Corporate Funding for Solar Sector Globally Rises by 34% With $9 Billion in 9M 2019
In Q3 2019, over $100 million in venture funding went to technology and manufacturing-focused companies
Total corporate funding (including venture capital/private equity, public market, and debt financing) in the first nine months (9M) of 2019 was up with $9 billion raised, compared to $6.7 billion that was raised in the same period last year, a 34% increase year-over-year (YoY) according to Mercom Capital Group’s recently released 9M 2019 Solar Funding and M&A Report.
In July 2019, Mercom had reported that in the first half of 2019 (1H 2019), funding activity in the solar sector was on the rise when compared to the same period last year. Total corporate funding (including venture capital funding, public market, and debt financing) for the solar sector globally came to $6 billion in the first half of 2019.
Corporate funding into the solar sector in Q3 2019 came to $3 billion, compared to $1.3 billion in Q3 2018.
“Corporate funding activity so far this year is ahead of last year’s levels as demand outlook looks positive, and solar public companies continue to do well. In Q3 2019, over $100 million in venture funding went to technology and manufacturing-focused companies, which is rare. Five IPOs and over a billion dollars in securitization deals so far this year have been the highlights,” said Raj Prabhu, CEO of Mercom Capital Group.
In 9M 2019, global VC funding in the solar sector was 13% higher with $1 billion compared to $889 million raised in the first nine months of 2018. Global VC/PE funding in Q3 2019 totaled $208 million in 11 deals.
Surprisingly, technology and manufacturing companies received over a hundred million in funding. Oxford PV continues to raise funds for its PERC solar cell technology while Solaria, a PV module manufacturer, and EXEGER Sweden, a dye-sensitized solar cell manufacturer for consumer electronics, buildings, and other applications, also raised substantial amounts in VC funding.
The top VC deals in 9M 2019 were: the $300 million raised by Renew Power, $144 million raised by Avaada Energy, $65 million secured by Yellow Door Energy, $50 million raised by BBOXX, and $50 million raised by Spruce Finance.
A total of 88 VC investors participated in solar funding in 9M 2019.
Solar public market financing in 9M 2019 rose to $2.25 billion in 13 deals, 25% higher compared to $1.8 billion in 14 deals in 9M 2018.
In 9M 2019, 64% of solar stocks were in positive territory compared to 26% in 9M 2018.
Seven of the solar stocks tracked by Mercom increased more than 50% in 9M 2019, with three equities increasing more than 100%. Due to favorable market conditions, there have been five IPOs this year, raising over a billion dollars combined. In Q3 2019 there were two IPOs: Sterling & Wilson Solar, a provider of solar EPC solutions, raised $406 million, and residential solar service provider, Sunnova Energy, raised $168 million.
The debt financing activity in 9M 2019 totaled $5.75 billion and was 43% higher compared to 9M 2018 when $4 billion was financed. The rise in debt financing activity was helped by six solar securitization deals, totaling $1 billion in 9M 2019. Cumulatively, $4.7 billion has now been raised through securitization deals since 2013. With low-interest rates expected to continue, and the possibility of further rate cuts in the U.S., the report states that there could be more securitization deals going forward.
There were a total of 13 project funding deals larger than $100 million in Q3 2019. The top project funding deal in Q3 2019 was Powertis, which received $613 million from BNDES (Banco Nacional de Desenvolvimento Economico e Social) and BNB (Banco do Nordeste), to develop a 765 MW solar PV portfolio in Brazil. A total of 60 investors provided funds for large-scale project development in Q3 2019.
In 9M 2019, there were a total of 57 (10 disclosed) solar M&A transactions compared to 64 (16 disclosed) transactions in 9M 2018.
The top M&A solar transaction in 9M 2019 was the $255 million acquisition of a 78.5% stake in Perseo, operator of photovoltaic generation facilities, by ERG, through its subsidiary ERG Power Generation.
There were 20 solar M&A transactions in Q3 2019 compared to 19 solar M&A transactions in Q2 2019 and 18 transactions in Q3 2018. Of the 20 transactions in Q3 2019, 14 involved solar downstream companies, five involved balance of system (BOS) companies, and one deal involved a solar service provider.Project acquisition activity was lower in 9M 2019, with 15.9 GW of solar projects acquired, compared to 23.6 GW acquired in the same period last year. In Q3 2019, a total of 34 projects for a combined 4.3 GW were acquired.
Project developers were the major acquirers of solar assets and accounted for about 2.2 GW of acquisitions in Q3 2019, followed by investment firms and funds, which picked up 739 MW of projects, and utilities, and independent power producers (IPPs) which acquired 536 MW of projects.
An expected mini-rush in installations before the investment tax credit dropdown in the U.S., relatively mild after-effects from the safeguard duty in the U.S. and India, and continued growth in solar installations globally will continue to be positive drivers for the sector according to the report.
In the first quarter (Q1) of the calendar year (CY) 2019, the Indian solar sector received investments totaling $2.8 billion (~₹195.4 billion), according to Mercom India’s Q1 2019 India Solar Market Quarterly Update.