Clean Energy Market Review Q3.2017

Transcription

1 CLEAN ENERGY MARKET REVIEW Q3.217

2 Clean Energy Market Review Q3.217 CONTACTS Subscription Sonja van Linden Tol This Clean Energy Market Review, by Clean Energy Pipeline, analyses venture capital, private equity, project finance, mergers and acquisitions, public markets and green bonds activity during the third quarter and the first nine months of 217. Research Thomas Sturge Data Thai Tran Chenwu Qian Editorial Andrew Nguyen Jack Pike Production Lex Guerra Media Partnership Matthew Jakubiec Centaur Media PLC () All rights reserved. No parts of this publication may be reproduced, in English or other languages, stored in a retrieval system or transmitted, in any form or by any means, without prior permission of the publishers. This includes hosting all or part of this publication online. Global clean energy investment significantly picked up in Q3 217 after relatively subdued performances in the first two quarters of the year. Clean Energy Pipeline s research and data team tracked a total of $76 billion green finance deals in Q3 217, an 18% increase on the previous quarter and over $2 billion higher than the amount invested in the first quarter of the year. However, on a nine-month consolidated basis, total clean energy investment has fallen far short compared to the same period in 216, given the lower than average activity recorded in the first half of 217. Clean Energy Pipeline s figures show that total investment between Q1 and Q3 217 declining by 14% to $195 billion, against the $226 billion of clean energy deals racked up in Q1-Q Clean energy investment in 217 is on track to have its second consecutive annual decline owing largely to negative policy changes in core markets such as the US and Europe, Thai Tran, Head of Data at Clean Energy Pipeline, commented. Despite improved performances from Australia, India and the Middle East, the renewables sector is definitely experiencing a downturn, particularly for greenfield financing. On a positive note, Europe s secondary asset M&A activity remains stronger than ever and the green bond market is set to break through the $1 billion barrier for the first time ever. Clean energy investment in the first nine months of 217 NORTH AMERICA $48B EUROPE $38B ROW $3B ASIA PACIFIC $79B

3 GLOBAL CLEAN ENERGY TOTAL INVESTMENT BY ASSET CLASS 29 TO 217-9M M Project finance Small scale project investment Public markets Venture capital & private equity 4 GLOBAL CLEAN ENERGY TOTAL INVESTMENT BY SECTOR 29 TO 217-9M M Wind Solar Biomass Other Clean Energy Market Review Q

4 RENEWABLES PROJECT FINANCE TOTALS $148 BILLION YEAR TO DATE Renewables project finance activity picked up considerably in Q3 217 as global investment in clean energy generation came to over $61 billion the strongest quarterly showing so far this year. The amount marked a 26% increase in project finance investment on the previous quarter and close to 4% on the $44.3 billion of commitments in made a year prior in Q After a lacklustre first half of 217, the spate of new project investments in Q3 has taken figures on a consolidated ninemonth basis in the year to $148 billion. Developers and investors in the offshore wind project finance space won many of the plaudits for the improved green financial performance of Q Offshore wind project investment in Q3 217 totalled a staggering $7.4 billion, which was more than the combined $7.2 billion project value in the sector for the first half of 217. Carol Gould [pictured], Head of Power & Renewables at The Bank of Toyko-Mitsubishi UFJ told Clean Energy Pipeline that appetite remained strong among investors for offshore wind, particularly in the Eurozone. Given that investors are most active in the final quarter of a year, total clean energy project financing for 217 is likely to exceed the $2 billion of investment made over the entirety of 216. However, on a consolidated nine-month basis 217 has performed poorly when it comes to new clean energy project finance, with investment slowing to lowest level since 29. Offshore wind attracts biggest lenders Offshore wind is certainly moving in the right direction and banks becoming more familiar with the risk involved, Gould said of the strong offshore wind finance results. Gould added that results in recent European offshore wind auctions was good news for the sector that prices were coming down across multiple markets. The result is a combination of reduced cost of capital, the reduced cost of the actual equipment as well larger offshore wind turbines, she explained. GLOBAL CLEAN ENERGY PROJECT FINANCE BY SECTOR 29 TO 217-9M Wind Solar Biomass Other 4

