Total venture capital investment soared to $2.7 billion in
1Q11, the highest quarterly investment tracked during the last two
years. This represented a 59% increase on 4Q10 ($1.7 billion) and a
12% increase on 1Q10 ($2.4 billion). Solar remains the largest
sector for venture capital investment in 1Q11 ($740 million), ahead
of green transportation ($429 million) and energy efficiency ($394
million).

Green transportation was one of the fastest growing
sub-sectors of venture capital activity with investment totalling
$429 million across 25 transactions in 1Q11, a substantial increase
on the $87 million invested in 15 transactions during the prior
quarter. This rapid growth resulted in green transportation
overtaking energy efficiency as the second largest sector for
venture capital investment in 1Q11.

The surge in investment activity in the green transportation
sector was driven by a small number of large financing rounds
secured by US electric vehicle manufacturers preparing to scale-up
manufacturing facilities and to launch their products.

Fisker Automotive, a US-based manufacturer of luxury plug-in
hybrid vehicles, secured $190 million in two financing rounds from
undisclosed investors during the quarter. Similarly Coda
Automotive, a US-based manufacturer of electric vehicles and
advanced batteries, secured $76 million from a consortium of
investors including Harbinger Capital Partners, Riverstone Holdings
LLC, Aeris Capital and Angeleno Group. 

Private equity investment also demonstrated substantial
growth, with the total volume of private equity buyouts reaching
$5.4 billion in 1Q11, a 58% increase on $3.4 billion in 4Q10 and
double the $2.7 billion recorded in the corresponding quarter last
year.

The sizeable increase was accounted for by two deals $1
billion plus deals - the $1.7 billion acquisition of Ansaldo
Energia Spa by First Reserve Corp and the $1.1 billion acquisition
of the 400 MW Anholt offshore wind farm by PensionDanmark A/S and
PKA A/S both of which were announced in March 2011. These are the
first two $1 billion deals announced since September 2009.



Private equity development capital investment also expanded. Global
investment reached $2.7 billion in 1Q11, an increase of 63% on 4Q10
($1.7 billion) and over three times the volume in the corresponding
quarter last year ($659 million). This increase was essentially due
to Equity Partners Fund’s $1.2 billion investment in the integrated
biodiesel producer BioJet International Ltd in February
2011.

Project financing volumes reached $42.1 billion in 1Q11, a 14%
decrease on the $48.8 million recorded in 4Q10 but a 56% increase
on the $27 billion secured during the corresponding period last
year. Despite the quarter-on-quarter decline, 1Q11 still
represented the second largest quarter in terms of project
financing volumes since the beginning of 2009.



Unexpectedly, onshore wind and solar continue to dominate the clean
energy project financing landscape, accounting for 33% and 19%
respectively of total project financing volumes, compared to 28%
and 12% during 2010. The higher proportion of onshore wind and
solar this quarter was due to the absence of large hydro
deals.

In Europe, widespread changes to feed-in tariffs triggered
unusual project financing patterns, particularly with respect to
solar energy. Solar project financing volumes in Italy soared to
$2.1 billion, up 19% on the $1.8 billion secured in 4Q10 and over
six times the $329 million allocated to the sector in the
corresponding quarter last year. Developers are essentially rushing
projects through the financing and connection process to ensure
that they qualify for the highest possible feed-in tariff in
anticipation of further cuts this year.

In contrast solar project financing decreased markedly in
Germany following the 13% feed-in tariff reduction that was
implemented at the start of the year. Project financing totalled
$58 million in 1Q11, an 84% decrease from $374 million in 4Q10 and
a 90% decrease on the $606 million secured in 3Q10.

“With project financing volumes so volatile, policy makers
across Europe need to ensure that any changes to feed-in-tariffs
are implemented incrementally to minimize market
disruption,” commented Douglas Lloyd, CEO of Clean Energy
pipeline.



One of the most dramatic swings in project financing in 1Q11 was in
the US onshore wind industry, where securing bankable power
purchase agreements is becoming increasingly difficult in light of
rock-bottom natural gas prices currently at just over $4/mBTU,
which is significantly below the price of $13.6 /mBTU at the start
of the year. Only $2.6 billion flowed into onshore wind farms in
the US in 1Q11, a 40% decrease on the quarterly average investment
of $4.3 billion in the sector during 2010.  

Clean energy companies secured $5.9 billion on public markets
globally in 1Q11 (including IPOs, secondaries and convertible
notes), less than half the $12.8 billion raised in 4Q10 but still a
13% increase on the $5.2 billion raised in 1Q10. Last quarter’s
exceptional performance was due to a small number of very large
transactions including Enel Green Power’s $3.4 billion IPO on the
Borsa Italiana.

Clean energy public market activity is increasingly driven by
China. Almost $3.0 billion was raised on Chinese public markets
during the first quarter of the year, approximately half of the
total $5.9 billion raised on public markets globally.

This represents a marked increase on 2010 when China only
accounted for 20% of public markets capital raising. As a further
sign of China’s dominance, the wind turbine manufacturer Sinovel’s
$1.4 billion IPO on the Shanghai Stock Exchange was the largest
public market transaction in 1Q11.

In contrast public markets activity in Europe is stagnant.
There were only five European listings in 1Q11 totalling $424
million, compared with 14 listings totalling $6.3 billion in the
previous quarter and nine listings totalling $4 billion million in
the corresponding quarter last year.

The postponement of Austrian solar backsheet manufacturer
Isovoltaic’s IPO in mid-April, in what would have been Europe’s
fifth largest renewable energy IPO since the beginning of 2008,
underlines the lack of appetite in the current
environment.  

Clean Energy pipeline tracked 283 M&A transactions
totalling $24.1 billion in 1Q11, an 18% decrease on $29.4 billion
in 4Q10 (264 deals) but a sizeable 68% increase on $14.3 billion in
1Q10 (150 deals). The average deal size in 1Q11 was $85 million,
23% below the average deal size in 4Q10 ($111 million) and 11%
below the corresponding period last year ($96 million).

The sizeable year-on-year increase in deal numbers was
underpinned by a significant expansion in solar M&A activity.
There were 63 solar M&A transactions in the first quarter of
2011, almost double the quarterly average of 35 during the course
of 2010.

 

The biofuels sector was also very active in 1Q11 with 22
completed deals, twice the 2010 quarterly average of 11 deals. One
development of note is the increasing appetite of large oil
companies to acquire stakes in first generation Brazilian sugar
cane ethanol producers.

BP’s $680 million acquisition of Companhia Nacional de Açúcar
e Álcool (“CNAA”), a Brazilian sugar and ethanol producer, was the
fifth largest M&A transaction this quarter. Shell’s $1.63
billion acquisition of Brazilian sugar and ethanol production firm
Cosan Ltd in late 2010 was the largest clean energy M&A
transaction of 2010.