Report Supporters: Australian CleanTech 8 Arunga Close Goodwood, SA 5034 ABN:66 124 840 491 Hwww.auscleantech.com.au Australasian Cleantech Review, 2014 Asia Drives Investment & Trade Industry Status & Forecast Trends, March 2014 Facilitating and Delivering Clean Technology Investments
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Australasian Cleantech Review Table of Contents Page Executive Summary 6 1. Definitions & Drivers 10 1.1 Definition of Cleantech 12 1.2 Drivers of Cleantech 14 2. International Market Trends 19 2.1 Clean Energy Investment Trends 2013 22 2.2 China CleanTech Index 2013 26 2.3 Asian Cleantech Industry Development 29 3. Australasian Cleantech Sector 35 3.1 Number of Companies 39 3.2 Revenue 42 3.3 Employee Numbers 44 3.4 Capital Transactions 46 3.5 Average Measures by State and Sector 51 3.6 State Strengths and Weaknesses 53 3.7 Listed and Unlisted Distribution 56 4. Australasian Listed Cleantech Sector 59 4.1 Number of Companies 60 4.2 Market Capitalisation 61 4.3 Revenue and NPAT 62 4.4 Employee Numbers 64 4.5 Capital Transactions 65 4.6 ACT Australian CleanTech Index Performance Report, 2013 67 5. Australasian Unlisted Cleantech Sector 72 5.1 Number of Companies 73 5.2 Revenue 74 5.3 Employee Numbers 75 5.4 Capital Transactions 76 6. Industry Forecast 78 6.1 Asian Acceleration 78 6.2 Don't Use That Word 80 6.3 Greentech Media Predictions 81 6.4 Growing Sectors 82 6.5 Industry for the Futue 85 6.6 2013 Trends Reviewed 88 6.7 2014 Australian Industry Trends 91 6.8 Regulatory Trends 93 6.9 Technology Trends 95 6.10 Investment Trends 97 6.11 The New (Profitable) Model of Cleantech Innovation 101 6.12 Key Cleantech Trends for 2014 102 Feedback 105 Appendix 1 2013 Cleantech Capital Transactions 106 Appendix 2 Summary Cleantech Data for Charts 116 Appendix 3 Australasian Company Analysis Assumptions 120 Appendix 4 Supporter Profiles 121 Appendix 5 - Australian CleanTech Profile 124 Australian CleanTech 2014 www.auscleantech.com.au Page 3
Australasian Cleantech Review List of Figures Background and Definitions Cleantech Sub-Sectors The 30 Abnormal Growth Cities Global Freshwater Availability Regions with Inadequate Annual Renewable Water Resources International Market Trends Global VC Investments in Cleantech, 2002-13 Global VC Investments in Cleantech by Sector, 2013 Global Clean Energy Projected Growth, 2012-2022 HSBC Regional Climate Change Theme Performances YTD September 2013 Global Total New Investment in Clean Energy, 2004-13 Global Clean Energy Investment Types and Flows, 2013 New Investment in Clean Energy by Sector, 2004-13 New Investment in Clean Energy by Region, 2004-13 New Investment in Clean Energy in Europe 2004-13 New Investment in Clean Energy by Asset Class 2004-13 NEX Clean Energy Index, 2003-13 and 2013 VC and PE New Investment in Clean Energy 2004-13 Public Market New Investment in Clean Energy, 2004-13 China CleanTech Index, 2008-13 and 2012-13 China CleanTech Index Sub-sector Performance, 2013 and 2012-13 China CleanTech Index vs Australian CleanTech Index, 2008-12 and 2012-13 Policies that Promote Low Carbon Energy Transition in Selected Countries in Asia Australasian Cleantech Sector Time Series for Revenue, Employees and Transactions - Total & Average Total Company Numbers presented by state and sector for 2013 and time series 2009-13 Total Revenue presented by state and sector for 2013 and time series 2009-13 Total Employee Numbers presented by state and sector for 2013 and time series 2009-13 Total Capital Transactions presented by state, sector & type for 2013 and time series 2009-13 Australian VC & PE Funds Raised and Investments Made 2004-13 Cleantech vs Total VC and PE Investments 2009-13 Average Key Measures by State and Sector, 2013 Percentage of Companies in Each State by Sector Total Company Numbers split by listed and unlisted presented by state and sector Total Revenue split by listed and unlisted presented by state and sector Total Employee Numbers split by listed and unlisted presented by state and sector Total Capital Transactions split by listed and unlisted presented by state, sector and type Australian CleanTech 2014 www.auscleantech.com.au Page 4
