Moving Day

We are happy to announce that we have changed our name to Peachtree Capital Advisors and our blog has also moved — to www.peachtreecapitaladvisors.com/blog.

Solar Continues Rapid Growth

The Solar Energy Industries Association (SEIA) recently released their 2009 U.S. Solar Industry Year in Review. Despite recessionary pressures that plagued the overall economy, solar continued on its impressive growth track, with U.S. solar capacity adding 37% onto its 2008 capacity. Solar power in the U.S. is now a $4 billion industry as it continues to gain mainstream adoption.

Though venture capital funding for solar dropped sharply in 2009 — as it did across the board for most sectors — we are beginning to see capital inflow again in 2010. Just two weeks ago, concentrated photovoltaic manufacturer Amonix completed a colossal $129.4 million round of funding led by Kleiner Perkins Caufield & Byers. As the economy recovers, we can expect to see more deals of this sort as investors jump aboard the solar growth train.

Greentech Mergers & Acquisitions 2009

The Peachtree Green Advisors 2009 Greentech M&A Round Up has been released.  In 2009, there were 248 greentech mergers, acquisitions, and capital raise transactions in the U.S. for a reported total of $9.5 billion. Distribution, Storage & Efficiency led the way with 90 transactions.

A resilient U.S. greentech M&A market saw 248 greentech mergers, acquisitions, and capital raises in 2009 for a reported total of $9.5 billion, falling a respective 14% and 4% from 2008. The declines, however, were more than offset by generous amounts of funding from the Department of Energy (DOE), courtesy of the American Recovery and Reinvestment Act of 2009.

As we look ahead to 2010 and beyond, it will be interesting to see whether venture capitalists step up when DOE funding runs out, and whether large utilities and Fortune 500 companies continue funding programs initially financed by the DOE.

For a comprehensive analysis of the greentech M&A environment in 2009, download the complete report from Peachtree Media Advisors at http://peachtreegreenadvisors.com/?p=research.

Best,

John

Greentech Needs Digital Media

When I say greentech needs digital media, I do not mean organizing environmentalists to attend rallies at the Copenhagen world climate change conference.  What I mean is that digital media is going to be instrumental in getting information to the consumer, especially when there is a muddled message or conflict of interest at the point of sale.  This “need” for a direct line of communication was most apparent with recent trips to auto dealerships while considering the purchase of a hybrid for my mom.

My mom is in the market for a new car, so I asked her to consider a hybrid and took her to a few dealerships in West Palm Beach during the Thanksgiving break.  I was surprised to find that Florida has a limited supply of hybrids and shocked at the level of anti-hybrid sentiment on the part of the car salesmen.

The only rationale I can think of trying to convince someone to not buy a hybrid who specifically went into the dealership to look at hybrids was because the sales margin or commission on hybrids was much lower than traditional gas vehicles.  (I clearly understand why for the guys who did not have any hybrids in stock.)  With the exception of a Toyota dealership that had the Prius in stock and the Lexus dealership that had the Lexus hybrid in stock, most sales guys were anti-hybrid.  Ummm…Ford/GM, you’ve got a real problem.

My point is that misinformation, especially at the point of sale, is going to be a big problem for green companies trying to sell to consumers through traditional retail channels.  If someone can be convinced that there is no science behind global warming, that smoking is not really that bad for them, or even that there is a magic pill that allows them to eat all the carbs they want, then it will be easy to say that hybrids are a waste of money or “hybrid just means more expensive.”  All it took was a few scumbucket sales guys and my mom was convinced that hybrids were “actually” not that practical.  Also, these car salesmen made these cases to my mom when I was not in the vicinity.  Wow.  As if she would not tell me exactly what they said to her.

This is a reflection of sales channel conflict that is a primary challenge for many greentech companies.  In addition to developing their own sales channels, separate and distinct from traditional sales channels, greentech companies need to develop one-to-one relationships with consumers.  Digital media is the most cost-effective media vehicle to make their case.  In this case it was a hybrid car, but in other cases it could be a multi-million commercial lighting program for a new skyscraper or G Diapers.  Yes, someone told me that Pampers and G Diapers were the same for the environment.  People will say anything for any reason and, therefore, controlling the message is a critical element to success for this sector.

China Cleantech Market Profile

China is the largest clean technology (cleantech) market in the world, with a market value of over $200 billion in environment protection and renewable energy industries alone. Energy generation became the most popular segment of cleantech investment in  2009 , followed then by the water and energy efficiency segments.

Chinese government spending on cleantech is snowballing. China has tripled its government investments on cleantech to 1.35 trillion yuan in the past decade, and boosted the share of cleantech spending in gross domestic product (GDP) from 1.3 percent to 1.5 percent.

