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Earth, Wind, and Fire:A Cleantech Perspective
IN THIS ISSUECleantechDefined InvestmentTrends:VentureCapital;InitialPublicOfferings;MergersandAcquisitions
M&AThesison:Solar;EnergyStorage;Water;EfficiencyTechnologies
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April 2007
KEY CONTACTS
MelodyJonesSVBAlliantMergersandAcquisitionsmjones@svballiant.com650.330.3076
JeffBerrySVBAlliantPrivateCapitaljberry@svballiant.com650.330.3778
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
TABlE Of CONTENTS
1 Introduction: Cleantech Grows-up
2 defining Cleantech: Is it an Industry, Sector, Theme or Application?
5 Cleantech Catches On: The Perfect Storm
7 financing: Cleantech Gets the Green light
11 Capitalizing on Cleantech: IPOs and M&A Activity
11 CleantechIPOListingsandIndices
14 M&AActivityinCleantech
19 Cleantech Segments ripe for M&A
19 SolarEnergyHeatsUp
26 EfficiencyTechnologies
30 EnergyStorageTechnologies:Cheaper,Faster,Longer,Cleaner
36 WaterTechnologies
41 risks and reality Checks of Cleantech Investing
43 Concluding remarks: Cleantech Spreads its wings
44 About SVB Alliant
45 Appendix1:ExamplesofTechnologiesinEachCleantechSegment
47 Appendix2:MostActiveVCsinCleantechasofDecember31,2006
50 Appendix3:CleantechIndicesandPerformance,2005-2006
51 Appendix4:LandscapeofSolarEnergyCompanies
52 Appendix5:LandscapeofEfficiencyTechnologyCompanies
53 Appendix6:LandscapeofEnergyStorageCompanies
56 Appendix7:LandscapeofWater-techCompanies
58 Acronyms and Abbreviations
59 references
SVBAlliantwouldliketothanktheCleantech Group™andAnastasiaO’Rourkefortheircontributiontothisreport.
TheCleantechGroup,whichplayedapivotalroleinthegrowthofcleantech,broughtadepthofknowledgeandthoroughunderstanding of the diverse industries that provide cleantech solutions. Their discernment, insight and passion forcleantechensuredthatwehadthehighestqualitydataandresourcesavailableforouranalysis.
AnastasiaO’Rourkesubstantiallycontributedtotheresearch,writingandanalysisofthisreport.AnastasiaiscompletingherPh.D.atYaleUniversityandiswritingontheemergenceofthecleantechindustry.
Also,specialthankstoSusanSeagrenandErikHansenfortheirvaluablecontributions.
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
TABlE Of CONTENTS — fIGUrES
3 Figure1a CleantechSub-Segments
3 Figure1b AndSomeoftheGrayAreasinCleantech
6 Figure2 TheDriversofCleantechareFundamentallyGlobal
8 Figure3 YearlyVCInvestmentinCleantech,EuropeandNorthAmerica,2003-2006
9 Figure4 AverageSizeofDealsperCleantechSegmentandStage,CleantechVCInvestments,North
AmericaandEurope,2003-2006
10 Figure5 AmountofVCInvestedperCleantechSegment,NorthAmericaandEurope,2003-2006
10 Figure6 AmountInvestedinCleantechVCDealsbyStageofInvestment,NorthAmericaandEurope,
2003-2006
12 Figure7 Activityof57EuropeanCleanEnergyCompaniesSince1999
12 Figure8 NumberofCleantechIPOsin2005-2006byExchange
13 Figure9 NumberofCleantechIPOsin2005-2006byCountry
13 Figure10 NumberofCleantechIPOsin2005-2006bySecondarySegment
15 Figure11 NumberofCleantechM&Adeals2005-2006byCleantechSegmentandLocationofTarget
16 Figure12 RegionalLocationofTargets,CleantechM&A,2005-2006
16 Figure13 TypesofCleantechM&ADeals,2005-2006
19 Figure14 SourcesofEnergyin2004
20 Figure15 NewPVInstallationandGrowthRate,2001-2005
21 Figure16 ComparisonofPower-GenerationCosts,2005
22 Figure17 TechnologyandMarketMaturityofSolarEnergyCellTechnologies
23 Figure18 SolarEnergyVC,2005-2006
24 Figure19 SolarEnergyM&AandIPOs,2005-2006
24 Figure20 TheCrystallineSiliconSupplyChain:ProspectiveChangestotheCorporateLandscape
29 Figure21 EfficiencyTechnologyVCInvestments,2003-2006
29 Figure22 EfficiencyTechnology,IPOandM&ATransactions,2005-2006
31 Figure23 OverviewofPortableandStationaryEnergyStorageTechnologyApplications
32 Figure24 OverviewofEnergyStorageTechnologies
35 Figure25 EnergyStorageVCInvestments,2003-2006
35 Figure26 EnergyStorageM&AandIPOs,2005-2006
38 Figure27 WorldwideFreshWaterUse
38 Figure28 TheWaterSupplyChain
40 Figure29 WaterTechnologyVCInvestments,2003-2006
40 Figure30 WaterTechnologyM&AandIPOs,2005-2006
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
1
Introduction: Cleantech Grows-upOver the last two years, cleantech has grown up and moved out of a niche category and into the mainstream. The opportunity created by growing global resource constraints, concerns over the security of energy supply, and the recognition of the environmental problems generated by current industrial systems has led to a kind of tipping point. Cleantech companies are beginning to mature into mainstream businesses. Although the opportunity is substantial, there are significant risks associated with an area that is just beginning to find its way.
