Global venture capital funding in the solar sector was off to a slow start in calendar year 2012 as deals worth $329 million were announced in January-March. This is the lowest since the fourth quarter of 2010,according to a report by clean energy communications and consulting firm Mercom Capital group. However,the volume of deals has risen,with Q1 witnessing 34 VC backed deals,the highest ever recorded in the solar industry.
While VCs interest in the solar sector remains strong,their appetite for risk appears to be lower as the average VC funding round amount in Q1 was $10 million,compared to $18 million in 2011, says Raj Prabhu,managing partner at Mercom Capital group.
“To add to the current over capacity problems,policy changes and lower tariff announcements in some of the largest solar markets,such as Germany and Italy,will all contribute to an uncertain 2012, Prabhu adds. We can expect a more cautious approach to investing in the solar sector this year.
There was strong M&A activity in the solar sector totaling $5 billion in 15 transactions mainly due to the $4.7 billion acquisition of Solutia,a performance and specialty chemicals company by Eastman Chemicals Company. Other significant M&A transaction was $275 million acquisition of solar equipment manufacturer Oerlikon Solar by Tokyo Electron and Andrem Powers $274 million acquisition of 3W Power which is a holding company of AEG Power Solutions.
The first quarter of 2012 also saw 11 new cleantech and solar-focused investment funds announced committing $5.7 billion.
The United States continued to be the dominant country for VC investments,accounting for about 80% of all VC funding in the first quarter.