5 And whilst the pricing is coming down, it is still fairly attractive for most banks. [MUFG] continues to see offshore wind as a very important market and are undertaking a number of both advisory and debt related roles in the sector. However, European clean energy project finance levels dipped by 41% to $26 billion in the consolidated nine-month period of 217, making it the only renewables market to suffer lower levels of investment. Solar and wind On the more traditional onshore wind and solar photovoltaic project side, investment activity also improved considerably from 216 levels, particularly for solar PV. While onshore wind finance in Q1-Q3 217 increased by 6% to $67 billion of commitments, solar PV projects attracted $46 billion in consolidated nine month period of 217, a considerable uptick on the $38 billion invested in the same time frame in 216. Region breakdown So far in 217, Asia Pacific has attracted the most clean energy project financing at $59 billion in total, followed by $37 billion of renewables investment made in North America, with both markets improving when compared to Q1-Q Clean Energy Pipeline s data team found that eight of the top 1 largest renewables project finance deals globally were located in Europe in 216, but this year large-scale deals were distributed more evenly across the global markets. Both Africa & Middle East [$11.9 billion/4%] and Latin & Central America [$13.2 billion/18%] clean energy finance levels remained buoyant in Q1-Q * This section was written by Clean Energy Pipe, quoting Carol Gould, Head of Power & Renewables at The Bank of Toyko-Mitsubishi UFJ. GLOBAL CLEAN ENERGY TOTAL PROJECT FINANCE BY REGION 29 TO 217-9M M Asia Pacific Europe North America Latin & Central America Africa & Middle East Clean Energy Market Review Q

6 GREEN BOND MARKET SET TO BREAK $1B MILESTONE The global green bond market is all but set to break the $1 billion mark in 217 after issuances swelled to a record $89 billion. On a consolidated nine-month basis, Clean Energy Pipeline s latest figures show issuances totalling $89 billion between Q1 and Q3 217, putting it far beyond the $66 billion that was recorded in the same period last year. The overall value of green bond issuances has increased consecutively for the past five years. Given the fact that global green bonds reached $95 billion over the entirety of 216, the trend is once again set to continue into its sixth year, with Clean Energy Pipeline analysis estimating the final tally to be placed well beyond the $1 billion threshold. In Q1-Q3 217, project bond issuances reached $8.3 billion, which is a staggering 25% increase on the $2.7 billion on the project bond transaction made over the entirety of 216 and substantially more than any of the preceding years made even more notable given the fact that project bond issuances in Q4 217 have yet to be taken into account. Government/municipality green bond issuances further increased by 129% to $25 billion in 217 over the same ninemonth period a year prior. Reduced green bond issuances from investment/commercial banks between Q1 and Q3 217 meant that the overall value of issuances fell short on the figure in 216, while green asset securitisations also failed to best its performance last year. Project bonds through the roof France tops green bond leader board An overall increase in the number of project bond and government/municipality type issuances was one of the main contributing factors for the robust performance of green bonds in 217. After hosting a respectable $4 billion of green bonds in 216, France shot up the green bond regional rankings with $17 billion of issuances in 217, transforming it into the most valuable green bond market globally. GLOBAL GREEN BOND ISSUANCES 28 TO Q Corporate Development bank Government/municipality Green asset-backed securitisation Investment/commercial bank Project bond 6

7 The US was able to maintain its second spot in the global green bond market with $12.2 billion of green bond issuances between Q1 and Q However, China significantly slowed its green bond activity with the economic powerhouse falling to third after recording $11 billion of issuances. While 217 is far from over, China will have to more than double its green bond output if it is to reach its $3 billion high water mark in 216. India and Germany rounded the top five green bond countries in 217 with $6 billion and $5 billion of issuances, respectively. Top 1 green bond issuing countries (217-9M) Country 217-9M ($m) Since 28 ($m) France 17,183 35,642 USA 12,296 67,82 China 11,363 43,6 India 6,9 8,672 Germany 5,19 28,28 Mexico 4, 6,958 Netherlands 3,844 16,42 Spain 3,449 9,961 Luxembourg 3,26 18,67 Canada 2,881 8,435 GLOBAL GREEN BOND ISSUANCES BY REGION 28 TO 217-9M M Europe Asia Pacific North America Latin & Central America Africa & Middle East Clean Energy Market Review Q

