Private equity players exit clean energy - RDS.A
Northern, WI 1/16/2013 (avauncer) - A rapid fall in the renewable energy investment by venture capital and private equity companies is a reflection of the losses that these companies have incurred. These companies who provided close to $5.8 billion to solar, bio fuel, wind and other alternate power resources have faced immense losses by backing solar panel manufacturers who competed with the Chinese market. A decline of 11 percent which dropped the total investment from 302.3 billion to just $268.7 billion shows the weariness among investors. Khosla Ventures founder, Vinod Khosla pointed out that this also reflects on the fact that entrepreneurs are not seeking enough capital for alternate energy start ups causing a significant shrink in the market. The decrease in incentives provided by the government is also a reason for a drop in the number of renewable energy start ups.
The amount of money available for the Venture Investors is also less than what it may have been about five years ago. Therefore investors are not able to see the bigger picture associated with these investments. There has been a huge decline in the money being offered. Draper Fischer, for example, fell by about 37 % in investments since 2011 while Braemar dropped 14%. This void is now being filled by corporate investors. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) provided a %26 million funding to Glass Point Solar Inc who are developing systems to use sunlight in oil recovery operations. CEO of Vantage Pint Capital Partners, Alan Salzman pointed out that a significant increase in the activity of the Corporates has been observed in the last few years.
Renewable energy companies with enough revenues are able to attract investors like Warren Buffet for funding. One of the main reasons why VCs are pulling out of these renewable energy companies is that most of them have been unable to keep up to the offerings made to the public with the WilderHill New Energy Global Innovation Index falling by 5.5 percent. Investments are down also because companies have began to pull back and leave the arena altogether and none of them have been able to make a successful exit. Political pressure on German companies that have sought finance from Obama’s administration could also be one of the causes of this investment decline. According to Khosla, this type of funding has hurt IPO markets badly.
Biofuel companies that were introduced in 2011 fell badly last year discouraging the investors. This has also hindered acquisitions and alternate exit strategies for these VC companies. Also companies that did start off stable biofuel ventures had to settle for lower payoffs. Such conditions have caused a slump in the investment market because of the discouragement felt by these investors. Therefore, investors are shifting from the solar and biofuel market and are looking at better companies to streamline their finances causing a significant drop in pure energy generation. There is also a significant change in investment patterns with all the large sectors like solar and LEDs being consolidated. Investors are now looking at potential hotspots to drift their funds into.
The shares of Dutch Shell plc (ADR) (NYSE:RDS.A) were up by 0.06% and closed at $69.70