As for the areas of cleantech investment, $172 billion has gone to environmental protection – 37 billion for desulphurization, 25 billion each for industrial waste water treatment and vehicle exhaust gas, and 22 for municipal waste water treatment.

In the renewable energy sector, $2.8 billion has been invested in wind, $8.1 billion on solar thermal energy, $1.7 billion on solar PV, $3.1 billion on ethanol, and 1.3 billion on biodiesel.

For its Five-Year Plan (2006-2010) period and in the long term, China has set two targets. The first is achieving at least 10 percent of total energy consumption from renewable energies by 2010, and the second is boosting the proportion of renewable energy consumption against primary energy consumption from 10 percent to 16 percent by 2020. Meanwhile, the government wants to reduce energy consumption per 10,000 yuan of GDP by 20 percent. It also seeks to reduce the water consumption per industrial output ratio by 30 percent by 2020.

Specifically, development goals of environmental protection for the 11th Five-Year Plan period are to treat 70 percent of municipal sewage and 60 percent of municipal garbage, discharge 10 percent less primary pollutants, and reach a 20 percent forest coverage.

In view of the current situation, China, however, faces tough challenges ahead, such as high energy consumption and high raw materials consumption. China’s energy consumption per 10,000 yuan of GDP was four times the world average and 14 times that of Japan. Raw material consumption is going up rapidly. In 2005, China consumed 310 million tons of rolled steel, up 15.1 percent year on year; 12.84 million tons of aluminum oxide, up 9.7 percent; and 960 million tons of cement, up 12.4 percent.

High environmental costs are offsetting about 4 to 6 percent of China’s GDP growth, only 43.6 percent of polluted water is treated, and 58.6 percent of Chinese cities have unhealthy air conditions. The continuing rapid growth of the Chinese economy presents unparalleled opportunities and challenges.

Since most of the vast cleantech market in China remains untapped, the country’s policy incentives, such as the latest environment and renewable energy tax, are attracting a lot of investment. Statistics from Cleantech China Research show that cleantech venture capital (VC) grew from a bit over $550 million in 2007 to more than $720 million in 2008, and is expected to reach over billion $dollars in 2009.

What we can see the vast investment would be used to massively expand China’s solar, wind, biofuel, electric car, energy efficiency sectors, carbon capture & store, environment protection and smart-grid markets in a move that could be as groundbreaking as the commercialisation of the internet. China has huge clean energy business opportunities for USA. US clean-energy companies can help Chinese firms meet their enormous energy demands while deploying technology that benefits the environment in the world.

Silver Spring Acquires Greenbox

This acquisition is a solid example where digital media and technology expertise is being utilized in greentech environments.  In order to reduce our carbon footprint, not only does there need to be an increase in demand for renewable energy, but there also needs to be an increase in the level of consumer engagement with regard to energy use.  Digital media technologies will play a key role with cleantech companies trying to engage with consumers to lower their energy use during peak demand.  Silver Spring clearly understands this point in their decision to buy versus build with their acquisition of Greenbox Technologies.  (Peachtree Media Advisors, Inc clearly understands this as well with Peachtree Green Advisors!)

According to their press release, the acquisition allows Silver Spring to provide another application to their customers – “a smart and intuitive energy-management portal.”  The Greenbox technology allows consumers to engage in time-of-use and other Smart Grid-enabled energy-saving programs.  According to Jonathan Gay, Founder and CTO, Greenbox Technology, Greenbox can now deploy its home energy-management solution much faster and more broadly than they could alone.

I wish Ivo (Greenbox’s CEO) and his team luck with their new partner.  Although the real trick is getting consumers to actually care about their energy usage, you will not be able to get them to take action without being somewhat engaged by at least being hooked up to the monitor!

Best,

John Doyle

Greentech Valuations are Edging Up

The greentech sector (as well as most other sectors) appeared to have bottomed out a few months ago.  As seen in the most recent Peachtree comps update (www.peachtreegreenadvisors.com), valuations for publicly traded comparable greentech companies are creeping up.  The overall EBITDA multiple for renewable energy companies increased slightly from 15.3x EBITDA in July-09 to of valuation to 15.6x EBTDA in Oct-09.  The slight increase represents a re-calibrated definition of confidence on behalf of investors.  While current growth predictions are not the “we are changing the world” pie in the sky projections of yesteryear, the political will to push forward on these renewable fuels and clean technologies is clearly apparent.  That said, the two largest renewable energy sectors (solar and wind) are well-positioned to capitalize on a stable economic environment with continued public and private support.  (Although there have been several renewable energy projects scrapped or sold on the part of the large oil companies, the Lewis & Clark will on the part of investors to push on can be seen in the relatively high valuations that the market is putting on these renewable energy and cleantech companies.)