8 OVER 4 GW OF CLEAN ENERGY ASSETS BOUGHT AND SOLD TO DATE Renewable energy assets remain an attractive investment proposition with more than $64.9 billion of clean energy corporate and project M&A investment made in the first nine months of 217. The figure just a little shy of the $67.8 billion reported after nine months in 216 covers more than 4.7 GW of renewable energy acquisitions between January and September 217. The $2.4 billion of investments made in 3Q 217 marked a 2% increase on the total investment made in Q2 this year though the figure was also a marked decrease on Q3 in 216. Gareth Baker, partner at law firm Gowling WLG, explained in a statement that there has been a slowdown in greenfield activity as a result of either a reduction or removal of subsidy support to projects. However, wind and solar fared less well when compared with total investment in Q Wind sector M&A investments experienced a nosedive to $7.4 billion in Q3 217, compared to $8.6 billion in Q The solar sector took a large hit with total investment this quarter reaching an unimpressive $2.4 billion, more than 5% less than the $6.2 billion recorded in Q Battery storage M&A activity saw a marked upturn the $1.1 billion recorded this quarter is 1 times the $1 million recorded in Q Likewise, total energy efficiency investments have more than doubled from $2.6 billion in Q3 216 to $5.6 billion Q3 217, according to Clean Energy Pipeline figures. Wind and solar sectors down, energy storage up In total, green investors committed to purchasing 2.4 GW of operating renewable capacity, 5.6 GW of projects that are currently under construction and 2.2 GW of pre-construction capacity projects in the 3Q of 217. Baker commented that storage has been high on the discussion list of many in the market, but meaningful activity has started. This has been supported by a step change in the approach of regulators. Effective capacity (GW) RENEWABLE ENERGY EFFECTIVE CAPACITY ACQUIRED 28 TO Q M In operation Under construction Pre-construction 8

9 Fundamentally, the cost of projects (including the materials which go into batteries) are reducing and processes are starting to standardise. In our view, this remains a developer/ equity market, but we know a number of banks and debt funders who are following the storage story with close interest. Q Further afield, we expect existing M&A hotspots to continue and project financing levels to increase, driven by offshore wind activity, the early, successful CfD projects tapping the market for debt to build out and reserve power asset owners building out under capacity market contracts. European investment on the up Europe has been a hotbed for M&A activity this quarter with over $12 billion of deals surpassing the $7.1 billion in Q2 this year. * This section was written by Clean Energy Pipe, quoting Gareth Baker, partner at law firm Gowling WLG. In the first nine months of the year Europe has seen $3.2 billion of clean energy corporate and project acquisitions in contrast to $25.8 billion from January to September 216. Baker said there has been a high volume of activity in the UK, but the emphasis has been secondary market activity (buying operating projects) as a fragmented market starts to consolidate. In Europe generally, there have been key hotspots of M&A activity. For example, Italy, has seen a spike in M&A due to favourable returns. The relevant factors have been projects in distress and secondary market activity. However, the same cannot be said for renewable activity hub North America where the $17 billion worth of deals has fallen well short of the $27.9 billion invested in the first three quarters of 216. Looking forward Baker highlighted Italy and Spain as interesting markets with many willing sellers. He then shared his future projections of continued and accelerated market consolidation. In the UK solar market three significant operating portfolios Solarplicity, Canadian Solar and Magnetar are coming to market and in reserve power, it is known that UKPR and Greenfrog are coming to market. Each are likely to complete their sales processes either in Q4 or Clean Energy Market Review Q

10 VC/PE INVESTMENT PLUMMETS TO $613 MILLION IN Q3 Venture Capital and Private Equity (VC/PE) activity totals $3.9 billion in 217. In Q3 217, global VC/PE investment in clean energy came to a meagre $617 million - the lowest quarterly showing recorded by Clean Energy Pipeline. The amount was merely 43% of the venture capital and private equity investment reported in the previous quarter and less than a third of the average quarterly investment of $2.3 billion, recorded since Clean Energy Pipeline s figures began in 29. The highest figure was $5.6 billion in Q On the other hand, energy storage investment has gone against the grain, growing from the $389 million invested after Q3 in 216 to $741 million of financing so far this year. Decline in every region Clean Energy Pipeline data team found that, across the the globe, VC/PE investment has mirrored sectors decreases. That said, the deduction in Europe from $756 million, from the start of January to the end of September last year, to $574 million, during the same period in 217, was not as sharp as in other regions. VC/PE investment has witnessed a steady decline from the $3.9 billion recorded at the beginning of the year. This time last year, total investment in 216 reached a healthy $7.3 billion, almost double the $3.9 billion of financing documented after three quarters of 217. US still on top The US maintained its position as the biggest VC/PE investor in clean tech and renewable energy in 217, notwithstanding a fall in investments. Whereas, India has overtaken China as the second most active country for investment. In fact, out of the top 1 deals to date this year, only the ninth largest has taken place in Q3. Green transportation and solar worst affected The Chinese venture capital and private equity market has all but disappeared, having dropped from $2.5 billion after 9 months in 216 to under a fifth of that figure at $438 million after the same time period this year. Total green transportation expenditure in venture capital and private equity, after three quarters this year, reached $249.3 million, compared with $2.4 billion after three quarters in 216. However, the Indian market is burgeoning from $262 million last year to a $555 million recorded to date in 217. Solar investment has also dipped from the $1.5 billion registered in 216 to 5% of that total at $777 million after nine months of this year. PUBLIC MARKETS HEADING FOR 4TH CONSECUTIVE ANNUAL FALL Public market activity in the global clean energy sector dipped by 32% to $6.8 billion on a consolidated nine-month basis, compared to the same period last year. Much of the decline can be attributed to the maturity of traditional clean tech companies operating in sectors such as wind [-92%/ $317 million], solar [-64%/ $64 million] and energy storage [-96%/ $73 million] all of which recorded a decline in public market activity. However, innovative technology companies involved in energy efficiency [+545%/ $1.3 billion] and recycling & waste [+3,232%/ $1.7 billion] recorded an increase in the amount of capital raised. Over $4.5 billion of capital was raised from initial public offerings (IPOs) undertaken by clean tech companies over the nine-month period in 217. By comparison, a total of $1.2 billion of secondary and $1.1 billion of convertible note offering transactions also took place between Q1 and Q

