Global clean energy investment dips but avoids Q1 lows
Figures from New Energy Finance show that total worldwide new financial investment* in clean energy totalled $25.9bn, down 9% from a revised Q2 total of $28.6bn**, but still markedly ahead of the dramatic low of $13.3bn reached in Q1.
The Q3 2009 figures remain 22% below the total for the same quarter last year, and 36% below the peak figure of $40.3bn recorded in Q4 2007. Investment in Q3 was aided by a strong recovery in public markets and the first real instalment of the billions of "green stimulus" dollars promised by major economies.
Despite the quarter’s strong figures, investment activity has not returned to the levels seen in 2007 and 2008. New Energy Finance today narrowed its forecast range for full-year 2009 total new investment to $105-$115bn***. This was the upper band of the previous forecast range of $95-$115bn. By comparison, total new investment was $155bn in 2008, $148bn in 2007 and $93bn in 2006. New Energy Finance still expects that total new investment in clean energy is likely to exceed $300bn per year by 2020, but this is well below the $500bn per year that would be required to limit the rise in global temperatures to two degrees Centigrade or less.
Michael Liebreich, chairman and chief executive of New Energy Finance, commented: "It is heartening to see that the collapse in investment seen in the first quarter of this year is firmly receding in the rear-view mirror. However, the financing environment remains difficult, with undue reliance on stimulus funds, development banks and state-backed capital providers of various sorts. Most significantly, the levels of investment required to bring global carbon emissions to a peak during the coming decade are as far out of reach as ever – particularly significant given the rapidly-approaching Copenhagen deadline"
During the quarter the WilderHill New Energy Global Innovation Index (ticker symbol NEX), which tracks the performance of 88 clean energy stocks worldwide, rose 11.5%, taking its gain so far this year to 38.5%. This helped drive fundraisings by quoted clean energy companies totalling $4.5bn during Q3, up from $3.1bn in Q2 and a far cry from the negligible $0.4bn of Q1. The Q3 total was boosted by a few major share issues, including a $724m rights issue by Norwegian solar company Renewable Energy Corporation and a closely-watched $371m initial public offering by US battery maker A123 Systems, the first major IPO in the post-crisis period.
Venture capital and private equity investors pumped $2.2bn into clean energy companies in Q3, up from $1.4bn in Q2 but little more than half of the peak figure of $4.1bn attained in Q3 2008. Among the big VC/PE deals in the latest quarter were the $198m of equity raised by US solar firm Solyndra and the $82.5m raised by US electric vehicle specialist Tesla Motors. Technology venture capital investment in the quarter totalled $813m, up from $551m in Q2.
Asset finance, which always constitutes the largest portion of overall clean energy investment, hit $19.2bn in the third quarter of 2009 for new-build projects, down from a revised $24.1bn in Q2 but far above Q1's total of $11.4bn, which was the lowest since the beginning of 2006.
Liebreich said: "The shortage of debt finance caused by the banking crisis remains an impediment to project finance for wind farms and solar parks. However, there are signs that the situation is beginning to ease. We are seeing governments – particularly the US – starting to spend the estimated $163bn they have earmarked for 'green stimulus' programmes. That should boost asset finance in the fourth quarter."
Among the substantial projects receiving finance in the third quarter were the $897m, 165MW first phase of the Belwind offshore wind park, 47km off the coast of Belgium, and the $586m, 200MW Longyuan Qinghai Germu PV project in China.
Looking at the data by region, EU Europe once again led the asset finance figures, accounting for $8.8bn of the $19.2bn new-build total. The US continues to lag far behind on $1.2bn. Investors there have been waiting for the stimulus funding programmes to get up to speed. The US Departments of Energy and Treasury launched a new stimulus grant programme in late July intended to spur development, but this has yet to feed through in a significant way to the data, although, with a number of substantial deals reaching the bridge-financing stage, this is expected to change in coming quarters.
Liebreich said: “The structure of the US stimulus programme effectively brought project finance to a halt in the US as developers waited to ensure they qualified for grants or debt guarantees. Now that there is an infrastructure in place to disburse funds, we expect investment activity in the US to accelerate sharply in Q4 and into 2010.”
New Energy Finance has been predicting a pick-up in acquisition deals in the wake of the financial crisis and falling demand, and this now appears to be taking place. Corporate mergers and acquisitions in the clean energy sector totalled $7.3bn in Q2, up by 250% on Q2's figure of $2.1bn and the highest figure since $8.7bn in Q3 2008. The biggest deal was the $3.4bn acquisition by parent GCL Poly of the outstanding shares in Chinese solar-grade silicon producer GCL Solar. Valuations, both on the stock market and for private technology firms, are lower than they were at the peak in late 2007 and access to fresh equity finance is more difficult than it was, providing an opportunity for deep-pocketed buyers.
* Total new financial investment includes venture capital, private equity, public equity, asset finance (equity, debt, lease and other sorts), bonds and corporate debt. The quarterly figures are not adjusted for reinvestment, for instance money raised on public markets later invested in projects.
** New Energy Finance has revised up its Q2 figure from $24.3bn based on delayed information on project finance, particularly in Asia.
*** Total new investment includes a number of elements that are not included in total new financial investment: namely government and corporate research, development and deployment; and small-scale distributed projects such as roof-top solar.
For further information, please contact:
Angus McCrone, Chief Editor, New Energy Finance
+44 207 092 8834
Ethan Zindler, Head of North American Research, New Energy Finance
+1 703 486 5667
Michael Liebreich, Chairman and CEO
New Energy Finance Limited
2nd Floor, New Penderel House
283-288 High Holborn
London WC1V England
tel: +44 20 7092 8800
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