Solar funding activity: Q3 falls by half, yieldcos out of favor

After two record quarters, residential and commercial solar funds in Q3 2015 fell by almost half with $997 million in five deals, according to the Mercom Q3 Solar Funding and M&A Report. However, the year-to-date total has now surpassed the $4 billion raised last year.

“After a record second quarter, project acquisition activity dropped in Q3 2015 with 42 transactions (11 disclosed) for approximately $1.2 billion,” said Raj Prabhu, Co-founder and CEO of Mercom Capital Group, a clean tech communications and research firm.

So how did the activity change?

“Yieldcos, which were the darlings of the market just three months ago, have been particularly hard hit with some stocks losing more than 50 percent of market value in just three months,” Prabhu said. “The market has soured on the entire yieldco model.”

RELATED: Report: Smart grid companies raise $289 million in first half of 2015 

There were three securitization deals announced in Q3, totaling $335 million. With the looming ITC expiration, solar companies dependent on tax-equity financing are gradually moving towards securitization to reduce their cost of capital.

Total corporate funding this quarter, including venture capital funding, public market and debt financings, into the solar sector rose slightly to $6.2 billion compared to $5.9 billion in Q2 2015, a five percent increase QoQ.

The full results:

Total Corporate Funding (includes VC funding, debt financing and public market financing)

• Q3 2015 – $6.2 billion in 45 deals
• VC funding – $257 million in 15 deals
• Debt funding – $4.1 billion in 22 deals
• Public market financing – $1.8 billion in 8 deals

VC Funding

• Q3 2015 – $257 million in 15 deals
• Q2 2015 – $142 million in 24 deals
• Q1 2015 – $195 million in 27 deals
• 2014 Annual – $1.3 billion in 85 deals
• Q4 2014 – $315 million in 16 deals
• Q3 2014 – $326 million in 21 deals
• Top 5 VC Funded Companies in Q3 2015

Silicor Materials raised $105 million from Icelandic pension funds as well as other strategic investors, including Hudson Clean Energy Partners. Sunlight Financial raised $80 million from Tiger Infrastructure Partners and Hudson Clean Energy Partners. Alcazar Energy raised $25 million from International Finance Corporation. Ampt raised $25 million from Bohemian Investments and Ampt co-founder Doug Schatz, through the Schatz Family Trust. HiQ Solar raised $11 million from a group of private investors.

Q3 2015 VC Funding by Technology

• Solar Downstream: $114 million in 7 deals
• PV: $107 million in 3 deals
• BOS: $36 million in 2 deals
• Service Providers: Undisclosed amount in 2 deals
• Thin Film: Undisclosed amount in 1 deal

Residential/Commercial Solar Project Funds (aka, third-party financing/lease/loan)

• Q3 2015 – $997 million in 5 deals
• Q2 2015 – $2 billion in 5 deals
• Q1 2015 – $2 billion in 10 deals
• 2014 Annual – $4 billion in 34 deals
• Q4 2014 – $1 billion in 8 deals
• Q3 2014 – $590 million in 9 deals

Announced Large-Scale Project Funding

• Q3 2015 – $2.5 billion in 23 deals
• Q2 2015 – $1.9 billion in 26 deals
• Q1 2015 – $2.5 billion in 29 deals
• 2014 Annual – $14.2 billion in 144 deals
• Q4 2014 – $3.4 billion in 33 deals
• Q3 2014 – $3.7 billion in 35 deals

Public Market Financing

• Q3 2015 – $1.8 billion in 8 deals
• Q2 2015 – $2.3 billion in 12 deals
• Q1 2015 – $1.3 billion in 10 deals
• 2014 Annual – $5.18 billion in 52 deals
• Q4 2014 – $1.6 billion in 14 deals
• Q3 2014 – $987 million in 11 deals

Solar IPO Activity of Q3 2015

TerraForm Global, a yieldco subsidiary of SunEdison formed to own and operate contracted clean power generation assets in emerging markets, raised $675 million through its initial public offering. The shares are listed on Nasdaq and began trading in July 2015.

