US venture capital investment in cleantech companies in Q3 2009 increased 46 per cent compared to the prior quarter to USD965m in 50 financing rounds, according to an Ernst & Young analysis based on data from Dow Jones VentureSource.
This is the second consecutive quarter of growth in 2009 and the fifth largest quarterly investment total on record.
Compared to Q1 2009, quarterly investment has increased 182 per cent in terms of capital and doubled in terms of financing rounds.
Continuing a trend that began in the first quarter of 2009, the majority of investment dollars – 61 per cent – in Q3 was directed to companies that are currently shipping products. In the first nine months of 2009, 62 per cent of capital invested went to companies that are shipping products compared to just 37 per cent for the same period in 2008.
A variety of investors continue to support the cleantech sector. Of the top ten venture capital-led deals in Q3 2009, four included private equity investors, three included corporate investors, and one included a sovereign wealth fund.
"Continuing growth in cleantech investment in the third quarter reflects investor confidence in the commercialization of clean technologies," says Joseph A. Muscat, Ernst & Young Americas director of cleantech. "The diversity in this quarter’s investment activity, in terms of the technologies receiving investment and the participating investors, illustrate the potential to create value through the development of a low-carbon economy."
The energy/electricity generation category received the largest amount of investment in Q3 09 with USD316m, representing 33 per cent of the quarter’s VC investment in cleantech. Solar technologies garnered the majority of investment in this category, raising USD309m, a quarterly increase of 115 per cent. Investment in the solar segment was spread across five deals, led by the USD198m deal done by Solyndra, a photovoltaic system developer for the commercial market in Fremont, California.
Industry-specific products and services for cleantech generated strong VC interest in Q3 09 with USD289m invested, a 57 per cent increase from the previous quarter. This increase was driven by deal activity in the construction, materials and transportation segments. The USD83m investment in Tesla Motors, based in San Carlos, California, by Aabar Investments, Daimler and Fjord Ventures, was the largest investment in this category.
Environmental products and services was the third-largest category in Q3 09, raising USD120m. Two deals account for this amount: the USD100m investment in WastePro, a waste removal services company in Longwood, Florida; and the USD20m investment in Liquid Environmental Solutions, a Dallas-based company that removes non-hazardous liquid waste streams.
The alternative fuels category, consisting entirely of biofuels deals, grew by 58 per cent to USD71m. Interest in biofuels among large oil corporations was evident in Q3 09, with the USD25m investment in LS9, a developer of renewable fuels and sustainable chemicals based in San Francisco, by a syndicate of investors that included Chevron Technology Ventures. Exxon Mobil announced it was investing USD600m in a partnership with Synthetic Genomics of La Jolla, California, to develop commercially viable biofuels from algae. BP and Martek Biosciences are partnering to study the use of algae to convert sugar into biodiesel.
The impact of the American Reinvestment and Recovery Act began to be felt in the market as funds were disbursed and spent in significant amounts over the third and fourth quarters. For example, the US Department of Energy recently announced USD3.4bn in grants for energy grid modernization projects, which the government expects to be matched by industry funding, bringing the overall funding to over USD8bn.
As of the end of September, New Energy Finance tracked USD18.2bn in disbursed ARRA funds to state and local agencies for energy efficiency, renewable energy, grid improvements and carbon capture and sequestration. NEF estimates that USD9.5bn in ARRA funding in these categories has actually been spent in the market. This growing pipeline of stimulus spending, which NEF expects to peak in 2010 or 2011, contributes to cleantech market confidence.
Other government programmes designed to promote cleantech development are also having an impact. In September, the DOE awarded the fourth conditional loan under its Advanced Technology Vehicles Manufacturing programme for USD528.7m to Fisker Automotive. Created by the Energy Independence and Security Act of 2007, the USD25bn programme is designed to spur the development of fuel-efficient vehicles.
US clean energy asset financings totaled USD789m in Q3 09, down from the USD1.7bn of transactions in Q2 09, according to NEF. A notable deal in this category is the USD300m investment by Wind Capital Group for a 150 megawatt wind project in Missouri.
M&A transaction values also increased in Q3 09 with eight deals valued at USD750m, more than triple the USD157m recorded in Q2 09, according to IHS Herold. Two large deals accounted for the majority of this amount, Covanta Energy’s USD450m acquisition of Veolia Environmental Services’ waste-to-energy unit and Terra Firma Capital Partners’ acquisition of Everpower Wind Holdings from Good Energies for USD200m.
