It seems as though the darkest clouds are finally dissipating over alt energy’s financing horizon. Over the past few weeks, money has started flowing into the sector again, as evidenced by a number of recent deal announcements:
- On June 9, I reported on the upcoming IPO for Magma Energy Corp., a geothermal exploration company. The IPO’s size will be upped from an initial C$50 MM to C$100 MM, a sign of increased market appetite
- SunPower Corp. raised $418 MM in early May through a share and debt offering, and recently announced it had reached a $100 MM deal with Wells Fargo to fund commercial-scale solar PV projects across the US
- John reported a few days ago that A123 Systems had amended the SEC registration statement for its proposed IPO, positing that it could be much larger than initially anticipated
- In late May, Suntech Power raised $277 MM from a follow-on offering of its American Depositary Shares (ADSs), and recently received a $50 MM convertible loan from the IFC
- On June 23, Yingli Green raised $193 MM through a follow-on offering of its ADSs
- On June 25, Trina Solar secured credit facilities of about $57 MM
- New Energy Finance just reported a slight increase in asset financing for Q2 2009, although it cautioned that money flows into renewable energy projects were: (1) down substantially from what they were a year ago (~66% in the US); and (2) far below the level where they need to be if greenhouse gas emissions are to be brought under control by 2020
As noted by both New Energy Finance and John, requirements for matching funds under the ARRA mean that firms that want to access government grants will have to put up some of their own money, potentially leading some of them to go to market even if conditions aren’t ideal.
The recent upsurge in public market financing also certainly has to do with buoyant markets and higher oil prices, a window that could close if the general sentiment turns negative in the coming weeks.
This increased financing activity is good news to be sure. Pure-play alt energy firms, by virtue of the sectors they do business in, typically have much weaker balance sheets than conventional energy firms or firms in more established industries. They are thus generally in a much weaker position to ride out a long capital markets drought.
But the industry is far from out of the woods yet, and I remain convinced that questionable firms are in a much weaker position to conceal their flaws behind generalized cleantech exuberance than they were in 2006 and 2007. The last rally lifted some boats that didn’t deserve lifting, and sooner or later those boats will sink again.