After a weak first and second quarter of corporate funding –including venture capital, private equity, public market, and debt financing — the fortunes of the solar sector globally picked up in the third quarter of this year, a report said.
According to Mercom Capital Group’s recent report, funding in Q3, 2020 was up at $3.2 billion, compared to $2.3 billion in Q2, a 43 percent increase quarter-on-quarter.
There has also been an increase in funding of 8 percent year-on-year compared to the same quarter previous year.
According to the report, after declining in Q2, there has been an uptick in financing activity across the board – Venture capital, private equity, public market, and debt financing.
“This is a clear sign that the market is bouncing back after a prolonged shutdown. Transactions in the works that could not make progress in Q1 and Q2 got closed in Q3, resulting in a funding surge. Project acquisition activity – an important indicator of the financial health in the solar sector has also bounced back strongly in Q3,” said Raj Prabhu, CEO of Mercom Capital Group.
However, the corporate funding in the first nine months of 2020 remained lower by 13 percent at $7.9 billion as compared to $9 billion raised during the same period in 2019.
Still, Prabhu noted, “Solar stocks are on an incredible run so far this year. Of the 24 solar stocks Mercom tracks globally, 12 were up over 100 percent at the end of Q3 — an unprecedented number”.
Break-up of the various funding
Global venture capital funding has increased in Q3 with $183 million in 15 deals compared to $65 million in five deals in Q2, 182 percent growth quarter–on quarter.
Year-on-year the funding has been lower by 12 percent when compared to $208 million raised in 11 deals in Q3 2019.
In the first nine months of 2020, venture capital funding in the solar sector has been 61 percent lower with $394 million compared to $1 billion raised during the same period in 2019.
In Q3 2020, debt financing touched $1.8 billion from 16 deals, a 20 percent increase compared to $1.5 billion from nine deals in Q2 2020. Year-on-year, debt financing was up by 16 percent.
In the nine months of 2020 however, the solar debt financing is lower at 6 percent, with $5.4 billion in 32 deals compared to the same period a year ago.
Meanwhile, according to the report, six solar securitisation deals brought in almost $1.6 billion in the nine months of 2020.
Despite Covid disruptions, project acquisition activity has been up by 52 percent in the nine months of 2020, with 24.3 gigawatt (GW) of solar projects acquired, compared to 16 GW acquired in the same period last year.
In Q3 2020, 9.5 GW of solar projects were acquired, 244 percent higher compared to 2.8 GW in Q2 2020. Acquisition activity has also been 119 percent higher year-on-year, with 4.4 GW acquired in the same quarter last year.
Solar projects continue to be an attractive asset class for investors, investment firms and utilities across the world.