The enormous end market opportunities and diverse applications of clean technologies has attracted an increasing number of investors, particularly in the last 12 months. According to the Cleantech Group LLC, cleantech is now the third largest investment segment behind software and biotechnology. North American and European venture investing in cleantech realized $3.6 billion in 2006, up from $2.5 billion invested in 2005.
The principal catalyst for the explosive growth in cleantech investment is the expanding realization that clean technologies have enormous global end markets and the ability to create economic windfalls for investors, as evidenced recently by numerous successful IPOs and increased M&A activity. As venture capitalist John Doerr of Kleiner Perkins Caufield Byers proclaimed in 2005, “Greentechi could be the largest economic opportunity of the 21st century”.
Despite all the discussion and momentum, cleantech is not a well understood term. The characterization of cleantech varies between venture capitalists (VCs), industry pundits and companies. In order to help bring some definition to the ambiguity, we interviewed a number of VCs, entrepreneurs and
key players at large industrial firms to get their perspective on what is and is not cleantech and their thoughts regarding future exits, to which we’ve added our own perspective.
This report is an exploration of the expanding and maturing world of cleantech. First, we define cleantech in order to help educate newcomers and add clarity for cleantech industry veterans. Then we give an overview of the technologies which typically fall under the cleantech moniker, and discuss some of the main drivers for its global growth. Next, we summarize the tidal wave of investment into the space, including which segments within cleantech are more nascent and emerging, and which segments are beginning to mature.
Finally, we discuss the exit opportunities on the horizon. Which industries are ripe for consolidation and which will likely support companies large enough to enter the public markets? What types of firms will be the likely consolidators and when do we believe the consolidating begins? Four cleantech segments we think are ripe for ensuing M&A are identified: solar energy, energy storage, efficiency technologies (such as sensors, monitoring and control devices), and water technologies. In each of these segments, the drivers and industry dynamics underpinning potential M&A are very different, illustrating the difficulty of defining and understanding cleantech.
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
Is cleantech an industry, sector, investment theme (like biotech or information technology) or an application? Most investors we spoke with feel that cleantech is neither a sector nor an industry, but rather an investment theme or category. We believe it is a term that denotes a thread that crosses a number of technologies and industries. Further, it is defined by applications which achieve some environmental, social and ultimately economic goals over incumbent technologies or products.
Cleantech encompasses technological innovations that cut through most of the industrial economy – from energy and water to agriculture and transportation to software and advanced algorithms. It builds on innovations from other technology sectors such as material science and nanotechnology as well as increasingly more mature wireless technologies. For this reason, VCs such as Erik Straser of Mohr Davidow Ventures refer to cleantech as, “the second wave of industrial technology.”
Many companies recognize the potential value of using their existing technologies for cleantech applications. This is facilitated by entrepreneurs who have transitioned out of other sectors and brought their expertise and skills to bear in cleantech companies. This expertise has enabled knowledge and technologies from other industries to be applied to clean technologies, often resulting in cost reductions and more competitive pricing. Miasole’s roll-to-roll thin-film photovoltaic manufacturing process is a prime example. By leveraging the manufacturing technique developed for products targeting the hard drive and telecom industries, the company was able to vastly improve the efficiency and cost profile of its roll-to-roll thin-film photovoltaic (PV) manufacturing process.
