The solar energy sector has re-emerged as a favorite among green-tech investors, who also lined up behind biofuel companies at a time when crude oil began to gush from a BP well in the Gulf and carmakers were getting ready to launch cars partly or completely run on electricity.
Clean-tech venture investments for these two sectors stood out among the deals announced during the second quarter, in which $2.02 billion -- a 43% jump from the same period last year -- went to 140 private companies worldwide, according to a preliminary report from the Cleantech Group and Deloitte released Thursday. In all, green-tech companies raised $4.04 billion for the first half of this year, beating the record of $4.02 billion set during the first half of 2008.
Although investors were more bullish during the second quarter than they were a year ago, they clocked slightly less than the $2.04 billion (among 192 deals) recorded for this year's first quarter.
Corporate investors are playing a bigger role in green tech. Some of them needed to pony up to meet government mandates, while others sought to enter or expand their reach in various emerging green-tech sectors. Corporate giants, such as Shell (RDS.A) and Alstom (ALSMY), took part in about 15% of the second-quarter deals.
"Public Markets Are Pretty Much Closed"
Raising money from going public remains difficult for many startups. Eight companies have postponed or ditched their initial public offerings so far this year, including the high-profile cancellation by Solyndra, a California-based maker of solar panels that decided to sell $175 million in convertible notes instead of going public.
The lackluster IPO market likely led to some of the large private equity and debt deals that exceeded $100 million during the second quarter, says Richard Youngman, the Cleantech Group's vice president of global research. Some startups also were able to raise good money after they had received federal stimulus funds.
"We have companies that are much more mature, and the need for capital is much greater. Public markets are pretty much closed," says Youngman. "If you look at some of the mega deals, you'll see a strong correlation between those who had received funding from government programs within the last year."
Shiny Deals in Solar, Smart Grid
The solar sector was a big winner in the second quarter. It garnered $811 million among 26 deals, including the debt financing by Solyndra. California's BrightSource Energy raised $150 million in equity and counted French industrial giant Alstom as a new investor. Another California company, Amonix, raised $129.4 million in equity.
Solar power has gotten a lot of love from American utilities, particularly because many states now require their electricity retailers to increase the amount of renewable energy they sell. Many utilities are both building their own solar farms as well as buying solar electricity from producers. They signed 1,539 megawatts of power purchase agreements for the first half of this year, a 148% hike from 621 megawatts in the second half of 2009, the Cleantech Group says.
Meanwhile, companies that are figuring out various steps for making fuels from plants, agricultural wastes or other types of biomass collectively raised $302 million in 13 deals during the second quarter. High-profile deals include the $61 million in equity from California-based Amyris Biotechnologies, which also raised an additional $47.8 million from Singapore's Temasek Holdings. Virent Energy Systems in Wisconsin received $46 million from Shell and Cargill Ventures, while Kior in Texas grabbed $40 million.
Smart-grid and energy-efficiency technology developers also pocketed substantial investments. The term "smart grid" refers to a wide range of software and equipment to help utilities and their customers better monitor and manage energy distribution and use. The sector raised $256 million in 11 deals during the second quarter. Landis+Gyr, a Swiss maker of meters with advanced communication technology, raised $165 million. Florida-based OpenPeak, which creates home energy management devices, bagged $52 million.
China's Clean-Tech Push
Overall, the second quarter saw 19 IPOs totaling $2.31 million, and 12 of the offerings totaling $1.73 billion came from the Chinese market. California-based Tesla Motors (TSLA) was among the three companies that went public in North America and collectively raised $304 million.
"Right now, data suggest that if there's appetite for clean-tech IPOs, then that appetite is stronger in the East than the West," Youngman says. Some of the largest Chinese IPOs over the past year: China Longyuan Electric Power raised $2.2 billion, while Chongqing Water raised $511 million.
Although Tesla Motors' $226 million IPO this week met with an enthusiastic investor response, it was an exception. When Solyndra filed to go public last December, it was looking at raising as much as $300 million. But the company, which had raised $970 million in equity and won approval for a $535 million federal government loan to build a factory, said unfavorable market conditions forced it to cancel the IPO.
Nobao Renewable Energy, a Chinese company that builds geothermal energy systems to heat and cool buildings, also ditched its IPO plan last month. Trony Solar, a maker of amorphous-silicon solar panels in China, postponed its IPO as well last December.
Meanwhile, JinkoSolar (JKS), a crystalline-silicon solar panel maker from China, went public on the New York Stock Exchange in May this year and failed to excite investors. The company's shares launched at $11 and closed at $11.01 on the first day.
Clean-Tech Investments Hit a High, With Solar Shining Brightest