The renewable energy and cleantech sector is ripe for a wave of consolidation and Wall Street banks don’t want to miss out on this potentially lucrative stream of green advisory fees.
That’s why a growing number of banks are forming dedicated renewable energy and cleantech-focused banking groups, including Lazard, which this week, hired veteran energy banker Jim Rossman to grow its alternative energy advisory work. Lazard is not new to the sector. This year it led the private placement of Amonix, the Seal Beach, Calif.-based maker of concentrated photovoltaic (CPV) systems. It also underwrote the follow-on equity offering of wind company Broadwind Energy.
Last week UBS appointed two bankers to launch a global renewable energy and cleantech investment banking group. Significant work scored by the Swiss bank this year include advising solar cell maker Santa Clara, Calif.-based Solaicx as part of its sale to MEMC Electronic Materials. Over at Morgan Stanley, Managing Director Kevin Genieser heads the firm’s clean energy and renewables practice from New York.
Small boutique investment banks are also beefing their green creds, including Moelis & Company, which over the summer appointed Roger Wood as a managing director in New York for power and infrastructure.
One of the first persons to get into the green M&A advisory business was former UBS banker Jeffrey McDermott, who a year ago launched New York-based . The boutique firm has been scoring a regular stream of work, including advising solar power developer Ausra as part of its acquisition by Areva, the French nuclear reactor maker. It also recently raised cash from a California hedge fund to finance a possible expansion to California.
The launch of these dedicated banking groups comes as renewable energy and cleantech are looking for capital to finance their growth.
According to our own calculations, over the past year, green companies have filed or sold shares as part initial public offerings (IPO) worth a combined $7.2 billion. Notable IPOs include last fall’s $378 million IPO of battery maker A123 Systems, underwritten by Morgan Stanley and Goldman Sachs. There also was the $200 million IPO of electric automobile maker Tesla, underwritten by Goldman Sachs, Morgan Stanley, J.P. Morgan and Deutsche Bank Securities. One of the largest and most awaited equity offerings is Enel Green�s $3.8 billion share sale, slated to happen later this month. J.P. Morgan, Bank of America and Morgan Stanley are underwriting that transaction. Barclays Capital, BBVA and UniCredit are also involved.
This quest for liquidity is also fueling M&A deals, investment banking�s other revenue recipients. Indeed, more than two years after the global financial implosion, green energy companies, including solar and wind developers, continue to find it hard to secure project financing. As a result, larger, bankable companies are purchasing a growing number of small developers. Case in point was Japanese conglomerate Sharp�s acquisition last week of San Francisco solar developer Recurrent Energy (Morgan Stanley advised Recurrent). Renewable Energy Systems (RES Americas) expects to generate $2 billion in revenues from the sale of wind projects, including a couple of projects to Canadian pipeline operator Enbridge Inc.
With key Stimulus funding programs folding at the end of the year, state and federal regulators are working overtime to green light projects in time for them to get government dollars while they are still available. Following California’s energy commission�s approval of the 709-megawatt Imperial Valley solar project, the federal Bureau of Land Management followed suit and also approved the landmark project. BrightSource Energy�s 392-megawatt Ivanpah solar thermal power plant was also approved by the BLM.
Another major project that’s racing against the ticking stimulus clock is Cape Wind, which is waiting for Massachusetts regulators to approve its power purchase agreement with National Grid. Cape Wind has actually asked Massachusetts regulators to come back with a decision by Nov. 15 so it can secure stimulus funds.
VC and PE Watch
Aster Capital, the Paris-based enertec and technology-focused investment fund told G.E.R. that it is looking to exit portfolio companies held by its decade-old SEV I fund.
Community Energy, a developer of solar power projects in the U.S. West, Midwest and Northeast regions, raised a $4 million Series A led by SJF Ventures.
AlertMe, a developer of home energy management devices based in the UK, closed a �15 million Series B. British Gas stepped in as a new investor.
SolarEdge, an Israeli developer of photovoltaic technology, brought in $25 million in a third round of funding led by Lightspeed Ventures.
VantagePoint Partners says it plans to make a significant investment in Chinese wind turbine maker Xinjiang Goldwind Science & Technology Company (Goldwind), when the turbine maker issues shares on the Hong Kong Stock Exchange early next month.
This week in a conference call with green business executive, Energy Secretary Steven Chu called for the extension of stimulus programs, including the 1603 grants. Chu knows the political mood in Washington these days is about scaling down, not increasing, government spending. However, he argued that continued government support of the green sector is money well spent that will pay long-term dividends. With the Obama administration officially putting its weight behind the 1603 grants, that could convince Congress to extend these programs during the upcoming lame duck session, as has been rumored.
Photo: ddmerino, Flickr