So what is the common theme that brings allthesedisparatetechnologiestogether?Howdoweknowacleantechnologywhenweseeit?Weaskedseveralleadinginvestorshowtheydefinecleantechandbelowaresomeoftheresponses:
One of the most cited definitions of cleantechis offered by the Cleantech Group: “Cleantech is any knowledge-based product or service that improves operational performance, productivity or efficiency; while reducing costs, inputs, energy consumption, waste or pollution.” ii
Diana Propper of Expansion Capital Partnersdescribes it: “On one side, cleantech is really about resource efficiency and productivity in supply – how to manufacture and produce to save energy, water, materials, etc. On the other side, these technologies are enhancing the bottom line of customers.”
RajAtluruofDraper Fisher Jurvetsonsays:“The investment thesis is this: Technologies that help to utilize your existing input resources more efficiently within your business processes and deal with the outputs of your operations which have an increasingly high cost to manage.”
Onesourcesaid,“I think the meaning of cleantech is going to come under increasing scrutiny. However, it’s very important that cleantech is not defined too narrowly, that no environmental activists get hold of the agenda. There are many important innovations, e.g. coal gasification that could really contribute to sustainable development.” —Anonymous
Though many VC funds rely on simple meta-categorizations such as clean energy, water, air and materials, the Cleantech Group categorizes cleantech investments into 11 different sub-segments (Figure 1a). A list of example technologies within each of these segments can be found in Appendix 1. Figure 1b shows cleantech sub-segments in which cleanliness may be suspect to some.
Defining Cleantech: Is it an Industry, Sector, Theme or Application?
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
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figure 1b: And Some of the Gray Areas in CleantechSource:SVB Alliant, 2007
Clarification: Cleantech as an ApplicationTechnologies are generally not intrinsically clean or dirty in and of themselves. Their application deter-mines the extent to which they reduce environmental impact and can be called a clean technology. For example, sensors can be used in cleantech applications such as in the detection of gases for regulation of carbon dioxide (CO2), sulfur dioxide (SO2) or nitrogen oxide (NOx) emissions or they can be used for non-cleantech applications, such as in military operations. In our view, these sensors are categorized as cleantech products if they are used to improve environmental performance, resource efficiency, and productivity.
Although many prefer not to use the wordenvironmental for fear of mixed perceptionsassociated with the word, cleantech balancesboth economic and environmental factorsin tandem, resulting in a more efficient use ofresources.
“Sorry, but being green, focusing the nation on greater energy efficiency and conservation, is not some girlie-man issue. It is actually the most tough-minded, geo-strategic, pro-growth and patriotic thing we can do.”—ThomasL.Friedman,New York Times, January2006
figure 1a: Cleantech Sub-SegmentsSource:Cleantech Group, 2006
Air and Environment
Materials
Manufacturing and Industrial
Agriculture
Energy Infrastructure
Energy Storage
Energy Efficiency
Energy Generation
Transportation
water and wastewater
recycling and waste Treatment
Nuclear Power Corn-based Ethanol Clean CoalBiofuels from
GeneticallyModified Crops
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
The Meaning of Clean is EvolvingThe concept of cleantech has its roots in a standing tradition of improving the environmental performance of industrial systems using technology, processes and services. Hence, the specific applications we now find in the cleantech universe span from older ideas of cleaning up dirty industries to more recent ideas of pollution prevention. The shift has parallels to that of alternative medicines where the adage that prevention is better than the cure reigns. Cleantech currently includes technologies that address the following broad themes:
Dirty industry modifications. Technologies that clean up previously dirty industries where pollution is already released. For example, technologies that remediate contaminated land.
End of pipe. Technologies that reduce or control environmental harm or externalities associated with industrial manufacturing. Examples include filters or scrubbers on smoke stacks or catalytic converters on car exhaust.
Clean substitutes. Provide cleaner substitutes to existing technologies or materials, often using the same infrastructure. Examples include biofuels like ethanol, or low toxic auto paints.
Efficiency. Enhance efficiency of existing pro-cesses – so that fewer inputs used leads to reduced outputs. Examples include energy efficient lighting and building materials that enhance thermal efficiency.
Pollution prevention. Eliminate pollution—for example using sensors and monitors to optimize process inputs in order to reduce NOx emissions.
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Industrial ecology. Models of efficient use of resources, energy and waste in a system-setting using closed-loop design. An example of this would be taking waste, energy or other materials and turning it into a feedstock.
The meaning of clean will continue to evolve, as many of these applications involve being cleaner than what came before. In our opinion, the next step in the evolution of cleantech will be improving technology processes over their full life cycle. As cleantech reaches larger scale applications, more questions will arise about the externalities created by the clean technologies themselves. Taking a life cycle view means to consider how a specific product is made, such as what materials, inputs, outputs and wastes are created as a result of making the product. The aim is to avoid shifting problems from one life cycle stage to another, from one geographic region to another, or from one environmental medium (air, water or soil) to another.