Australasian Listed Cleantech Sector Number of companies by state and sector Market Capitalisation by state and sector Revenue (FY13) by state and sector NPAT (FY13) by state and sector Employees by state and sector Capital Transactions by state, sector and type ACT Australian CleanTech Index Performance, 2006-13 ACT Australian CleanTech Index Sub-Indices Performance Australasian Unlisted Cleantech Sector Number of Companies by state and sector Revenue (CY13) by state and sector Employees by state and sector Capital Transactions by state, sector and type Industry Forecasts Low Carbon Green Growth Policies and Measures Practiced and Proposed in Asia The Trough of Disillusionment 2013 Wind Installed by Country Cumulative and Annual Global Wind Installations 1996-2013 Annual Solar PV Capacity and Revenue by Region 2011-20 Electric Vehicle Global Leaders Annual Light Duty EV Forecast Sales 2013-20 Projected Change in Number of People Employed by Industry 2011-25 Global Emissions/capita vs GDP/capita Global R&D Statistics All-in Solar Module Manufacturing Cost, Integrated China Manufacturer, 2011-17 Gross Total Value Multiple by Cleantech Subsector Internet VC Bubble vs Cleantech VC Bubble, Time Aligned Australian CleanTech 2014 www.auscleantech.com.au Page 5
Executive Summary Australian CleanTech has analysed and assembled the most comprehensive report yet published on the cleantech sector in Australia. The report is based on detailed analysis of nearly 1450 Australian companies to understand their activities, location, revenues, profit, employees and their capital transactions. A comparison is also provided from international researchers including detailed charts and commentary from Bloomberg New Energy Finance, provided specifically for inclusion in this report, showing international activity and investment levels. Finally the report provides a forecast for the regulatory, technology and investment trends that will impact the cleantech industry in Australia in 2014 and identifies the top ten Cleantech Trends for 2014. The data provided in this report will enable those interested in cleantech to more fully understand the activity that is occurring across the sector. To be able to analyse the cleantech sector, it is first necessary to define the composition of the sector. The definition of cleantech used in this report is that it comprises of companies that provide: Economically viable products, services and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources or cut or eliminate emissions and wastes. The sub-sectors of cleantech include renewable energy, water, waste and recycling, construction materials, energy efficiency, carbon trading and environmental services. The international market trends section of this report considers comparative policy initiatives that show Australia is lagging compared to Asia - and this was prior to the 2013 election! However, this Asian backing of the sector presents a massive growth opportunity for the Australasian industry to increase its investment and trade activities. International investment data was sourced from public data available from the Cleantech Group and detailed data provided by Bloomberg New Energy Finance. The data is summarised in a number of charts that show both venture capital investments in cleantech and total global investments in clean energy fell from the record levels achieved in 2011. The key sub-sectors for the recipients of the 2013 venture capital and corporate investment were Energy Efficiency with US$1.3 billion secured in 188 deals, followed by Transport Technologies at US$1.2 billion across 121 deals and Solar at US$719m across 92 deals. The total new investment in clean energy fell 11% from the 2012 level of US$386bn to US$254bn in 2013. The main sources of this new investment were Renewable Energy Asset Finance (US$133bn) and Small Distributed Capacity (SDC) (US$60bn). The two biggest investing countries, China and the US, both saw their dollar commitments fall in 2013. China invested $61.3bn in clean energy last year, down a modest 4% from $63.8bn in 2012. The US saw investment slip a more significant 8.6% from $53bn to $48.4bn. Other big movers were Japan's surge of 56% to $35.4bn and Europe's slump of 39% to $57.8bn. Australian CleanTech 2014 www.auscleantech.com.au Page 6
