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Cleantech Venture Investments Down in 3Q

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Cleantech venture investment was down by 30% in 3Q10, compared to the previous quarter and was also 11% lower than the same period a year ago. However, through the first three quarters of 2010, total investment ($5.73 billion) is already slightly ahead of the full-year 2009 total ($5.69 billion), according to preliminary figures released by The Cleantech Group.

Venture investments in cleantech for 3Q in North America, Europe, China and India, totalled $1.53 billion across 152 companies.

The number of deals recorded in 3Q10 was 152, a total which will rise once all investors have completed reporting deals, and is expected to exceed 2Q10 (when 158 deals were recorded), analysts said.

"After record venture capital deployment in 1H 2010, a continued low volume of exits and doubts resurfacing over the strength and sustainability of the global economic recovery, it is perhaps not surprising that cleantech investment has eased off on the third quarter" said Sheeraz Haji, President of Cleantech Group. "Much of this quarter’s fall can be attributed to a very notable pull-back in solar investment compared to earlier in the year, and masks the buoyancy we are still seeing in sectors such as transportation, biofuels and smart gridas well as Asia in general. We at the Cleantech Group believe 2010 is still firmly on course to record the second highest annual volume for cleantech VC investment ever.”

Corporations have multi-faceted roles in cleantech. Any single utility or multi-national could play any or all of the following roles--investor, partner, customer, acquirer, or competitor. As such, their activity levels are a key indicator of the health and growth of the broader market for clean technology products. The strengthening of corporate commitment to renewable energy and broader cleantech are evident in the strong growth of multi-national corporate and U.S. utility investment not only in 3Q10 but also in prior years.

Renewable energy Power Purchase Agreements (PPAs) rose 39% quarter over quarter in 3Q10, as utilities operating in California continued their efforts to meet a 33% RPS target by the end of 2020.

PPAs announced by California utilities such as PG&E (NYSE: PCG) and Edison International (NYSE: EIX) comprised 87% of the total renewable capacity additions through PPAs announced in 3Q10, as these utilities strive to meet California’s RPS target.

3Q10 corporate investments in cleantech were in line with the average investments in 2008-2009. Investments increased significantly in 1Q10 and 2Q10, due to some large deals such as the $1.6 billion joint venture between Shell (NYSE: RDS-A) and Cosan (CSAN3.BR) in a sustainable biofuels field, $1.7 billion investment in electric vehicles by Nissan (OTCPK:NSANY), and $1.1 billion investment in various cleantech segments by General Electric (NYSE: GE). General Electric alone accounted for 82% of the total 3Q10 investments by corporations, which has been investing heavily in clean technologies under its Ecomagination initiative which aims at increasing revenue from green businesses.

VENTURE INVESTMENT BY TECHNOLOGY SECTOR

The leading sector in the quarter by amount invested was transportation ($208 million), followed by biofuels ($186 million) and smart grid ($163 million). Energy efficiency was the most popular sector measured by number of deals, with 24 funding rounds, ahead of solar (19 deals) and transportation (17 deals). The largest transactions in the top three sectors were:

TRANSPORTATION - $208 million in 17 deals
eHi Car Rental, a China-based car sharing company, raised $70 million in a deal led by Goldman Sachs Group (NYSE: GS) and also including CDH Ventures, Ignition Partners, and Qiming Venture Partners; EcoMotors, a Michigan-based developer of an internal combustion engine with improved efficiency, raised $23.5 million from Khosla Ventures and Bill Gates; and China-based Anhui ActBlue, a developer of technology to break down pollutants in the exhaust streams of diesel engines, raised $22 million from Shenzhen Green Pine Capital Partners, IDGVC Partners and Shenzhen Leaguer Venture Capital.

BIOFUELS - $186 million in 9 deals
Kior, a Texas-based developer of a catalytic cracking technology for turning biomass into bio-crude, revealed that it had raised $110 million from investors including Khosla Ventures; Solazyme, a California-based developer of technology for making fuel and bio-products from algae, raised $52 million in a round led by led by Braemar Energy Ventures and Morgan Stanley (NYSE: MS) and also including Unilever (NYSE: UL) among others; and SG Biofuels, a California-based developer of jatropha seeds for biodiesel production, rasied $9.4 million from Flint Hills Resources, and Life Technologies.

SMART GRID - $163 million in 7 deals

Trilliant, a California-based provider of wireless equipment and management software for smart grid communication networks, raised $106 million from Investor Growth Capital, VantagePoint Venture Partners, ABB and GE; Nexant, a California-based provider of software and consulting services for the smart grid, raised $43 million from Oak Investment Partners, Intel Capital, TeleSoft and Beacon; and eMeter, a California-based developer of  software to enables electric, gas and water utilities to achieve large-scale smart grid deployments, raised $32 million from Sequoia Capital, Foundation Capital and Northgate Capital.

Also notable was a significant drop in solar investment. After being the leading sector in 2Q10 ($874 million invested in 25 deals), investment in 3Q10 totaled just $144 million across 18 deals.

VENTURE INVESTMENT BY WORLD REGION

North America accounted for 61% of the total, while Europe and Israel accounted for 25%, China for 10%, and India 4%.

GLOBAL M&As AND IPOs

There were eight clean technology IPOs during the quarter, totaling $430 million, down from 22 in 2Q10, totaling $2.31 billion. The largest IPO was for Ameresco (NYSE: AMRC), a Massachusetts-based provider of energy management and data technology services, which raised $87 million. Close behind was California’s Amyris (Nasdaq: AMRS), a developer of a synthetic biology platform for the production of fuels and chemicals, which raised $85 million on the same exchange.

All the other IPOs during 3Q10 were in Asia, with five in China (totaling $180 million) and one in India (totaling $78 million).

Clean technology M&A totaled an estimated 139 transactions in 3Q10, of which totals were disclosed for 36 transactions totaling $4.04 billion. The total number of transactions was down compared to 2Q10, when there were 205 transactions (56 of disclosed value) totaling $5.77 billion. The largest deal was by U.S. utility Exelon (NYSE: EXC), which acquired John Deere Renewables, the wind energy subsidiary of engineering firm Deere & Co. (NYSE: DE), for $900 million. Other notable deals included the acquisition of Green Mountain Energy Company, a retail provider of clean energy products and services, by NRG Energy (NYSE: NRG) for $350 million in cash, and Sharp’s (6753.T) $305 million acquisition of US-based solar project developer Recurrent Energy.



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