“Putting renewable energy into an inefficient system – is like having a Diet Coke with your double bacon cheeseburger.”—JoelMakower,CleanEdge
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
5
Cleantech Catches On: A Confluence of Drivers“It’s almost like we are seeing the perfect storm coming together. You have Iraq, Iran, Nigeria, Venezuela, and then Katrina… People recognize that where there is disruption there is also opportunity.”—BryantTong,Nth Power
Recently, many large corporations have been taking a public stance of supporting the cleantech agenda.
A few examples include:
Dow’s sustainability goals include reducing its energy intensity by 25 percent by 2015 and increasing revenue from its sustainable chemistry products and services.
DuPont’s recently expanded sustainability commitments are expected to generate $6 billion in additional revenue by 2015 and pledge to double their investment in research and development (R&D) programs.
General Electric’s watershed Ecomagination™ initiative plans to generate $20 billion in annual sales by 2010 from eco-efficient products and services such as wind turbines, fuel-efficient engines, energy-efficient appliances, solar energy panels and water treatment systems.iii
Aside from improving their own environmental performance and energy use, retailers such as Home Depot, Office Depot, Staples and even Wal-Mart, are also starting to look at cleantech for both top and bottom-line growth. Wal-Mart set ambitious targets of eventually being powered 100 percent by renewable energy, making stores at least 25 percent more energy efficient, and having a 25 percent reduction in solid waste across all stores in three years.
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Figure 2 illustrates the vast variety of conditions facilitating both the current and future worldwide adoption of cleantech. These drivers will affect each of the cleantech segments differently and are distributed across industries and regions.
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
figure 2: The drivers for Cleantech are fundamentally GlobalSource:SVB Alliant, 2007
Aginginfrastructureandhistoricunder-investment
Limitedpartnerdemand
Consumerdemandforfaster,cheaper,lighter,cleanerproducts
Largecompanies’corporategreeningefforts
Needforsafe,reliableandcleanenergy,water,andair
demand pull
Environmentallegislation
Climatechange
Internationalpoliticalinstability
Energysecurityissues
Pricingandmarketsforexternalitiese.g.CO2emissions,Kyoto
International geo-politics
Sociallyresponsibleinvestors
Industryorganizations
Policyincentives
Shareholderpressureonenvironmental/socialissues
Stakeholder pressure
ManycleantechfundsandFundofFundsraisedandclosed
Moreevidenceofreturns
Humancapital—successfulentrepreneurstransitioning
Supply of capital
ToptechIPOsin2005
OutsourcingCommoditiesboom
Internationaleconomicdevelopment:e.g.BRICs
Highandvolatileoilprices
resource scarcity
Squeezeonprofitmargins
Increasingurbanpopulationsworldwide
Privatization
Pressureforproductivity
Industry trends
Marketliberalization
Propellingcleantech
Technology advances and convergence
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
7
Financing: Cleantech Gets the Green LightThe growth in cleantech investing has been staggering and there is no sign of a slowdown.
In addition to traditional venture capital, angel investors, corporate venturing programs, later stage private equity funds, project financiers, and increasingly hedge funds, have all started making investments into cleantech and may play an imperative role in providing additional financing for the most capital intensive segments.
Recently, many investment firms that focus solely on cleantech have raised their second or third fund, underscoring the limited partners’ (LP) growing interest in cleantech. Chrysalix, Emerald Technology Ventures (formerly SAM Private Equity), Expansion Capital Partners, MissionPoint, Nth Power, and Rockport to name a few have closed new funds in the past year. Top generalist VC funds are also investing across the spectrum of cleantech segments. Kleiner Perkins Caufield Byers has dedicated $200 million to what they refer to as greentech investments which attracted much buzz. Further reflecting the perceived LP demand, several cleantech fund of funds are being launched, including Macquarie Bank (Australia), Piper Jaffray (U.S.), Royal Bank of Canada (Canada) and Triodos Bank (Netherlands) and others are rumored to be in the works. Appendix 2 shows a list of top VC investors by number of reported transactions in cleantech.
Cleantech as a concept has gained the most traction with the venture capital community in North America. From 1999 through the end of 2006, investors in North America and Europe committed a total of $9.4 billion to cleantech investments. 2006 saw dramatic growth in dollars invested. In North America and Europe, venture capitalists placed approximately $3.6 billion in cleantech companies
in 2006, up from $2.5 billion invested in 2005 (Figure 3). The third and fourth quarter of 2006 also saw several large (>$50 million) deals in biofuels, batteries and energy storage, and recycling. The data shows that Europe typically invests between 20 and 35 percent of total North American VC investments (in cleantech) by amount and that investments are typically smaller in size.