Sunrun, a U.S.-based residential solar company, raised $250.6 million through its initial public offering. The shares, listed on Nasdaq, began trading in August 2015.

Grenergy Renovables, a Spanish solar project developer and an independent power producer, raised $4.2 million through its initial public offering. Shares are listed on the Spanish Mercado Alternativo Bursatil (MAB) and began trading in July 2015.

Debt Financing

• Q3 2015 – $4.1 billion in 22 deals
• Q2 2015 – $3.4 billion in 14 deals
• Q1 2015 – $5 billion in 27 deals
• 2014 Annual – $19.97 billion in 58 deals
• Q4 2014 – $1.5 billion in 14 deals
• Q3 2014 – $8.5 billion in 17 deals

Top Large-Scale Project Funding Deals in Q3 2015 by Dollar Amount

SolarReserve and ACWA Power secured $400 million in debt financing as an investment guarantee, from the Overseas Private Investment Corporation for its100 MW Redstone CSP Tower Project in Northern Cape, South Africa.

Recurrent Energy secured $337 million in construction and term debt facility for its 200 MW Tranquillity Solar Project in California, from NORD/LB, Rabobank, Santander, KeyBanc, CIT and CIBC.
Recurrent Energy also raised $266 million in project financing for its 100 MW Mustang Solar Project located in California, from Santander Bank and U.S. Bancorp Community Development Corporation.
SunEdison received $253 million in project financing for its 156 MW Comanche solar project in Pueblo, Colorado.

Aloe Energy secured $223.5 million in debt refinancing for its nine PV projects with a combined capacity of 69.3 MW from Credit Agricole Corporate & Investment Bank, Siemens Bank and Societe Generale. The projects are owned by its subsidiary Delta Solar.

Announced Large-Scale Project Acquisitions

• Q3 2015 – $1.2 billion in 42 transactions
• Q2 2015 – $2.9 billion in 66 transactions
• Q1 2015 – $953 million in 44 transactions
• 2014 Annual – $3.2 billion in 163 transactions
• Q4 2014 – $898 million in 49 transactions
• Q3 2014 – $582 million in 38 transactions

Top 5 Project Acquisitions by Dollar Amount in Q3 2015

1. Dominion acquired 50 percent of the cash equity and 99 percent of the tax equity in the 265 MW Three Cedars Solar Project from SunEdison for $320 million.
2. Abengoa Yield acquired the Solaben 1 and 6 solar projects with a combined capacity of 100 MW in the Extremadura region of Spain for $304 million from Abengoa.
3. SunEdison acquired a 33 percent stake in a 425 MW portfolio of solar assets from Dominion Resources for $300 million.
4. United Photovoltaics Investment acquired a 100 MW solar project from Hubei Jingtai Photovoltaics Power for $137.1 million.
5. SunPower acquired 1.5 GW of the U.S. solar project pipeline from Infigen Energy for $37.9 million.

Corporate M&A Transactions

• Q3 2015 – $4.2 billion in 22 transactions
• Q2 2015 – $295 million in 17 transactions
• Q1 2015 – $563 million in 29 transactions
• 2014 Annual – $4 billion in 116 transactions
• Q4 2014 – $2.2 billion in 21 transactions
• Q3 2014 – $649 million in 32 transactions

Top 5 M&A Transactions in Q3 2015

1. SunEdison acquired Vivint Solar for $2.2 billion.
2. KKR acquired an 80 percent stake in Gestamp Asetym Solar from Gestamp Renewables for $1 billion.
3. Flextronics International acquired NEXTracker for $330 million.
4. ENGIE (formerly GDF Suez) acquired a 95 percent stake in Solairedirect for $222 million.
5. Opera Investments acquired SoloPower Systems for $220 million.

— Solar Builder magazine

[source: http://solarbuildermag.com/news/solar-funding-activity-q3-falls-by-half-yieldcos-out-of-favor/]