Vancouver - Despite
the recession, the cleantech sector remained strong throughout
2009, especially when compared to other industries. And the
cleantech sector is expected to continue expanding and remain
dominant through 2010, with a flurry of acquisitions and
consolidation transactions.   

Cleantech Investment: Recovery and Growth

While the global recession had an impact on investment in
cleantech in 2009, Greentech Media reported that venture capital
investors’ spending on cleantech was $4.86 billion US in 2009,
while the Cleantech Group (cleantech.com) noted that 2009 was the
second-highest annual level of venture capital (VC) investment in
cleantech.

The sector was the single-largest investment theme in 2Q09 and
3Q09, attracting 25 per cent of all VC investment during 3Q09.
Given this momentum, it’s not surprising that the Cleantech Group
believes global venture and private equity investment in cleantech
in 2010 will exceed that of 2009 by a wide margin.

This will also be a bumper year for general partner fundraising.
In the latter half of 2009, two entities launched large
cleantech-focused funds: Khosla Ventures created a pair of funds
totaling $1 billion US, and Hudson Clean Energy Partners launched
its own $1-billion US fund. The Cleantech Group predicts that 2010
will continue this trend, becoming a record-setting year.

Global stock markets also rebounded substantially in 2009,
leading investors to increasingly view the cleantech sector as a
source of investment opportunity. The WilderHill New Energy Global
Innovation Index, or NEX, which tracks a broader array of
energyrelated cleantech stocks, regained 39.7 per cent of its value
from a year earlier. But that said, investors are expected to
remain cautious in 2010, resulting in leading companies likely
receiving a disproportionate share of investment funds.

Continued Government Stimulus

Governments worldwide are investing in cleantech in an effort to
rebuild economies and resolve climate change and environmental
concerns. American governments are also looking to cleantech to
enhance their country’s energy security. Globally, governments have
committed $3 trillion US to a variety of economic stimulus
packages, with $660 billion US of those funds allocated to green
projects and initiatives. Almost half of this cleantech funding was
committed by the Chinese and American governments alone.

No doubt this massive global influx of government stimuli has
sheltered the cleantech sector from the full brunt of the recent
recession. Private equity and capital have flowed into the US,
encouraged by government loan guarantees and other stimulus
initiatives that largely eliminate the risk to private funds. The
continued rolling-out of stimulus funds through 2010 will help many
cleantech companies deal with the reduced availability of capital
as markets rebuild and investors lower their guard. But there is
the potential for such stimulus funding to distort the market and
eventually make private investors cautious yet again.

This is because large government loans and grants effectively
pick the winners in each subsector, making it difficult for
investors to predict the success of any given cleantech company.
Such “winner-picking” makes the sector increasingly risky for
private investors, who may become hesitant to part with funds until
stimulus funds are exhausted. Nonetheless, expect subsidies to keep
flowing to the cleantech sector, largely because governments enjoy
delivering new “green jobs.”

2010: Greater Investment and M&A

Despite the promise for great growth in the cleantech sector,
2010 is likely to bring an acceleration of acquisitions and
consolidations. The Cleantech Group predicts that this will be
particularly so in sectors and geographies where there has been
overinvestment, such as in Germany’s and China’s wind and solar
equipment manufacturers. Similar consolidative trends are likely in
North America, with a number of companies buckling under high asset
costs and debt loads.

The Cleantech Group also expects that 2010 will bring
acquisition activity moving beyond cleantech startups and into
acquisitions of other corporate assets - much like Panasonic’s
acquisition of Sanyo, a leader in solar cells and batteries for
electric vehicles. For this reason, it’s predicted that asset
acquisitions will be prevalent in 2010 as corporations restructure
in an attempt to create modern, integrated cleantech
businesses.

Now that the cleantech sector has regained much of its momentum,
2010 may be punctuated by record investment levels. M&A
activity will be brisk, and there may be a number of early-stage
casualties. Regardless, cleantech continues to outpace other
sectors and will likely do so through much of 2010.