Bryant Tong from Nth Power argues that therecent increase in valuations and number ofdealsisamisnomer.“We have to remember that the growth numbers of cleantech investing are relative to what was going into it earlier – not to the size of the total market.” Tongsays, “I would argue that there is a huge market ahead of us and opportunities to put a lot more money to work.”
Raj Atluru goes on to add that “What really excites VCs is the quality of entrepreneurs that are going after opportunities in cleantech coupled with what we believe are really transformative technologies.”
Further, Ira Ehrenpreis of Technology Venture Partners believes, “The lack of R&D spending in large utility type companies is a great opportunity for start-ups to move into under-innovated verticals.”
Within the different subcategories of cleantech, there is a broad disparity of venture capital investment and interest (Figure 5). Clean energy dominates, with around 45 percent of the total investment in North America and 75 percent in Europe. Within the energy space, energy generation (i.e. solar, biofuels, wind, wave and tidal, geothermal and waste to energy) take the largest portion. A notable recent trend is the rise of biofuels, capturing a whopping 69 percent of cleantech investment in the third quarter of 2006, for a total of $0.5 billion. This is arguably due to the fact that manufacturing biofuels is capital intensive and currently enjoys U.S. Federal
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
and state subsidies.iv Investors appear unconcerned about the perception that, as one anonymous source put it, “ethanol is the redneck of cleantech” and that production plants for fuel are not traditional venture plays.
A significant sign of the health and maturation of cleantech is the increase in the number of mid to later stage deals. Figures 4 and 6 illustrate this evolution from seed to later stage investments in
North America and Europe. In the second quarter of 2006, more than 93 percent of the more than $1 billion invested in cleantech was into expansion or later stage rounds, dropping slightly to 88 percent of approximately $0.9 billion in the fourth quarter. With so many investments in expansion stage companies from 2003 to 2005, we expect cleantech IPO and M&A activity to pick up in the next two to three years.
figure 3: Yearly VC Investment in Cleantech, Europe and North America, 2003-2006 Source:Cleantech Group,2007
0
500
1000
1500
2000
2500
3000
3500
4000
2006200520042003
559
297
332
397
335
973
567
1,209
854
1,632
695
2,902
Europe
North America
Total Number of Deals
(inU.S.Millions)
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
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figure 4: Average Size of deals per Cleantech Segment and Stage, Cleantech VC Investments, North America and Europe, 2003-2006Source:Cleantech Group,2007
Wat
er &
Was
tew
ater
Tran
spo
rtat
ion
Rec
yclin
g &
Was
te
Mat
eria
ls
Man
ufa
ctu
rin
g/I
nd
ust
rial
En
erg
y S
tora
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En
erg
y In
fras
tru
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En
erg
y G
ener
atio
n
En
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y E
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Air
& E
nvi
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Ag
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16
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2
0
Expansion
Early Stage
Startup/seed
(inU.S.Millions)
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
figure 6: Amount Invested in Cleantech VC deals by Stage of Investment, North America and Europe, 2003-2006Source:Cleantech Group,2007
figure 5: Amount of VC Invested per Cleantech Segment, North America and Europe, 2003-2006Source:Cleantech Group,2007
Energy Storage$1,308
Energy Infrastructure$510
Materials$849
Recycling & Waste$568
Transportation$285
Water & Wastewater$406 Agriculture
$404Air & Environment$637
Energy Efficiency$782
Energy Generation$2,976
Manufacturing/Industrial$456
(inU.S.Millions)
(inU.S.Millions)
Early Stage $1,916 (466 Deals)
Startup/Seed $202(168 Deals)
Expansion $7,062(722 Deals)
Select both chart circlesdouble click the Re-Scale tool: pick non-uniform in the scale box and use 86% for horizontal scale, and 64% for vertical scale.Then adjust white pointer rules to line up and all should have a horizontal tail, the labels should hang from the tailsuse two lines for text labels with values below labels, justify towards edge of pointer ruleuse 7pt bold, 8.5 leadingthe pointing rule should vanish an equal distance from the edge of
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
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Capitalizing on Cleantech: IPOs and M&A Activity
RobDayof@Venturesexplains that, “[cleantech investors] until now have been at the proliferation stage. The next is harvesting those investments.”
