The global business climate has dramatically deteriorated amid the ongoing public health crisis caused by the Covid-19 outbreak, and the solar sector is no exception, with a whopping 31% decrease in corporate funding for solar projects, according to a new report by Mercom Capital Group.
The India-based research and consulting group was publishing quarterly business activity reports long before the Covid-19 crisis, allowing for some interesting comparisons. Between January and March of this year, total corporate funding in the solar sector amounted to $1.9 billion, spanning 17 deals. That is 31% less than the $2.8 billion achieved from 35 deals over the same period last year, according to Mercom. Also, in the reporting period from October to December, global solar market activity reached $2.7 billion, involving 27 deals.
A lack of venture capital investment, as well as lower public market financing activity due to Covid-19, are squeezing cash flows. Global venture capital funding in the solar sector clocked in at $145 million in the first quarter, marking a significant decrease from $350 million in the fourth quarter of 2019. The January-March 2019 period saw $176 million in venture capital investments.
About 84% of the investment volume that was available in the first quarter of 2020 reached downstream companies, representing a 3% quarter-on-quarter increase. Mercom noted that the Sunset group secured the most venture capital investment in the January-March period, at $72 million, followed by ABC World Asia with $37 million.
“Funding levels dropped in Q1 as the coronavirus pandemic brought the global economy to a halt. Most large economies are shut down and there is minimal activity in solar markets. Solar project M&A was the bright spot in this time of uncertainty, proving once again that solar is a safe long-term bet. The worst may be yet to come, but hope is that activity picks up in the second half of the year,” said Raj Prabhu, CEO of Mercom Capital Group.
Public market financing dropped even more sharply. Mercom recorded a mere $22 million in public market activity over the last three months. The previous reporting period saw $259 million being raised, and also, a year-on-year comparison shows a 91% decrease from $247 million.
Meanwhile, debt financing in the first quarter reached $1.8 billion, while the fourth quarter of 2019 saw $2 billion being raised via that route. In the first quarter of 2019, that figure was even $2.4 billion, or 25% more.
Mergers and acquisitions have been mostly unaffected by the outbreak, the authors of the report asserted. The first three months of 2020 saw 55 large-scale solar project acquisitions, compared to 52 in the last three months of 2019 and 54 in the first three months of 2019.
Measured by capacity of the large-scale solar projects, the current reporting periods saw 12 GW of projects change hands, from 10.1GW in the fourth quarter and 5.9 GW in the first quarter of 2019.