Mercom Capital Group, llc, a global clean energy communications and consulting firm, released its report on funding and merger and acquisition (M&A) activity for the solar sector in the third quarter of 2016.
Total corporate funding, including venture capital, public market and debt financing into the solar sector in Q3 2016 was up to about $3 billion in 45 deals, compared to the $1.7 billion in 32 deals in Q2 2016.
“Funding levels bounced back across the board compared to a weak Q2, but they are still well below last year’s totals,” commented Raj Prabhu, CEO and Co-Founder of Mercom Capital Group. “The combination of slower than expected U.S. demand, the overcapacity situation coming out of China, and global hyper-competitive auctions leading to lower margins has affected the entire supply chain and most of the solar equities are in the red year-to-date. The exception has been the rebound of some of the yieldcos.”
Global VC funding (including private equity) for the solar sector almost doubled in Q3 2016 with $342 million in 16 deals compared to the $174 million raised in the same number of deals in Q2 2016.
Solar downstream companies raised $273 million in eight deals compared to $112 million in seven deals in Q2 2016. The largest share came from the $220 million raised by Solar Mosaic, a provider of residential solar loans, from Warburg Pincus, Core Innovation Capital and Obvious Ventures.
Other top VC deals this quarter included the $47 million raised by Heliatek, $20 million raised by BBOXX, $15 million raised by d.light, and the $10 million each raised by Morgan Solar and Off-Grid Electric.
Solar public market financing in Q3 2016 came to $880 million in five deals, including one IPO, compared to $179 million in four deals in Q2 2016. In Q3 of 2015, public market financing totaled $1.8 billion.
The first solar IPO this year was recorded by BCPG, a solar downstream company for $166 million.
Debt financing came to almost $1.8 billion in 24 deals in Q3 2016 compared to 12 deals in Q2 2016 for $1.3 billion. Year-over-year, $4.1 billion was raised in 22 deals in Q3 2015.
The top large-scale project funding deal this quarter was Magnetar Capital’s raise of $397 million to refinance its 135 MW UK solar projects portfolio. Sinogreenergy raised $200 million to develop a portfolio of up to 550 MW of solar projects in Taiwan. SunPower secured a $199.7 million syndicated loan for its 100 MW Pelican Solar Project in Chile. Gunkul Engineering secured $115.8 million in a syndicated loan for the construction of the 31.75 MW Sendai Okura solar project in Japan. Fotowatio Renewable Ventures received $103.4 million in project financing for the 50 MW solar PV project in northern Jordan.
Residential and commercial solar funds raised in Q3 2016 came to $1.1 billion in five deals compared to $1.36 billion in 11 deals in Q2 2016. Of the $1.1 billion announced this quarter, $760 million went towards lease and $333 million went to loan funds. So far this year, close to $3.5 billion has been raised in 22 deals. During the same period last year, more than $5 billion was raised in 21 deals.
There were 18 solar M&A transactions in Q3 2016 compared to 17 in the previous quarter. Solar downstream companies accounted for half of the transactions (nine), followed by manufacturers with five. Four acquisitions involved SunEdison companies this quarter as a result of the company filing for bankruptcy and selling off parts of its business.
There were 55 large-scale solar project acquisitions (24 disclosed for $1.3 billion) compared to Q2 2016 which had 38 transactions (13 disclosed for $1.9 billion). About 2.6 GW of solar projects were acquired in Q3 2016 compared to 2 GW in the previous quarter.
The largest disclosed transaction was the $218 million acquisition of a 24 percent stake in Desert Sunlight Investment Holdings’ 550 MW solar project in California (called Desert Sunlight Solar Energy Center) by NextEra Energy Partners. Solar Partnership Capita, acquired 152 MW of solar projects from Sky Solar Japan for $165 million. Integrated Asset Management acquired a portfolio of 30 solar projects totaling 34 MW in Italy for $141.4 million. 8point3 Energy Partners, a yieldco company formed by First Solar and SunPower, acquired SunPower's 49 percent stake in its 102 MW Henrietta Solar Project in California for $134 million. Macquarie Group and BRUC Capital acquired a 37 MW solar project pipeline including 27 individual projects in Japan from IBC SOLAR for $101.2 million.
Mercom tracked 185 new large-scale project announcements worldwide in Q3 2016 totaling 9.2 GW.