For the period from 1995-2004, the Cleantech Group reported that approximately 92 percent of the successful exits in cleantech worldwide were via M&A and eight percent were via IPO. Although many cleantech funds have been successful in raising capital with limited partners, Even Bakke of the BankInvest Group in Copenhagen explains that as a young sector with a limited track record, “The main question everybody has is if this sector can give VCs required returns.” A November 2006 study performed by New Energy Finance and European Energy Venture Fair indicates venture-grade returns on cleantech investments may be possible. Albeit only a small sample size of 57 European clean energy companies were surveyed, the study tracked the financing activity of those companies since 1999. Investors realized returns on eight of the 57 investments (Figure 7).
cleantech ipo listings and indices
The buzz in cleantech hasn’t been limited to new investments. Recently there have been several high-profile, high-return exits via the equity markets, especially in the solar space. In 2005, Conergy, Q-Cells, SunPower and Suntech Power raised a combined total in excess of $1.1 billion. This trend continued in 2006 where there were several more solar IPOs but attention shifted to the biofuel industry with the successful IPOs of Aventine Renewable Energy Holdings, U.S. Bioenergy, Verasun Energy and Verbio together raising in excess of $1.2 billion (Figure 10).
As a category, cleantech IPOs are being well received by the public markets and investor appetite for new listings is on the rise. In 2005, cleantech IPOs raised $2.6 billion and in 2006, this figure nearly doubled to $4.9 billion.
It’s a well-known fact that IPO activity in the U.S. has been down since 2002 due to economic, market and regulatory environments. This has served to create pent-up demand on the part of institutional investors. While the U.S. markets are beginning to open up, cleantech IPOs in 2005 and 2006 have been carried out predominantly on smaller international exchanges such as the London Stock Exchange’s Alternative Investment Market (AIM), the Frankfurt Stock Exchange as well as on exchanges in Oslo, Mumbai and Sydney among others (Figure 8). AIM in particular is attracting a diverse and international group of company listings, with 27 cleantech listings collectively in 2005 and 2006 and several more pending. Many believe that companies listing on AIM are still early stage and are using the listing more to access mezzanine-type equity than they are to provide liquidity to early investors, though some investors are able to exit as well. Some concerns remain on the thin trading and volatility of these stocks.
As far as returns are concerned, new cleantech listings have performed well as a category. Cleantech companies which went public in 2005 were up an average of 32 percent from file to 2006 year end price. Cleantech IPOs from 2006 were up an average of 21 percent. Solar IPOs from 2005 and 2006 had strong after-market performance from file to 2006 year end price with an average increase of 38 percent. Biofuels and other energy generation technologies, such as wind, also performed well with an average return of 24 percent and 68 percent, respectively for the same time period. This was
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
followed by energy storage companies at 8 percent, manufacturing and industrial companies were flat on average and water and wastewater companies lost an average of 31 percent.
Furthermore, we analyzed the spread between file and offer prices to determine relative demand for cleantech stocks during the roadshow period. Although this data is publicly available for less than
half of the new listings, the information that is public indicates positive investor demand. The average premium to the initial midpoint filing for cleantech IPOs was positive in both 2005 (eight percent) and 2006 (seven percent) further emphasizing the healthy appetite for cleantech investments by institutional investors. From 2005 through 2006, solar IPOs have demonstrated by far the largest investor demand at an average premium of 16 percent.
figure 7: Activity of 57 European Clean Energy Companies Since 1999Source:New Energy FinanceandEuropean Energy Fair,2006
figure 8: Number of Cleantech IPOs in 2005-2006 by ExchangeSource:SVB Alliant,2007
Trade Sale:3
Liquidated:6
2nd Round of VC:9
No NewFinancing:34
IPO: 5
30
25
20
15
10
5
Other EuropeanExchanges
AustralianStock Exchange
AsianExchangesNYSENASDAQ
Xetra/FrankfurtStock ExchangeAIM
27
13
9
43
2 2
NumberofListings
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
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figure 10: Number of Cleantech IPOs in 2005-2006 by Secondary SegmentSource:SVB Alliant, 2007
figure 9: Number of Cleantech IPOs in 2005-2006 by Country Source:SVB Alliant,2007
3
6
9
12
15
IndiaOtherAustraliaOther
EuropeChinaGermanyUnitedStates
UnitedKingdom
15
1312
6
5
4
3
2
NumberofListings
5
10
15
20
Recyclingand Waste
Water andWastewater
Manufacturing& Industrial
Other EnergyGeneration
EnergyStorageBiofuelsSolar
18
14
98
7
3
1
NumberofListings
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
More IPOs can be expected in the coming years as venture funding remains active, cleantech companies mature and as public markets and institutional investors become increasingly informed about and enamored with the concept of cleantech.