The reason that I say greentech valuations are “relatively high” is due to the fact that this sector is still in its early stages with the valuation, reporting and capital raise efforts akin to the wild wild west.  (Yes, be prepared for many more 19th century Manifest Destiny type  analogies.)  The greentech industry is filled with many so many companies with lofty valuations, but no real business revenue.  Similar to the Internet sector 15 years ago, most of the greentech “technologies” have been around for years.  Media was not invented with the Internet.  Many companies are also changing their name to “green” similar to the way companies changed their name to .com in the late 90s.  (Did someone say Peachtree Green Advisors?)

Sorting through the business models is posing a small challenge for many of the providers of capital as well.  More importantly, the inability for these companies to produce revenue at an early stage and the capital intensive nature of developing these technologies are prohibitive to traditional Angel investors getting involved (many of whom are licking their wounds right now).  Also, many companies have taken to the practice of counting grant money and partnership investment as revenue, making it more difficult to build uniform apples-to-apples comparisons.  Hence, the term “wild wild west” comes to mind.

As seen in Wonderhill New Energy’s latest global index of greentech stock prices appears below, greentech valuations are on the rise globally.  Although valuations are far from where they were at the height of optimism in 2008, a stable economic environment will help to propel growth for greentech companies by allowing these companies to compete in an environment with a more receptive consumer.  The only sand trap that I can see is whether the political will exists to continue onward for the next decade.  National and local governments across the globe generate substantial amounts of tax revenue from dirty cheap fossil fuels.  (Cigarettes are still sold and taxed around the world.)

New Posts On the Way…But First

There are many new posts on the horizon that are dedicated to greentech M&A.  The blog posts relate to business models, end users, acquisitions and partnerships and will reflect many of the insights that I learned from conversations with green tech CEOs this past month.

But First…I would like to clearly state something in our industry that concerns me.  (The reason I blog is because a former client of mine suggested that I be a part of social media, especially since I was his banker!)  So, I began blogging.  My concern with green tech is that most of the units produced (solar, blades, meters, etc.) are made with energy from non-renewable sources.  There has to be some way to correct this.

Bizarre and slightly hypocritical.  It’s one of those things that make you go, “Hmmmm.”

Follow GT Solar on Dipity.com

Dipity.com is an excellent Web site for tracking companies, events, politicians, or anything topical, on the Web.  I just put in GT Solar and will soon add a link to the companies when I upload my quarterly public market comps to the blog.  Here is an example.

http://www.dipity.com/timeline/GT-Solar

or Tesla Motors.

http://www.dipity.com/timeline/Tesla-Motors

Pretty cool stuff.

Best,

John

Five Greentech Venture Capital Stars from 2008

Greentech has emerged as one of the hottest sectors for venture capital funding within the past few years.  Today we introduce some of the major players driving this trend.  Below, as reported by New Energy Finance, the top five greentech investors of 2008 are ranked by their number of transactions, with total deal value listed as well.  The deal values are not entirely accurate, however, as numerous deal values were undisclosed.

[1] Good Energies (21 deals/$65.3m)
As in 2007, Good Energies claimed the top spot, this time participating in twenty-one deals sprayed across a variety of sectors, development stages, and countries. The seemingly low $65.3m figure is misleading due to the presence of fifteen deals with undisclosed values.

[2] Draper Fisher Jurvetson (20 deals/$102.9m)
In addition to leading segments solar and biofuel, Draper heavily focused on early stage companies in the energy efficiency and energy storage segments. Efficiency companies Luminus Devices and Tesla Motors, alongside solar thermal startup BrightSource Energy, headlined DFJ’s list of deals.

[3] Kleiner Perkins Caufield & Byers (16 deals/$187.2m)
Famous for successful tech investments in Google and Amazon, KPCB has recently bet big on greentech. Its $187.2m topped the list for transactions value in 2008, mostly focused in efficiency and biofuel.

[4] RockPort Capital Partners (14 deals/$166.3m)
Solely a greentech-focused VC, RockPort poured money into all areas of the efficiency segment, ranging from green building (Aspen Aerogels) to supply-side efficiency (Powerspan) to digital energy (Northern Power Systems). Investing in both early-stage and late-stage companies, RockPort also made investments in solar and fuel cell technology.

[5] Khosla Ventures (14 deals/$111.5m)
Already notorious for making big bets in greentech, former Sun co-founder Vinod Khosla’s firm kept busy once again in 2008. In particular, biofuel was a major area of investment, including large raises for Range Fuels, Amyris Biotechnologies, and Mascoma.

For more on greentech venture capital activity, you may read Peachtree’s greentech report.