Total corporate funding in the solar sector increased by 20% in 2019, reaching $11.7 billion in 117 deals, up from $9.7 billion in 139 deals in 2018, according to Mercom Capital Group’s recently released 2019 Q4 and Annual Solar Funding and M&A Report.
The increase in corporate funding was mainly due to large debt financing activity in the first (Q1) and last (Q4) quarters of 2019 compared to 2018.
In October 2019, Mercom had reported that in the first nine months (9M) of 2019, total corporate funding was up with $9 billion raised, compared to $6.7 billion that was raised in the same period last year, a 34% increase year-over-year (YoY).
“Financial activity was up across the board in the solar sector in 2019 with venture funding, public market, and debt financing all increasing year-over-year. Solar equities also had a great year with six solar IPOs around the world, and strong debt financing activity, including securitization deals, rounded off a strong year for the sector,” said Raj Prabhu, CEO of Mercom Capital Group.
The report said that Global Venture Capital/Private Equity (VC/PE) funding in the solar sector in 2019 came to $1.4 billion in 53 deals, compared to $1.3 billion in 65 deals in 2018. Solar downstream companies accounted for 75% of VC/PE funding that went into solar companies in 2019.
The top disclosed VC funding deal in 2019 was Indian renewable developer ReNew Power that raised $300 million through a rights issue. Collectively, Indian solar downstream companies raised approximately $650 million in 2019.
The other top deals include Hero Future Energies with $150 million, followed by Avaada Energy with $144 million. Yellow Door Energy raised $65 million, and Infinity Solar brought in $60 million.
Public market financing increased by 9% in 2019 to $2.5 billion compared to the $2.3 billion raised in 2018. Five of the solar stocks tracked by Mercom increased more than 50% in 2019, with four equities increasing more than 100%.
Initial Public Offerings (IPOs) were instrumental in higher public market financing activity in 2019, with $1.3 billion raised in six deals notes the report. The largest deal was Xinyi Energy Holdings (Xinyi), a Chinese solar farm operator, which raised $465 million in its initial public offering. Other significant companies that went public in 2019 included U.S.-based residential solar installer Sunnova which raised $168 million on the New York Stock Exchange; Sterling and Wilson, an Indian-based EPC company, raised $406million on the Bombay Stock Exchange; and Ginlong Technologies, which makes the Solis brand of inverters, raised $79 million on the Shenzhen Stock Exchange.
Debt financing activity surged in 2019 with $7.8 billion in 46 deals, a 29% increase year-over-year (YoY) spurred by eight securitization deals in 2019, totaling $1.6 billion. The top debt deal in 2019 was Yieldco company TerraForm Power, which raised $700 million through senior notes. Solar Mosaic was the most active company with $468 raised in securitization deals in 2019. Interest rates for securitization deals ranged from 3.36% to 9.96%.
Announced large-scale project funding deals were up in 2019 with $16.1 billion in 152 deals, compared to $14.1 billion in 184 deals in 2018.
The top project funding deal was the $2 billion raised for the Noor Energy 1 Solar Project by Dubai Electricity and Water Authority (DEWA), ACWA Power, and Silk Road Fund.
According to the report, there were 65 merger and acquisition (M&A) deals in the solar sector in 2019 compared to 82 transactions in 2018. The top deal in 2019 was $6.1 billion acquisition of Pattern Energy by Canada Pension Plan Investment Board (CPPIB). Oil and gas majors like BP, Tokyo Gas, PETRONAS, Reliance Industries, Shell, and Total continued to be significant acquirers of solar companies in 2019.
There were 192 large-scale solar project acquisitions in 2019 compared to 218 transactions in 2018. About 26.1 GW of solar projects were acquired in 2019, compared to 29 GW in 2018, a decrease of 8% YoY.
Project developers and independent power producers were the most active acquirers in Q4 2019, with 17 acquisitions totaling over 8.1 GW, followed by investment firms and funds with 16 transactions totaling 1.5 GW, and electric utility companies with a total of 228 MW.
Yieldcos and Manufacturers made one acquisition each for 100 MW and 70 MW, respectively, and an oil and gas major and a Trading group acquired one project each for a total of 96 MW.
“Investment firms acquired over 30 GW of large-scale solar projects in the past five years, a reflection of solar’s attractiveness as a long-term, low-risk investment,” added Prabhu.
In July 2019, Mercom had reported that in the first half of 2019 (1H 2019), funding activity in the solar sector was on the rise when compared to the same period last year. Total corporate funding (including venture capital funding, public market, and debt financing) for the solar sector globally came to $6 billion in the first half of 2019.
Image credit: Amplus Solar
Ranjitha S is a Research Associate at Mercom India. Prior to Mercom, she worked as an Associate Analyst in GlobalData, has an experience in data forecast and modeling for electrical transmission and distribution network and smart grids, and also worked for other custom research reports. She earned her bachelor’s degree in Electrical & Electronics from ATME college of Engineering and Master’s degree in Electrical Power Systems from the Adichunchanagiri Institute of Technology at VTU University.