Decline in clean energy investment continues

Published on Friday, 06 July 2012 10:04
Posted by Vicki Mitchem

Report blames "major storm" of policy uncertainty, subsidy cuts, and Eurozone crisis for further drops in investment activity

Global renewable energy investment looks set to remain sluggish after a marked drop in levels of project finance, venture capital, and private equity funding during the second quarter of this year.

Rather than improving on a poor start to the year, the latest figures from analyst firm Clean Energy Pipeline show a decline in activity to some the lowest levels seen since the economic downturn.

Uncertainty around subsidies and financial turmoil in the Eurozone combined to send project finance tumbling to $34.6bn, a 22 per cent decline from the same period in 2011 and the second lowest quarterly level recorded during the last two years.

Venture capital and private equity investment crawled to $1.9bn, the poorest quarterly performance since the beginning of 2009, on the back of a substantial decline in investment in solar and energy efficiency companies.

Meanwhile, merger and acquisition (M&A) activity plunged to $9.2bn, less than half of the $21.9bn recorded in the first three months of this year and around a quarter of the $39.2bn clocked up in the corresponding period in 2011.

The 179 transactions announced were also a marked reduction on the 2011 quarterly average of 256, while an absence of large deals hurt total deal volumes.

Only three $500m plus deals, worth a cumulative $4bn were announced during the quarter, substantially below the nine totalling just under $13bn announced in the previous quarter.

"The global clean energy sector is right in the middle of a major storm combining policy uncertainty in the US, low natural gas prices across North America, feed-in tariff cuts in Europe, a slowdown in Chinese wind installation levels and an on-going sovereign debt crisis in the Eurozone," said Douglas Lloyd, chief executive of Clean Energy pipeline. "All these factors explain the disappointing investment levels recorded this quarter."

However, there are signs the downturn in clean energy investment could soon be reversed.

Investment in bioenergy companies grew to $422m, almost double the $228m recorded in the second quarter of last year.

Energy efficiency M&A activity also grew to $3.5bn, a 52 per cent increase on the $2.3bn average quarterly volume recorded last year, underpinned by investment firms Melrose plc's $2.3bn acquisition of metering company Elster.

And while the $2.2bn raised by clean energy companies from IPOs, secondaries and convertible notes was still well below the $4.5bn two-year quarterly average, it still represented a significant increase on the $1.2bn secured in the first quarter of the year.

"Despite the challenging environment, there are reasons to be optimistic," Lloyd said.

Source: ©Business Green

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