VC Cleantech Investments Down 4.5% in 2011

The number of US venture capital (VC) investments in cleantech companies didn't increase in 2011, but they didn't decline either. They did decline 4.5% by dollar amount invested, however, reflecting the difficult economic and market conditions that prevailed, particularly during the latter half of 2011, according to an Ernst & Young report based on data from Dow Jones VentureSource.

Total VC cleantech investment amounted to $4.9 billion in 2011, according to Ernst & Young. There were 70 financing rounds in the fourth quarter of 2011, in which a some $940.5 million of capital was raised.

Though down year-to-year, 2011's totals are best viewed from a longer term perspective, Ernst & Young LLP Americas Cleantech director Jay Spencer commented. Looking back another year and comparing 2011's total amount invested to that in 2009 shows that the amount of VC capital invested in cleantech companies was 29% greater in 2011 than the $3.8 billion raised in 2009.
“Cleantech is still in the early stages of a long-term journey,” Spencer stated. “We’ve reached a point where new products and services are ready to be launched, and as these products come to market, we’re seeing renewed interest, innovation and opportunity in cleantech.”

2011 Cleantech market breakdown

Breaking out the year's VC investment totals by state, California continued to lead national cleantech investment. Some $2.8 billion was raised from VCs in California cleantech alone in 4Q, while the Golden State garnered 67% of total VC investment dollars - $629.5 million in 26 deals. Massachusetts ranked second with $465.1 million of VC cleantech investments in 2011, a 63% year-over-year increase. Colorado ranked third, with $363.3 million of VC capital invested in cleantech for the year, up 28% annually.

More VC capital was invested in the Energy/Electricity Generation segment of the cleantech market in 2011 than any other: $1.5 billion was raised in 71 financing rounds, though that's down 5% year-to-year, according to the report.

Ranking second in terms of VC capital invested was the Industry Products and Services segment, in which $1 billion was raised, down 34% year-to-year. VC firms invested $256.2 million in 4Q, $203.2 million, or 79%, of which was invested in the Transportation sub-segment in 4Q. That's up 36% from 4Q 2010. Better Place's raising $201 million took largest deal honors.

Ranking third in Ernst & Young's 2011 report was the Energy Storage segment, in which VCs invested $932.6 million across 28 deals. That's a huge 253% increase over 2010's total for the segment in dollars and a 47% increase in terms of transaction numbers, Ernst & Young noted.

VC investment in the Energy Efficiency segment of the cleantech market totaled $646.9 million in 2011, down 29% year-to-year. Energy Efficiency did lead overall VC investments for 4Q and the year in terms of the number of financing rounds, however, with 21 and 78 deal totals for the quarter and 2011, respectively. The Energy Efficiency Products sub-segment attracted the most VC investment in 2011, with $57.5 million raised across 10 deals.

2011 Cleantech IPOs, M&A, asset financing

There were five clean tech companies in what was a decidedly lackluster overall IPO market in 2011, up from three in 2010, in which a total $688.3 million in equity was raised. Ernst & Young reported. Biofuels IPOs - from Solazyme, Gevo and KiOR - made up the majority. Ending the year, semiconductor and cleantech R&D company Intermolecular Inc raised $96.5 million, and LA-based clean energy solutions provider Rentech, Inc. raised $136.8 million in 4Q.

“There’s a strong appetite among cleantech companies to go public and we see tremendous opportunity as this industry continues to mature,” Spencer commented. “The growing IPO pipeline shows viable, long-term potential."

There were 13 cleantech mergers and acquisitions (M&A) in 2011 with a disclosed value of $150.5 million in 4Q 2011, according to Bloomberg New Energy Finance. The 2011 disclosed total for cleantech M&A was $2.8 billion spanning 79 deals.

In addition, 39 new-build clean energy asset financings with a total deal value of $1.8 billion took place in Q4. New-build asset financing totaled $23.2 billion across 234 deals in 2011, NRG Energy's Project 855-megawatt (MW) Amp PV plant being the largest, according to Ernst & Young's report.

Corporate cleantech activity

Solar and wind energy proved especially attractive to corporate cleantech investors in 2011. Google and KKR invested $189 million in four California solar farms with a total 88MW of capacity, while NRG acquired solar power project developer Solar Power Partners.

In the wind energy market segment, Berkshire Hathaway's MidAmerican Energy bought a 49% interest in NRG Energy's 290 MW Agua Caliente wind farm project in Yuma, Arizona, as well as three wind power projects in Iowa with a combined capacity of 404.8 MW. Duke Energy and American Transmission bought a power line project intended to carry wind-generated electricity from Wyoming south to the US Southwest.