CEO of Clean Energy Pipeline. “The continued strength of the public markets is also giving the sector a more positive feel.”

Project finance investment increases for fourth consecutive quarter

Project finance totalled $36.6 billion in 1Q14, in line with the $36.5 billion invested in 4Q13 but 18% ahead of the $31.1 billion invested during the corresponding quarter in 2013. Clean energy project finance volumes have now increased for four consecutive quarters.

The value of project finance activity remained buoyant, despite a 14% decline in the total number of deals. This was due to a small number of billion dollar utility balance sheet investments in European offshore wind farms. Dong Energy started construction of the 312 MW Borkum Riffgrund 1 and the 210 MW Westermost Rough offshore wind farms, representing investments of $1.7 billion and $1.3 billion respectively, while E.ON started construction of the 288 MW Amrumbank West offshore wind farm, representing a $1.4 billion investment.

The high levels of offshore wind project finance looks set to continue in 2Q14, with the $1.5 billion project debt finance package for the 600 MW Gemini offshore wind farm and a $400 million tranche of debt for the 468 MW Cape Wind offshore wind farm both set to close over the next three months.

Project finance was also boosted by a number of large debt financing packages secured for projects in emerging markets. The Sarulla Consortium closed $1.2 billion of financing to develop and construct the 300 MW Sarulla geothermal project located in Indonesia, while Aldwych and partners secured $859 million to finance construction of the 300 MW Lake Turkana wind farm in Kenya.

Public markets maintain momentum

Clean energy companies raised $5.3 billion on the public markets globally in 1Q14 through a mixture of IPOs, secondaries and convertible notes. This is the second largest quarterly value of funds secured through the public markets in the last three years. Some 24 public market deals were executed in 1Q14, the highest number since 3Q11. 1Q14 was notable for a number of clean energy equipment manufacturers completing secondary offerings, with Danish wind turbine manufacturer Vestas, Chinese solar panel manufacturer JinkoSolar and Canadian solar manufacturer Canadian Solar raising $598 million, $282 million and $256 million respectively through secondary offerings.

The YieldCo trend also continued apace, with UK-based John Laing Environmental Assets Group securing $264 million through an IPO on the London Stock Exchange and US-based NRG Yield raising $345 million through a convertible note issuance.

Flurry of offshore wind acquisitions can’t prevent total deal numbers hitting three-year low

Clean energy M&A activity totalled $12.8 billion in 1Q14, a 14% decrease on the $14.8 billion transacted in 4Q13 but 20% ahead of the $10.7 billion recorded in the corresponding quarter in 2013. The number of deals was relatively low by historical standards. Only 223 clean energy M&A deals were announced in 1Q14, the lowest number since 3Q10.

1Q14 was notable for a series of large acquisitions in the offshore wind sector. Stakes in five offshore wind farms totalling 2.3 GW were acquired in 1Q14, three of which disclosed financial details. These were Caisse de dépôt et placement du Québec’s $1.1 billion acquisition of a 50% stake in the 630 MW phase one of London Array, Marubeni and the UK Green Investment Bank’s $399 million acquisition of a 50% stake in the 210 MW Westermost Rough project, and the UK Green Investment Bank’s $366 million purchase of a 10% stake in the 576 MW Gwynt y Môr offshore wind farm.

1Q14 also saw one of the largest ever clean energy M&A transactions. In early January 2014 Google acquired smart thermostat maker Nest Labs for $3.2 billion. This is the seventh largest ever M&A transaction in the clean energy sector.

Venture capital and private equity still struggling

Venture capital and private equity investment in clean energy (excluding buyouts) totalled $1.57 billion in 1Q14, in line with the $1.56 billion invested in 4Q13 but 14% below the $1.83 billion invested over the corresponding quarter in 2013. The number of investments fell 14% quarter-on-quarter to 166, the lowest number of investments recorded since 2Q10.

Despite the year-on-year decrease in funds invested, investment in solar reached a ten-quarter high. Venture capital firms invested $573 million in solar companies in 1Q14, a 42% increase on the $403 million quarterly average during the past three years.

Press release, April 16, 2014; Image: DONG Energy (Illustration)