Clean Technology Venture Investment May Be A Record

by Leroy Baker, Tax-News.com, New York

12 January 2010

2009, after all deals are counted, could be a record year for number of cleantech venture capital deals, and approximately equal with 2007 for the total amount invested, said Cleantech Group, the clean technology ecosystem consultants, and Deloitte, after announcing preliminary 2009 investments totaling USD5.6bn in 557 deals in North America, Europe, China and India.

“In parallel to trying to reach carbon agreements, governments spent the year earmarking hundreds of billions of dollars for clean technology in pursuit of economic growth. And in the private sector, about a quarter of all global venture investment capital was invested in cleantech in 2009 — more than software, biotech or any other category,” announced Nicholas Parker, Executive Chairman, Cleantech Group.

2009 venture investment was down 33% from USD8.5bn in 2008, paralleling the global economic decline of the same period. However, investment in cleantech declined less than other sectors. While overall venture capital has retreated back to 2003 levels, according to the US NVCA, cleantech venture capital has been reset only to 2007 levels.

Wind energy, which was the sector most heavily invested in by US utilities in 2008, continued to be a significant investment sector for utilities in 2009, trailed by investments in solar thermal and PV. In addition to utilities, energy and consumer and industrial products companies made significant investments in the cleantech sector.

“In 2009 we saw a surge in utility Power Purchase Agreement (PPA) announcements with Solar Thermal and Solar PV accounting for 80% of the total PPAs, while Wind saw increased capacity announcements in the second half of the year aided by the extension of the production tax credit,” announced Scott Smith, US Clean Tech leader for Deloitte.

“Additional project financing came from large corporations whose direct investments in cleantech increased by 14% in the second half of 2009 compared to the same period in 2008.”

The top clean technology sector for venture investment in 2009 was Solar, which accounted for 21% of total clean technology investment, closely followed by Transportation (20%) and Energy Efficiency (18%). Solar investment in 2009 was down 64% from the previous year. Meanwhile, investment in Transportation and Energy Efficiency reached record levels in 2009, and both now rival Solar for amounts invested.

North America’s share of clean technology venture capital was down from 72% in 2008 to 62%, a four year low, while the share for Europe and Israel was up from 22% in 2008 to 29%, a five year high. North America continued to attract the largest percentage of clean technology venture capital in 2009, with Europe and Israel in second place, followed by China (6%) and India (3%).

“North America’s historic cleantech innovation and capital advantage may grow less distinct over time,” suggested Dallas Kachan, Managing Director of Cleantech Group.

European and Israeli companies raised USD1.6bn in VC investment in 2009, the second highest year on record. Total investment was down 12% from 2008 but up 30% from 2007. There were a record 214 deals completed, surpassing the 212 deals in 2008. Energy Efficiency more than doubled its share of investment to 19% (USD304m in 38 deals), moving it ahead of Solar (USD292m in 35 deals).

The leading country for investment was the UK (USD291m in 61 deals, a decrease of 21% from 2008), followed by Norway (USD234m in 12 deals, an increase of 333% from 2008) and Germany (USD207m in 17 deals, a decrease of 47% from 2008).

There were a record number of M&A transactions (143, up 12% from 2008), although the total value dropped to USD9.6bn (down 32% from 2008). The USD74m raised in four cleantech IPOs represented the lowest total since 2004.

Chinese companies raised USD331m in VC investment in 2009, approximately equal to 2008 (USD330m). There were 28 deals, up from 24 in 2008. Investments were spread across a more diverse range of sectors compared to 2008, with companies in eight industry sectors raising capital: Energy Generation, Materials, Transportation, Recycling & Waste, Agriculture, Energy Efficiency, Energy Storage and Water & Wastewater.

M&A activity in China reached a historic high in 2009, with 29 transactions totaling USDS5.5bn. China also accounted for 72% of global IPO proceeds raised (USD3.4bn raised by 17 companies), spurred by approval of the Mid-to-Small company board on the Shenzhen Stock Exchange.

Indian companies raised USD190m in VC investment in 2009, down 13% from 2008 (USD218m). There were 17 deals, the same number as in 2008.

Energy Generation, in particular Biofuels, attracted 55% of the total. There was also significant interest in the Smart Production and Agriculture, Natural Pesticides in particular. In 4Q09, the Government of India also approved the launch of the Nehru National Solar Mission to be deployed at an estimated cost of USD932m.

North American companies raised USD3.5bn in VC investment in 2009, down 42% from 2008 and down 17% from 2007. There were 298 deals completed, slightly down from both 2008 (314 deals) and 2007 (317 deals).

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