11 GLOBAL CLEAN ENERGY VENTURE CAPITAL & PRIVATE EQUITY Q1-29 TO Q M Q1 Q2 Q3 Q GLOBAL CLEAN ENERGY PUBLIC MARKETS BY REGION Q1-29 TO Q Number of deals North America Asia Pacific Europe ROW Number of deals Clean Energy Market Review Q

12 RENEWABLE ENERGY DISCOUNT RATE SURVEY It all comes down to cost of capital or discount rates that are being used to discount forecast cash flows to the valuation date, therefore having a robust view on where pricing is across those technologies is very important. There aren t a lot of pure play public comparables you can use to develop your cost of capital, and that s why we ve developed this survey to really get that data from investors which the same funds find extremely useful when they see the results. Grant Thornton, in collaboration with Clean Energy Pipeline, has launched its first Renewable Energy Discount Rate Survey, spearheaded by valuations expert Tomas Freyman. You can access the survey here. Determining the cost of capital for secondary renewable energy assets is crucial work for any investor. However, sourcing quantifiable data points remains a tricky proposition for investors wanting to determine a project s fair value, with investors often relying on their own experience and advisory teams in their evaluations. Grant Thornton s new survey looks to solve this dilemma by reaching out to investors across the market in Europe, the US and Australia to collate this crucial information. Tremendous appetite remains in the market for secondary clean energy assets, particularly for those renewables projects already generating power. According Clean Energy Pipeline s figures, over $2 billion was spent globally on operational clean energy assets in Q3 217, while the number stood at a robust $7 billion for renewable energy projects under construction or in development. Freyman, who leads the Grant Thornton survey, explained to Clean Energy Pipeline that demand for renewable energy assets remains strong, calling the huge amount of capital trying to find a home in infrastructure assets one of the factors driving the continual cost of capital yield compression. Survey results We have a team specialising in valuing renewable energy projects, Freyman, a partner at Grant Thornton, told Clean Energy Pipeline. Respondents will receive survey results and accompanying report which will also include other data and analysis on transactions across the technologies and geographies. And the first question I get asked by any fund or investor across renewable energy is: Where are you seeing the market? And really, the question is where is pricing across these assets? The survey closes on 1 November 217 and the report will be published at the end of November

13 LATEST CLEAN ENERGY MARKET REPORTS Get your free copy of our latest market reports at: Clean Energy Pipeline understands the global renewable energy investment landscape and delivers real-time news, transaction data and analytics on this increasingly complex sector. Our in-house team identifies the latest investment, M&A, project finance, fund and regulatory announcements. In addition, we deliver proprietary content including interviews, analysis, insight reports and events. Find out how we can support delivering on your business objectives by contacting: Sonja van Linden Tol on +44 () or sonja. Clean Energy Pipeline 79 Wells Street London W1T 3QN Tel: +44 () For more information about Clean Energy Pipeline: Clean Energy Market Review Q

14 DRIVING GREEN INVESTMENT Clean Energy Pipeline understands the global renewable energy investment landscape and delivers real-time news, transaction data and analytics on this increasingly complex sector. Our in-house team identifies the latest investment, M&A, project finance, fund and regulatory announcements. In addition, we deliver proprietary content including interviews, analysis, insight reports and events. Find out how we can support delivering on your business objectives. Sonja van Linden Tol on +44 () or Discount Code: Q