Global VC funding in solar sector down 50% in 2012

Global venture capital (VC) investments in the solar sector last year were $992 million, down nearly 50 percent over 2011 to five year low.

According to clean energy communications and consulting firm Mercom Capital Group, the global VC investments plunged nearly 50 percent to $992 million involving 103 deals in 2012, compared to $1.9 billion raised in 108 deals in the previous year.

The 2012 total represents the lowest amount since 2007. “The slowdown in VC funding can be attributed to the grim prospects for thin-film, concentrating solar and concentrating PV technologies,” Mercom Capital Group Managing Partner Raj Prabhu said.

Thin-film companies saw the largest amount of VC funding in 2012, although the total fell 47 percent to $ 314 million compared to almost $ 600 million in 2011. Over the past three years, thin-film companies have received the most VC funding, with almost $1.5 billion.

“The diminished funding activity is not a true reflection of the health of the solar sector, because the demand side of global solar installations has continued to grow,” Prabhu said. More than 140 investors participated in 2012. The most active investors in terms of deal numbers were New Enterprise Associates with four, followed by Black Coral Capital, Firelake Capital Management, Kleiner Perkins Caufield & Byers and SunPower who participated in three deals each.

Corporate M&A activity in solar amounted to$6.7 billion in 52 transactions compared to $4 billion in 65 transactions in 2011. “It was a buyer’s market in 2012—acquirers were targeting distressed companies with the goal of buying technology or equipment on the cheap,” Prabhu said, adding, “more than half the 52 M&A deals in 2012 involved solar manufacturers and equipment makers.”

There were 12 corporate M&A transactions in Q4 2012, totalling $953 million with only six transactions disclosing amounts, the report said.