Venture capital (VC) funding in the solar sector in Q3 2012 was down to its lowest levels since 2008, totaling just $72 million in 14 deals compared to $376 million in 32 deals in Q2 2012. Twenty-six investors participated in the 14 deals in Q3, and only New Enterprise Associates was involved in multiple deals. The leading VC deal this quarter was concentrating photovoltaic company SolFocus with $15 million. At the end of Q3, most of the year-to-date VC funding went to solar downstream ($258 million) and thin film companies ($246 million).



Solar VC Funding

“This was the first sub-$100 million quarter for solar VC funding since 2008. It is a very challenging market, particularly for upstream companies – good exits have become rare and M&A deals are more and more resembling distress sales,” said Raj Prabhu, Managing Partner at Mercom Capital Group.

Solar Top 5 Deals in Q3 2012

Global solar installations have been growing remarkably, Mercom noted, from just 7 GW in 2009 to a forecasted 29 GW by the end of 2012. This has been aided by significant drops in prices of Chinese c-Si PV modules, from about $3.00/W in 2009 to current prices of approximately $0.65-0.70/W, as well as drops in polysilicon prices from around $200/kg in 2009 to approximately $19/kg currently. In addition, there have been loans, credit facilities and framework agreements of about $50 billion received by Chinese manufacturers from state-owned Chinese banks which started production, resulting in chronic oversupply leading to a further drop in prices. Meanwhile, billions of dollars in venture funding were going to thin film, CSP, and CPV companies in some very large deals.

Over $1 billion in VC funding has gone into thin film companies alone since 2010. While these deals may have made sense in years past, the quick and steep fall in of c-Si prices have put crushing pressure on thin film companies especially, along with CSP and CPV technologies.

Solar VC Funding 2011-12 YTD (By Technology)

The bright spot, Mercom’s report noted, has been third party finance firms, or solar lease firms. Over $1 billion in solar residential and commercial lease funds have been raised just in Q3 2012, and almost $2 billion in 2012 YTD. Some of the notable third party finance firms include: SolarCity, SunRun, SunPower, Sungevity, OneRoof Energy, Clean Power Finance, and Enfinity among others. Active investors in these funds in 2012 include: Credit Suisse, Rabobank, Wells Fargo, Citi, and U.S. Bancorp. In a move that highlights this trend, SolarCity filed to raise more than $200 million in an IPO on October 5.

Solar Project M&A

There were 12 corporate M&A transactions in Q3 2012, totaling $393 million with only four transactions disclosing amounts. Two of these transactions, Q.Cells and MiaSolé, were distressed sales. German solar cell and module manufacturer Q.Cells was acquired by Korean conglomerate Hanwha Group for $322 million ($50 million plus $272 million debt assumption). Chinese vertically-integrated manufacturer JA Solar acquired a 65 percent stake in Hebei Ningjin Songgong Semiconductor Co, a wholly-owned subsidiary of the Japanese polysilicon and wafer manufacturer M.Setek, for $39 million, and CIGS thin film company MiaSolé was acquired by the Chinese renewables company Hanergy for $30 million.

A notable transaction this quarter was the acquisition of Vivint by Blackstone Group for $2 billion. Included in the transaction was the Vivint Solar division, a third party solar finance lease firm. The valuation of Vivint Solar on its own is unknown.

To get a copy of this report, please email us at