subject: Alternative Energy Quarterly Deals Analysis: M&A and Investments Trends - Q1 2010 [print this page] Alternative Energy Quarterly Deals Analysis: M&A and Investments Trends - Q1 2010
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GlobalData's "Alternative Energy Quarterly Deals Analysis M&A and Investments Trends - Q1 2010" report is an essential source of data and trend analysis on the Mergers and Acquisitions (M&A) and financings in the alternative energy market. The report provides detailed information on M&As, equity/debt offerings, Private Equity (PE), venture financing and partnership transactions registered in the alternative energy industry in Q1 2010. The report portrays detailed comparative data on the number of deals and their value in the last five quarters, subdivided by deal types, segments, and geographies. Additionally, the report provides information on the top PE, Venture Capital (VC), and advisory firms in the alternative energy industry.
Data presented in this report is derived from GlobalData's proprietary in-house Alternative Energy eTrack deals database and primary and secondary research.
M&A Activity Decelerated In The Alternative Energy Market In Q1 2010
M&As, which include changes in the ownership and control of companies (GlobalData considers this value as not a new investment into the market), in the alternative energy industry witnessed a decline of 17% in the number of deals and 54% in deal value, reporting 90 deals worth $9.9 billion in Q1 2010 compared to 109 deals worth $21.7 billion in Q4 2009. The high deal value in Q4 2009 can primarily be attributed to the following prominent deals: Alstom and Schneider's agreement to acquire Areva T&D for $5.8 billion; Stanley Works merger with Black & Decker, valued at $4.7 billion; and Panasonic's acquisition of 50.2% stake in Sanyo Electric for $4.5 billion.
The large scale projects in wind and solar segments are more capital intensive and in the current scenario of relatively tight financial market conditions, it is becoming difficult for companies to keep up the pace of adding new projects, which in turn is driving the slowdown in the alternative energy market. The M&A activity in the wind segment has registered a 97% decline in deal value, from $2.3 billion in Q4 2009 to $61.7 million in Q1 2010, while the solar segment reported an 84% decrease in value from $6.2 billion in Q4 2009 to $1 billion in Q1 2010.
According to Nidhi Singh, Analyst at GlobalData, "M&As in the alternative energy market might see some action in coming year on the cues of economic recovery and increased interest in renewable energy. With the improving financial condition of the economy, companies will come up with new budgets for expansion, which will lead to new project additions in 2010."
Asset Financing Investments In Alternative Energy Market Slowed Down In Q1 2010
Asset financing, including project financing, self-funded, tax equity, lease and bond financing, and bridge loans for new builds, acquisitions, and the refinancing of assets, registered a decrease in the number of deals and deal value, reporting 357 deals worth $70.1 billion in Q1 2010 compared to 301 deals worth $40.2 billion in Q4 2009, a decrease of 43% in terms of deal value.
Technology wise, the hydro energy market accounted for 44% of the total new investments in projects in Q1 2010. The Government of Ecuador's proposed investment of $6 billion in the Zamora hydro power project in Ecuador and JVPL's proposed investment of $4.3 billion in the Lower Siang mega hydro power project in Arunachal Pradesh were the two prominent asset financing deals registered in Q1 2010.
According to Nidhi Singh, Analyst at GlobalData, "This declining trend could be attributed to the poor performance of the alternative energy stocks, which has reduced investor confidence in the market. Though economic recovery is underway, it will take some time for the market to respond, but the industry remains optimistic and expects to see more projects and investments coming in the next two quarters of 2010."
New Investments In The Alternative Energy Industry Declined By 34% In Q1 2010
Investments in alternative energy companies, including new investments through equity/debt and financing by PE/VC firms, reported a decrease of 20% in the number of deals and 34% in deal value, reporting 194 deals worth $29.5 billion in Q1 2010, compared to 242 deals worth $44.8 billion in Q4 2009. A relatively tight financial market and the poor performance of alternative energy stocks are affecting the free flow of new investments into the market. While many companies are able to receive small size funding, it is still not reflecting a major chunk in the total investments in Q1 2010.
Although overall investments represented a slight disappointment, GlobalData expects thatthe alternative energy market will re-bounce with more positive move in the deal making activity in the near future, driven by the clean energy theme.
