Mercom Q1/2016 Funding Report

Corporate Funding In Solar Drops Around 60% Sequentially
07:35 PM (Beijing Time) - 11. April 2016
n_bus_venture capital_mercom_Mercom Q1 report-graph Top projects_ab

Key Takeaways

  • Mercom Capital report points out that private sector funding has dropped down considerably in Q1/2016
  • Number of venture capital funding deals went up, yet the total amount came down 11% from previous quarter
  • Merger and acquisition activity also saw a downfall of 24.3%, from $440 million in Q4/2015 to $333 million in Q1/2015
  • Public market financing sequentially dropped by 84.4% to $94 million in four deals, as did debt financing, which fell over 60% from Q4/2015

Amid fading YieldCos and depressed market valuations, the solar industry in the first quarter of 2016 had a mixed period with venture capital (VC) funding going up over 100% YoY from $195 million to $406 million. Nevertheless, VC funding saw a downfall of over 11% sequentially, even as the number of deals went up to 23 in Q1/2016, vis-à-vis 17 in the quarter before.

Raj Prabhu, CEO of Mercom Capital Group, which released its report for the first quarter funding on April 7, 2016, said, “It’s a tough environment out there. Solar public companies in general have had a difficult time raising capital at depressed market valuations. YieldCos, which accounted for significant financial activity in the debt and public markets last year, have faded this quarter. On the bright side, VC funding held up well, securitization deal activity picked up and residential/commercial funds raised a billion dollars in Q1.”

The biggest large-scale solar project funded by dollar amount in the quarter was India Solar Projects for $250 million for 400 MW senior debt. Renew Power of India bagged the deal from Overseas Private Investment Corporation.

Downstream companies bag the most money
The cumulative corporate funding – which according to Mercom includes VC, public market and debt financing – strongly dropped by 59.4% to $2.8 billion, from $6.9 million in the previous quarter. It also didn’t improve on a yearly basis – in Q1/2015, total corporate funding was $6.4 billion.

n_bus_venture capital_mercom_Mercom Q1 report-graph funding Q1_ab

The report titled “Funding and merger & acquisition activity for the solar sector,” points out that venture capitalists continue to see better growth for downstream solar companies, which dominated VC funding in the reporting quarter, even though volume dropped by 24.3% from the previous quarter. Solar downstream companies attracted $333 million in eight deals as compared to $440 million in 13 deals in Q4/2015 (see Corporate solar funding $25.3 billion in 2015). Among the top most VC funded companies, Sunnova Energy raised $300 million.

Nine out of 14 M&A transactions were reported in Q1/2016 – and all of them involved solar downstream companies. Yet, 2.4 GW of solar projects were reportedly acquired in 50 transactions, down from 3.3 GW in 52 transactions last year. Most project acquisitions were by project developers, followed by investment firms, utility/independent power producers and YieldCos. The 132 MW Alamo 7 solar project in Texas was the largest project that was acquired by dollar amount – by ConEdison Development for $227 million from Korean chemical company OCI, which is also a leading polysilicon producer.

Public Market Financing and debt financing not big either
With no solar initial public offering (IPO) in Q1/2016, Mercom says public market financing dropped 84.4% to $94 million in four deals, against $605 million in eight deals in the last quarter. The number of deals in debt financing fell down to 19, from 27 deals in Q4/2015 ($5.8 billion) and 25 deals in Q1/2015 ($4.9 billion). The amount raised was $2.3 billion.

The Mercom report also stated, “Securitization deals in solar have now surpassed $1 billion globally.”

Mercom’s Q1 2016 Solar Funding and M&A report costs $299.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani