How have U.S. renewable energy companies fared in the public markets and in private finance this year?
ACORE just released a report on conditions in the US and China, and on their efforts to help both countries move renewable energy forward.
Following a successful first quarter, public equity markets have recently exhibited considerable volatility, largely due to the European credit crisis and policy uncertainty, resulting in many clean energy IPOs being delayed and leading to a large IPO pipeline. Private equity and venture capital investments, however, are increasing substantially quarter-on-quarter, with a particular focus on energy smart technologies, solar and wind, and investment still overwhelmingly concentrated in California. Asset and corporate financings are recovering from the lows of 2009, but still lag behind Europe and, increasingly, China.
Given current market conditions where investors are unsure about where the economy and energy policy is headed, investors in clean energy stocks have become increasingly selective. U.S. and European investors are favoring companies with differentiated products or business models and are increasingly shying away from markets they perceive as commoditized, such as the wind and solar supply chain.
Given the general capital shortage and market uncertainty, combined with an abundance of public clean energy companies to choose from, only those companies that are particularly differentiated from their competitors are receiving investor interest.
Interest in clean energy stocks was strong in the first quarter (Q1), when investors had growing confidence as markets appeared to be in a steady recovery from the global recession. Q1, which is traditionally the slowest quarter for stocks, exceeded the previous quarter's investment by more than 72% and exceeded Q109 investment by more than 144%.
However, in Q2, the Eurozone sovereign credit crisis began impacting global equity markets, particularly in Europe and the U.S. Investment in clean energy stocks declined 2.6% from the first to second quarters, an unusual quarterly investment trend.
Four IPOs and seven secondary offerings have been completed in the U.S. this year, for a total of $513 and $476 million raised, respectively. Two U.S. companies had IPOs - Codexis (biofuels) and Tesla Motors, (electric cars); and two Chinese companies had IPOs - China Hydroelectric (small hydro operator) and JinkoSolar (vertically-integrated solar manufacturer).
These companies represent a range of clean energy sectors, and their stock prices have each performed very differently since their IPO. This is partly due to the individual company's prospects and partly due to changing investor sentiment.
China Hydroelectric, which launched on the NY Stock Exchange on January 22, 2010, was a casualty of this shift in investor sentiment. With a 61% decline in stock price from January to present, the company is the worst post-IPO performer in the U.S. this year.
While this statistic illustrates the decline in investor appetite for clean energy deals since early-2010, it should be recognized in the context of the significant success of the IPO at the time of its offering-the company twice increased its offering size in the month preceding the offering, and ultimately raised $110 million, almost double its initial proposed deal size of $61 million.