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Global Clean Energy Investment Shows 9% Dip in Q3

Global new financial investment in clean energy totalled $25.9 billion in the third quarter of 2009, down 9% from a revised Q2 total of $28.6 billion, but still markedly ahead of the dramatic low of $13.3 billion reached in Q1.

New Energy Finance's data show that Q3 2009 was 22% below the total for the same quarter last year, and 36% below the peak figure of $40.3 billion recorded in Q4 2007. Investment in Q3 was aided by a strong recovery in public markets and the first real instalment of the billions of "green stimulus" dollars promised by major economies.

Despite the quarter's strong figures, investment activity has not returned to the levels seen in 2007 and 2008. New Energy Finance today narrowed its forecast range for full-year 2009 total new investment to $105-$115 billion. This was the upper band of the previous forecast range of $95-$115 billion. By comparison, total new investment was $155 billion in 2008, $148 billion in 2007 and $93 billion in 2006. New Energy Finance still expects that total new investment in clean energy is likely to exceed $300 billion per year by 2020, but this is well below the $500 billion per year that would be required to limit the rise in global temperatures to two degrees Centigrade or less.

Michael Liebreich, chairman and chief executive of New Energy Finance, commented: "It is heartening to see that the collapse in investment seen in the first quarter of this year is firmly receding in the rear-view mirror. However, the financing environment remains difficult, with undue reliance on stimulus funds, development banks and state-backed capital providers of various sorts. Most significantly, the levels of investment required to bring global carbon emissions to a peak during the coming decade are as far out of reach as ever – particularly significant given the rapidly-approaching Copenhagen deadline."

During the quarter the WilderHill New Energy Global Innovation Index (ticker symbol NEX), which tracks the performance of 88 clean energy stocks worldwide, rose 11.5%, taking its gain so far this year to 38.5%. This helped drive fundraisings by quoted clean energy companies totalling $4.5 billion during Q3, up from $3.1 billion in Q2 and a far cry from the negligible $0.4 billion of Q1. The Q3 total was boosted by a few major share issues, including a $724 million rights issue by Norwegian solar company Renewable Energy Corporation and a closely-watched $371 million initial public offering by US battery maker A123 Systems, the first major IPO in the post-crisis period.

Venture capital and private equity investors pumped $2.2 billion into clean energy companies in Q3, up from $1.4 billion in Q2 but little more than half of the peak figure of $4.1 billion attained in Q3 2008. Among the big VC/PE deals in the latest quarter were the $198 million of equity raised by US solar firm Solyndra and the $82.5 million raised by US electric vehicle specialist Tesla Motors. Technology venture capital investment in the quarter totalled $813 million, up from $551 million in Q2.

Asset finance, which always constitutes the largest portion of overall clean energy investment, hit $19.2 billion in the third quarter of 2009 for new-build projects, down from a revised $24.1 billion in Q2 but far above Q1's total of $11.4 billion, which was the lowest since the beginning of 2006.

Looking at the data by region, EU Europe once again led the asset finance figures, accounting for $8.8 billion of the $19.2 billion new-build total. The US continues to lag far behind on $1.2 billion. Investors there have been waiting for the stimulus funding programmes to get up to speed. The US Departments of Energy and Treasury launched a new stimulus grant programme in late July intended to spur development, but this has yet to feed through in a significant way to the data, although, with a number of substantial deals reaching the bridge-financing stage, this is expected to change in coming quarters.

Liebreich said: 'The structure of the US stimulus programme effectively brought project finance to a halt in the US as developers waited to ensure they qualified for grants or debt guarantees. Now that there is an infrastructure in place to disburse funds, we expect investment activity in the US to accelerate sharply in Q4 and into 2010.'

New Energy Finance has been predicting a pick-up in acquisition deals in the wake of the financial crisis and falling demand, and this now appears to be taking place. Corporate mergers and acquisitions in the clean energy sector totalled $7.3 billion in Q2, up by 250% on Q2's figure of $2.1 billion and the highest figure since $8.7 billion in Q3 2008. The biggest deal was the $3.4 billion acquisition by parent GCL Poly of the outstanding shares in Chinese solar-grade silicon producer GCL Solar. Valuations, both on the stock market and for private technology firms, are lower than they were at the peak in late 2007 and access to fresh equity finance is more difficult than it was, providing an opportunity for deep-pocketed buyers.