Solar Project Acquisition Activity Up 52% YoY in First Nine Months of 2020

Mercom Capital Group’s latest 9M and Q3 2020 Solar Funding and M&A Report showed that total corporate funding – including venture capital (VC) funding, public market, and debt financing jumped 43% during the third quarter of 2020 to $3.2 billion (₹234.2 billion) from $2.3 billion (₹169.3 billion) in the previous quarter.

The 95-page report covered 309 companies and investors from around the world. It finds that despite disruptions due to the COVID-19 crisis, project acquisition activity was up 52% in the first nine months of 2020 (9M 2020), with about 24.3 GW of solar projects acquired. Last year, only 16 GW of projects were acquired in the same period.

Project acquisitions in Q3 2020 were a staggering 244% higher at 9.5 GW compared to just 2.8 GW in Q2 2020. Compared to the same quarter last year with 4.4 GW of acquisitions, activity was up 119%.

The report also showed that corporate funding during the quarter was up 8% year-over-year (YoY) but was down 13% overall during the first nine months of the year with $7.9 billion (~₹578.1 billion) compared to $9 billion (~₹658.6 billion) in the same period last year.


Solar Corporate Funding Q3 2019-Q3 2020

“After declining in Q2, financing activity was up across the board, whether it was VC, private equity, public market, or debt financing, a clear sign the market is bouncing back after a prolonged shutdown. Transactions in the works that could not make progress in Q1 and Q2 were getting closed in Q3, resulting in a funding surge. Project acquisition activity – an important indicator of the financial health in the solar sector, bounced back strongly in Q3,” said Raj Prabhu, CEO of Mercom Capital Group.

“Solar stocks are on an incredible run so far this year. Of the 24 solar stocks Mercom tracks globally, 12 were up over 100% at the end of Q3 – an unprecedented number,” Prabhu added.

According to the report, global venture capital funding also increased in Q3 2020, with about $183 million (₹13.4 billion) secured through 15 deals. This represented a 182% spike from the previous quarter, which saw $65 million (~₹4.8 billion) across just five deals. However, compared to Q3 2019, funding was 12% lower from $208 million (~₹15.2 billion) raised through 11 deals.

Meanwhile, the solar sector saw a 61% decline in venture capital, with only about $394 million (~₹29.8) raised in the first nine months of 2020. Venture capital funding in 9M 2019 stood at $1 billion (~₹73.2 billion).

Some of the top VC deals in 9M 2020 included $72 million in funding raised by Sunseap Group, $50 million (~₹3.7 billion) raised by Zero Mass Water, $40 million (~₹2.9 billion) by Ecoppia, $37 million (~₹2.7 billion) raised by the Sunseap Group in another deal, and $35 million (~₹2.6 billion) raised by Lumos.

Public market financing accounted for $1.3 billion (~₹95.1 billion) to the solar sector through four deals in Q3 2020. This was 75% higher than the $737 million (~₹53.9 billion) raised in five deals in Q2 2020. Compared to the same quarter last year, public market financing was only up about 2%.

Debt financing stood at about $1.8 billion (~₹131.7 billion) raised through 16 deals – 20% higher than the $1.5 billion (~₹109.7 billion) raised from nine deals in the previous quarter. Compared to the Q3 2019, debt financing was up 16%, the report said. It added that solar debt financing in the first nine months of 2020 stood at $5.4 billion (~₹395.2 billion) raised through 32 deals, 6% lower than 9M 2019.

In terms of solar securitization deals, the report said that about $1.6 billion (~₹117.1 billion) was raised in 9M 2020. It noted that three residential and commercial solar funds announced in Q3 2020 reeled in about $400 million (~₹29.3 billion).

There were 42 corporate mergers and acquisition (M&A) transactions that were announced in 9M 2020. Only 11 of these had disclosed their deal values, which totaled $7 billion (~₹512.2 billion). In 9M 2019, there were 57 transactions. The value of the ten disclosed deals from these cumulatively totaled $600 million (~₹43.9 billion). Seventeen solar M&A transactions were executed in Q3 2020. This included $6.8 billion (~₹497.6 billion) from five disclosed deals. Sunrun executed the largest transaction in 9M 2020 worth about $3.2 billion (~₹234.2 billion) in an all-stock transaction.

Project acquisition activity was up 52% in 9M 2020, with 24.3 GW of solar projects acquired, compared to 16 GW acquired in the same period last year.

It said that investment firms were the most active project acquirers in Q3 2020, picking up about 4.2 GW of projects. Project developers and independent power producers stood second in terms of acquisition activity and picked up 3.8 GW of projects during the quarter.

Utilities (distribution companies) acquired 912 MW of projects, oil and gas majors picked up 514 MW, while yield companies and other companies bought 86 MW.

Solar Project Acquirer Mix (%) 9M 2020

The report concluded that solar projects continued to remain attractive investments. For the latest funding and M&A related news, check Mercom’s daily roundup here.

In July, Mercom’s report showed that total corporate funding dipped 25% to $4.5 billion (~₹336.09 billion) in the first half of 2020 from $6 billion (~₹448.13 billion) in the same period last year.

 

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