Global VC Investments in Cleantech 12,000 10,000 Venture and Corporate Investment (US$m) (LHS) No. of Deals (RHS) 9,610 1007 1200 1000 8,000 6,000 4,000 301 356 415 4,730 440 6,550 511 8,760 585 6,090 624 7,770 715 829 704 6,460 6,800 800 600 400 2,000 164 908 1,260 1,360 2,090 200-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 Industry Profile The analysis of the 1447 Australian cleantech companies that have been reviewed provides some interesting patterns in the sub-sectors with the greatest activity levels and the regions in which they are based. The cleantech companies reviewed as part of this report include manufacturers, service providers, wholesalers, retailers, research organisations and exporters. As a sector the companies had a combined revenue of nearly $32.5 billion and employed over 58,000 people. They were involved in capital transactions totaling $4.3 billion during the 2013 calendar year in 120 separate deals. The average capital transaction was $35.7 million. Listed Unlisted TOTAL Number of Companies 84 1,363 1,447 Market Capitalisation ($m) $15,291 N/a N/a Revenue ($m) $19,053 $13,478* $32,531 NPAT ($m) -$335.89 N/a N/a Employees 23,000* 35,396* 58,396 New Capital Transactions ($m) $2,800 $148 $2,948 Total Capital Transactions ($m) (incl M&A) $3,298 $990 $4,288 Total No. of Capital Transactions (incl M&A) 66 54 120 Average Total Capital Transaction ($m) $50.0 $18.3 $35.7 *: Australian CleanTech estimates based on company analysis. With 58,000 employees, the sector is larger than the direct employment of the declining automotive manufacturing industry in Australia and the $32.5 billion of revenue makes it equal in value to a quarter of the entire manufacturing sector. The sector now contributes more than 2% of Australian GDP. Furthermore, employees in cleantech create on average about five times the revenue per employee when compared to both automotive and general manufacturing. The results have been analysed in comparison to the results from 2009-12. Overall there has been a steady increase in the average employees per company to reach 40 per company. Other than a jump in 2010, the average revenue has remained fairly static at about $20m per company. Each of the categories in the 2013 summary table above has been analysed in terms of the sub-sectors and geography to provide a comprehensive national profile of the industry. This also includes a detailed assessment of State strengths and weaknesses and enables investors and policy makers to understand the extent and locations of current activity. New South Wales with 456 cleantech companies and Victoria with 358 currently dominate the distribution of cleantech companies with more than 56% of the 1447 companies. A comparison with FY13 Gross State Products (GSP) shows that Queensland and Western Australia are Australian CleanTech 2014 www.auscleantech.com.au Page 7
relatively under-represented in cleantech companies and South Australia has a greater share of the total than its GSP would indicate. The reduced activity in Western Australia and Queensland is due to the higher focus on mining in those states which inflates their GSP in areas where cleantech solutions are not yet being developed. In terms of the sector distribution of cleantech companies, the Water, Waste and Solar sectors are the only ones with greater than 10% of the companies. Water has the most companies with 268 companies, followed by Solar with 230 companies and Waste with 186 companies. Revenue numbers show a strong dominance by New South Wales and the Waste sector. This is primarily because the figures for companies are allocated to the state of the head office and the overall sector is dominated by a number of large waste industry companies. New South Wales, Victoria and Queensland generated the largest amounts of revenue. The Waste, Water, Hydro, Environmental Services, Solar and Wind sub-sectors all generated more than $1 billion of revenue over 2013. A key issue for funding of cleantech is the lack of available venture capital in general in Australia and more specifically for the cleantech sector. An analysis has been undertaken for the first time plotting the total VC spend against the cleantech VC spend. There is significant variation over the five years covered by this report, ranging from 3% in 2011 up to 53% in 2012. When averaged over the five years 24.7% of total VC investment was spent on cleantech. The 2013 figure came in at 16.4%. Source: Gartner VC Investments ($m) 250 200 150 100 The term 'cleantech' is out of fashion politically in Australia and in investment circles in the rest of the developed world as it travels through the 'trough of disillusionment' as defined by Gartner. However, in developing countries in Asia cleantech is highly valued and sought after. The challenge of differential branding at home and abroad is a difficulty for both companies and governments. Listed