Various cleantech indices have been launched recently, some focusing on cleantech public companies by region (e.g. in North America or international) and others on sub-segments such as clean energy or water technologies. A few have recently added an exchange traded fund (ETF) to invest in the index. Appendix 3 lists four of the most widely quoted indices in cleantech.
m&a activity in cleantech
In our opinion, M&A activity in cleantech will ramp up in the next 18 to 24 months. There are several drivers, not the least of which will be investors who want to exit existing investments. We expect that many private companies looking to scale quickly, capture market share and access larger global markets will turn to M&A to obtain the required capital, distribution channels and critical mass.
Joel Makower of Clean Edge observes three waves of corporate engagement with environment issues:
Wave 1: “do no harm”;
Wave 2: “do well by doing good” (improving the bottom line through improved efficiencies); and
Wave 3: “growing the top line through innovation”.
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These waves have all created huge market opportunities for cleantech companies but we believe the third wave will be a key motivator for acquisitions, particularly by industrial companies. These initiatives, in turn, will assist small and mid-size cleantech companies to achieve the scale necessary in order to appeal to potential industrial acquirers. As one business development professional at one such firm explains, “The win for the other party would be our brand name and scale to put that company on the map and give it some acceleration into commercialization.” (Anonymous)
Done Deals: Watershed moments in Cleantech M&AThere has already been some meaningful M&A activity in cleantech. Well-known conglomerates such as ABB, Air Products and Chemicals, Danaher, General Electric, Honeywell, ITT, and Siemens have all been active acquirers.
We screened numerous databases to develop an extensive list of cleantech M&A transactions worldwide. Our analysis indicates there were at least 540 transactions in 2005 through 2006v (Figure 11). Although the data does not include all M&A activity due to limited disclosures, some preliminary analysis of this data suggests the following patterns:
Forty-five percent of cleantech M&A transactions had buyers that were already fully or partially active in the cleantech space, while 42 percent were buyers not otherwise exploiting cleantech markets. The other 13 percent of transactions were by investment funds, including private equity shops not typically focusing on cleantech investment themes.
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Investment funds and non-cleantech buyers invested most heavily in energy generation companies, followed by water and wastewater, and recycling and waste companies.
In cases where both the buyer and target are identifiably cleantech, M&A deals tended to be either outright acquisitions or divestures of business units. A smaller number of cleantech-to-cleantech minority-stake transactions were found and very few (only three) mergers of equal-sized companies were found (Figure 13).
Acquisition is one thing, but how have acquired companies performed as part of a larger entity? Have they commercialized and reached the scale and profitability that was anticipated? Here we only have anecdotal evidence. For example, when General Electric acquired Enron Wind in 2002, revenue at the time was estimated to be several hundred million
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per year. Today, yearly revenue for this unit of General Electric’s sits at close to $3.5 billion per year.
Numerous questions remain unanswered. Will future acquisitions in cleantech be more about the technology, market share, or geographic expansion? Because cleantech is so heterogeneous, M&A drivers and dynamics in each segment will differ enormously. We can, however, note some of the meta-trends that will likely occur on the side of the buyers and sellers.
Looking Forward: Will a Clean Wave carry us home or dump us on the shore?We believe M&A will likely continue on a greater scale in terms of the number of total acquisitions as well as valuations paid. Here, we have identified some of the more general trends which are particularly relevant to cleantech as a whole. We will delve into more detail on a few subcategories later.
figure 11: Number of Cleantech M&A deals 2005-2006 by Cleantech Segment and location of TargetSource:SVB Alliant, 2007
Water andWastewaterTransportation
Recyclingand WasteMaterials
Manufacturing& Industrial
EnergyStorage
EnergyInfrastructure
EnergyGeneration
EnergyEfficiency
Air andEnvironmentAgriculture
10
3743
243
27
13
31
12
57
5
57
South America
Asia/Pacific
Europe
North America
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figure 13: Types of Cleantech M&A deals, 2005-2006Source:SVB Alliant, 2007
figure 12: regional location of Targets, Cleantech M&A, 2005-2006 Source:SVB Alliant, 2007
Take Private 4 (1%)
Minority Stake Transaction 85 (16%)
Merger 6 (1%)
Divestiture 151 (28%)
Aquisition 289(54%)
Asia/Pacific 80(15%)
North America 216(40%) Europe 229
(43%)
South America 9(2%)
Africa 1(0%)
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acquirer demand vs. supply
Ali E. Iz, General Electric said, “After we have formulated our business strategy, we look at where we have gaps and then try to fill those either organically with new technology and product development, or in-organically with acquisitions. It depends whether we think we can do it better, faster, cheaper internally or whether we have to go and acquire someone.”