Decreased Financing Through Equity and Debt Offerings In Q1 2010
Global equity offerings, including Initial Public Offerings (IPOs), secondary offerings, and Private Investment in Public Equities (PIPEs) witnessed a decrease of 44% in the number of deals and 72% in deal value, reporting 51 deals worth $4 billion in Q1 2010 compared to 91 deals worth $13.7billion in Q4 2009. The decrease in raising equity capital can primarily be attributed to the poor performance of alternative energy stocks and exchange traded funds, and the credit crunch prevailing in the market. Furthermore, the IPO market witnessed a huge decrease of 89% in deal value, from $6.8 billion in Q4 2009 to $0.8 billion in Q1 2010. The high deal value in Q4 2009 can be attributed to two big ticket deals: China Longyuan Electric Power's IPO for $2.6 billion and PGE Polska Grupa Energetyczna's IPO for $2.6 billion. The PIPE segment also registered a huge decline of 88% in deal value, from $4.2 billion in Q4 2009 to $0.5 billion in Q1 2010. Further, the number of PIPE deals reported a decrease of 84%, reporting 28 deals in Q1 2010 compared 54 deals in Q4 2009.
Debt offerings, including public and private debt placements by alternative energy companies, have seen a decline of 53% in the number deals and 20% in deal value, reporting 46 deals worth $24 billion in Q1 2010 compared to 97 deals worth $29.9 billion in Q4 2009. In particular, debt placement through public offerings saw a huge drop out in the number of deals, from 74 deals in Q4 2009 to 31 deals in Q1 2010. On a year-on-year basis, capital raising through debt offering declined by 70% in Q1 2010, compared to $80.3 billion in Q1 2009. Debt financing for large scale projects remained difficult, with the continued burden on return on investments in the debt instruments market along with the banks' general reluctance to provide debt financing for large projects.
New Investments From Venture Capital Investments Grew By 44% In Q1 2010
VC investments in the alternative energy industry increased by 44%, with $832.4 million in Q1 2010 compared to $578.8 million in Q4 2009. Further, the number deals witnessed a huge increase of 114% with 77 deals in Q1 2010 compared to 36 deals in Q4 2009. Solar companies accumulated the majority of the VC funding, with $312.5 million in Q1 2010. The increase in VC investment in Q1 2010 was driven by the sector's resource efficiency over the traditional energy sector and the bright future outlook of the industry. The majority of the financing was provided to companies in the growth capital/expansion stage, with 26 deals worth $459.8 million in Q1 2010, followed by start up financing with 47 deals worth $316.9 million. Khosla Ventures emerged as the top VC firm by providing financing worth $216.9 million for 13 alternative energy companies during Q2 2009 Q1 2010.
Further, investments from the PE market increased from $560.9 million in Q4 2009 to $668.5 million in Q1 2010, an increase of around 19%. The number of PE deals also increased marginally from 18 deals in Q4 2009 to 20 deals in Q1 2010. The wind energy market attracted the maximum investments from PE investors, with $455 million in Q1 2010. Altira Group topped the PE ranking table by providing financing for seven alternative energy companies, for a deal value worth $427.5 million.
According to Nidhi Singh, Analyst at GlobalData, "Wind power being the preferred sector in many countries across the globe has attracted investments despite the tight financial situation. Growing wind power capacity and rising energy demand in developing countries have led to a surge in new investments in the renewable energy sector and this trend will continue in the next quarter also."
Investments Declined In North America, Europe And Asia Pacific In Q1 2010
North America, Europe and the Asia-Pacific witnessed a decrease in alternative energy market investments, reporting $33 billion, $19.5 billion and $14.3 billion respectively in Q1 2010, compared to $49.8 billion, $35.7 billion and $37.1 billion respectively in Q4 2009. The unstable financing environment coupled with commercial banks' reduced credit for renewable energy projects and companies reliant on bank lending and export credits led to a decrease in investments in Q1 2010. The large projects have not been able to attract much financing due to credit freeze. Further, investments in the rest of the world, including South and Central America and the Middle East and Africa, registered an increase, with $17.4 billion investments in Q1 2010 compared to $11.2 billion in Q4 2009.
According to Nidhi Singh, Analyst at GlobalData, "Although investments have declined in the last quarter due to the credit crunch in the market, this trend will not continue in the second quarter of 2010 as various countries and regions across the globe are witnessing the signs of recovery, such as rising investments in some areas. Many companies will now lift the budget freeze due to the end of the economic recession, which will result in new project additions and increased investment activity in the industry. Thus this scenario will change in coming year and the renewable energy industry will witness a rise in investments in North America, Europe and the Asia-Pacific as well." For more details, please vist http://www.reportreserve.com/reportdet.php?company=GlobalData&reportid=10170