cleantech companies in Australia had a combined market capitalisation of $15.3 billion at 31 December 2013, up from $9.2 billion 12 months earlier, and raised a total of $2.78 billion in new capital in the 12 months to 31 December 2013. The sector's size compared to the overall market is shown in the table below. The table shows that whilst the sector comprises just under 4% of the listed companies, it holds less only 1% of the market capitalisation of the total market but raised 5.3% of the new equity. Cleantech Sector (CY13) Total ASX (CY13) Number of Companies 84 2,195 3.8% Market Capitalisation $15.29 bn $1,527 bn 1.0% New Equity $2.78 bn $52.53 bn 5.3% New Equity/Market Cap 18.2% 3.4% N/a 50 0 Cleantech vs Australian VC Investments A full listing of all the identified capital transactions for both listed and unlisted companies is provided in Appendix 1 of the report. % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2009 2010 2011 2012 2013 Australian Venture Capital Total (FY) (LHS) Australasian Cleantech VC (CY) (LHS) % Cleantech VC (RHS) Source: Australian CleanTech 2014 Australian CleanTech 2014 www.auscleantech.com.au Page 8
Cleantech Trends for 2014 Through its work throughout multiple sub-sectors and for multiple industry stakeholders, Australian CleanTech has identified a number of distinct trends that are occurring either globally or specifically within Australia and which will impact the evolution of the sector during 2014 and beyond. These are summarised in the table below. Cleantech Trends for 2014 1. International Embarrassment 2. Cleantech Enters Stealth Mode 3. Free Trade Drivers 4. RET Review Protests 5. Mainstream Finance Products 6. Increasing Focus on Climate Liabilities 7. Environmental Refugees Flee in Opposite Directions 8. Green Building Retrofits 9. Accelerating EVs 10. Storage Roll Out Challenges Utility Denial The climate politics at home will lead to some embarrassing situations in international discussions during 2014. There have been some examples of this in early 2014 including the US pressure to include climate change on the G20 agenda and Globe International's Lord Deben description of Abbott s climate policy as So unintellectual to as to be unacceptable Cleantech is seen as a 'bad' word in some countries and its use will decline in Australia and other developed countries for financial or political reasons. However, with the decline of traditional manufacturing the cleantech theme, under an alias, will be backed heavily to drive jobs, investment and trade. The irony of cleantech becoming a 'bad' word here is that the demand for and recognition of cleantech in Asia is reaching new highs. In particular, in the three nations that have been targeted with free trade agreements with Australia, Korea, Japan and China, the focus on cleantech is becoming one of the highest priorities. The RET Review will slow down investment activity and persuade international developers to look elsewhere. The panel is likely to make strong recommendations to water down the target and there will be a politically damaging community backlash. As more cleantech products become mainstream, the high street banks will start providing more financial products that increase the depth and technology breadth of finance. 2013 saw the launch and growth of the divestment campaign against investments in coal. 2014 will see ongoing campaigns across all fossil fuel investments and a growing awareness in mainstream institutional investors about climate risk and liabilities. 2014 will see the growth in two types of Environmental Refugees: Rich families from heavily polluted developing countries seeking a healthier life through the Significant Investor Visa scheme. Environmental finance and other professionals leaving Australia to regions with more supportive government policies. 2014 will see acceleration in the deployment of retrofit products to improve the environmental performance and operating costs of existing commercial buildings. The overdue loss of local car manufacturing will drive governments to back the roll out of Electric Vehicle (EV) fleets and recharging stations. And finally, the fast falling costs of both solar and energy storage technologies will see storage solutions demonstrated in 2014 and provide a tangible challenge to distribution network business models. This will lead to outbursts and defensiveness from the utilities. Australian CleanTech 2014 www.auscleantech.com.au Page 9