Total global corporate funding into the solar sector, including private equity/venture capital (PE/VC), debt financing, and public market financing raised, came to $12.8 billion in 2017 – a 41% increase compared to the $9.1 billion raised in 2016, according to a new report from Mercom Capital Group.
“A strong fourth quarter pushed overall funding higher in 2017. Higher installation levels around the world, the lack of threat to the solar investment tax credit, lower-than-expected tariff recommendation by [the U.S. International Trade Commission], strong debt financing activity, and over a billion dollars in securitization deals helped the solar industry have a much better year in terms of financial activity compared to 2016,” explains Raj Prabhu, CEO and co-founder of Mercom Capital Group.
“After several challenging years, most of the solar securities were up in 2017, reflecting overall positive sentiments around the solar industry, even as several Chinese manufacturers decided to go private,” adds Prabhu. “Of course, all this could change swiftly if President Trump decides to impose higher tariffs in the trade case.”
According to the report, global solar VC investments came to $1.6 billion in 99 deals in 2017, up 30% from the $1.3 billion raised by 78 deals in 2016 – led by several large private equity deals in India.
Solar downstream companies accounted for 85% of total VC funding in 2017, bringing in $1.4 billion of the total $1.6 billion raised. Thin-film companies brought in $106 million while service providers raised $47 million.
Investments in PV technology companies came to $40 million, and balance-of-systems companies raised $36 million. The concentrated solar power (CSP) category raised $8 million, and the concentrator photovoltaics (CPV) category received $6 million.
According to the report, the top PE/VC deals reported in 2017 included a deal for $200 million signed by Lightsource Renewable Energy; two deals of $200 million each from ReNew Power; $155 million raised by Greenko Energy Holdings; $125 million raised by Hero Future Energies; and $100 million raised by CleanMax Solar. Overall, the report notes, five of the top six solar VC funding deals in 2017 came from India.
The report says there were 162 PE/VC investors that participated in funding rounds in 2017, with eight involved in multiple rounds: Engie, Avista Development, DSM Venturing, InnoEnergy, Innogy, International Finance Corp. (IFC), Shell, and Techstars.
Public market financing was flat in 2017, reaching $1.7 billion raised in 33 deals compared to $1.8 billion raised in 27 deals in 2016. The report says three initial public offerings were logged during the year that raised a combined total of $363 million for Canadian Solar Infrastructure Fund, New Energy Solar Fund, and Clenergy.
Announced debt financing in 2017 surged to $9.5 billion compared to $6 billion in 2016. There were six securitization deals in 2017 totaling $1.3 billion. Securitization deals surpassed the $1 billion for the year – a first, the report notes.
Large-scale project funding announced in 2017 reached $14 billion raised in 167 deals, compared to $9.4 billion raised in 133 deals during 2016. A total of 161 investors funded about 20.5 GW of large-scale solar projects in 2017 compared to 5.9 GW funded by 153 investors in 2016.
The report says the top investors in large-scale projects included Clean Energy Finance Corp. (CEFC), which invested in 13 projects, followed by Santander with eight deals, and Commonwealth Bank of Australia and Siemens Financial Services with six deals each.
According to the report, $2.4 billion was raised by 16 residential and commercial solar project funds in 2017, which was down 50% compared to $4.9 billion raised by 30 funds in 2016. The top fundraisers were Sunlight Financial, Sunnova, Solar Mosaic, SolarCity, and Spruce Finance. Since 2009, the report notes, solar residential and commercial firms offering leases, power purchase agreements, and loans have raised more than $24.8 billion in lease and loan funds.
There were 71 corporate merger and acquisition (M&A) transactions in the solar sector in 2017, up slightly from 68 transactions recorded in 2016. Solar downstream companies were involved in 51 of these transactions. Engie acquired three companies while BayWa, Brookfield Asset Management, Horizon Solar Power, Siva Power, Solar Spectrum, and Sonnedix acquired two companies each. The largest and the most notable transaction in 2017 was the $1.6 billion acquisition of FTP Power (sPower) by AES and Alberta Investment Management (AIMCo) from Fir Tree Partners.
The report says project acquisitions jumped up 67%, as a record 228 large-scale solar projects with a combined capacity of more than 20.4 GW were acquired in 2017. That’s compared to the 12.2 GW that changed hands in 218 transactions in 2016.
Mercom notes it also tracked 187 large-scale project announcements across the globe that totaled 10.6 GW in the fourth quarter of 2017 and 922 large-scale project announcements totaling 50.1 GW for all of 2017.