Funding for solar projects dipped globally in Q2

Second-quarter funding and M&A activity in the global solar sector slipped slightly. Total global corporate funding in the sector — including venture capital (VC) and private equity (PE), debt financing and market financing raised by public companies — amounted to $6.3 billion (₹37,810 crore), compared to $7 billion (₹42,013 crore) in Q1 2014.

The quarter also saw two initial public offerings, including a securitisation deal, according to Mercom Capital Group, a clean energy consulting firm. Of the total corporate funding of $6.3 billion, $432 million came via VC funding and PE deals while $1.3 billion was via third party funds, the agency said in its report.

Explaining third party funding, Priyadarshini Sanjay, Managing Director, Mercom Communications, said the practice is quite common in the US and the UK, among “investment bankers like Credit Suisse and Goldman Sachs (who) tend to invest in solar roof top installations where the initial costs are very high. These are quite different from either VC or PE.”

Third party residential and commercial solar funds continued to attract significant attention in the second quarter. Globally, SunPower topped the list, raising $492 million in three different funds. Investors included Google, Admirals Bank and Hannon Armstrong Sustainable Infrastructure Capital.

Indian share Sanjay added that there were several notable Indian transactions during the quarter. In the case of venture capital funding, Simpa Networks, a distributed energy solutions provider, raised $2.2 million (₹13.2 crore) in funding, while AK Surya PowerMagic, a provider of solar-based irrigation for farmers, raised $500,000 (₹3 crore) in funding from Intellecap Impact Investment Network and Infuse Ventures, IIM Ahmedabad’s clean-tech fund.

In the case of public market financing, Welspun Renewables Energy, a renewable energy project developer, announced that Asian Development Bank (ADB) had purchased a 25 percent stake in the company for $50 million (₹300 crore) and DEG, the subsidiary of German government-owned development bank KfW, subscribed to the compulsory convertible debentures of the company valued at $37 million (₹222 crore), taking the total captital raised by the company to $88 million (₹522 crore).

Bigger deal sizes Welspun Renewables Energy also raised $24 million (₹144 crore) in project funding from GE Energy Financial Services for a 151-MW solar PV project in Madhya Pradesh. CaptureSolar Energy, a solar project developer, raised $125 million (₹750 crore) from PG Concept, a Cyprus-based PV solutions provider, for a 75-MW solar PV project in Pune.

The global VC funding in solar for the second quarter, which totalled $432 million, came from 21 deals, up from $251 million in 26 deals in the first quarter of 2014. Solar downstream companies attracted most of the VC funding this quarter, with $388 million in 10 deals.

Raj Prabhu, CEO, Mercom Capital Group, said, “It was a solid quarter for the solar sector in terms of fundraising. VC funding was up, public markets remained strong, and we are seeing new and innovative financial structures. Residential and commercial solar funds continue to raise record amounts.”

The largest VC and PE deal globally in the second quarter was the $150 million raised by US-based Sunrun, a provider of residential solar power systems. Investors included Foundation Capital, Accel Partners, Sequoia Capital, Madrone Capital, among others.