Speaking to several key individuals from large industrial conglomerates as well as leaders in the venture capital industry, the following generalizations were observed about cleantech acquisitions:
Large industrial conglomerates prefer acquiring companies rather than technologies. Typically these conglomerates are not accustomed to acquiring technologies and incubating them in house as Bruce Jenkyn-Jones of Impax Capital argued. For example, one company stated: “We would rather wait until the company proves the technology and has some revenue and growth, and then acquire it.” (Anonymous) Many industrial conglomerates have immensely different cultures and risk tolerance than entrepreneurial start-ups and therefore do not have the infrastructure in place to nurture a fledgling technology or retain some of the talent that start-ups attract. These buyers generally prefer to acquire companies at or near profitability.
Disparity in valuation expectations. Proven companies are typically more expensive to acquire and it remains unclear whether industrial conglomerates will pay the types of multiples (typically higher than their own) that VCs and their LPs expect from their investments. Because many of the prime acquisition targets are likely to
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be venture-backed and have significant amounts of invested capital, shareholders are likely to seek and expect lofty valuations that are in line with technology industry valuations. It is not yet clear whether the larger, more industrialized acquirers would be willing to pay up. We believe end-market demand and size will play the dominant role in determining the answer to this question.
Exceptions exist for both stage and value. Despite a clear preference for more mature target companies, several companies also mentioned that there are always exceptions. Potential acquisition targets are also assessed in terms of what value the larger company can bring, and how well their products might fit together. For example one company representative stated “The idea is a technology that is proven to some scale with some commercial success but that has some hurdles we are uniquely suited to help them overcome. So then our combination of cash and know-how will be brought to bear in part or in its entirety.” (Anonymous)
With acquirers setting certain criteria for what they would buy, will there be enough of the right type of cleantech companies to fit these parameters? Will we see more large companies making more exceptions to their stated policies as competition heats up?
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Mergers and RollupsFor mergers and acquisitions by existing cleantech companies, some different dynamics emerge:
Gain market share. As more cleantech companies emerge and begin competing with each other, mergers may be made to gain market share in new and fast growing markets as well as to increase barriers to entry. Existing cleantech companies may want to vertically integrate in order to secure intellectual property (IP), access strategic resources and reduce costs.
Vertical specialization. In general, we suspect several cleantech segments will begin to vertically combine, allowing companies to provide integrated solutions to customers. For example, a company could provide a complete energy efficiency solution for building managers, including sensors, high efficiency heating, ventilation, air conditioning and lighting equipment and even insulation products.
Capital constraints. The question remains as to whether cleantech companies will have sufficient capital to both invest in the business and make acquisitions. Due to the significant capital requirements of several cleantech segments, many cleantech companies will find it difficult to secure enough cash to make acquisitions.
Beyond Acquisitions: Other Cleantech Strategies for Large FirmsEven if many of the larger conglomerates are not jumping to acquire cleantech companies, their involvement and enthusiasm is significant and we believe indicative of a future wave of acquisitions. Below are a few of the ways large firms are beginning to get their feet wet and gain exposure to clean technologies.
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Internal research and development and creation of new business units to serve cleantech areas.
Rebranding existing products and services for cleantech applications. Similar to how GE’s Ecomagination renamed many existing technologies and initiatives.
Establishing joint ventures and partnerships with cleantech companies to gain exposure to their technologies and markets.
Dedicating corporate venture funds to cleantech investing in order to get a window on the technologies as well as to make financial returns.
Spinning-out existing technologies to other companies, start-ups or otherwise, while still getting access to technology through licensing agreements.
Expanding corporate environmental health, safety and sustainability programs and expertise to cleantech applications.
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Cleantech Segments Ripe for M&ADue to its broad applications and end markets, cleantech exit activity will differ greatly in terms of the buyers, sellers, timing and valuation. Some technologies are more advanced and could be ripe for consolidation as we’ve started to see with wind and solar; others are in their infancy such as bio-based materials, marine energy technologies, superconduc-tors and waste-reducing plasma technologies.
We expect there will be a wave of M&A exits beginning in 2008 and accelerating 2009. In what follows, we profile some of the exit dynamics in four cleantech segments: solar energy; efficiency technologies (sensors, monitoring and control devices); energy storage; and water technologies. These four segments were selected based on interviews with VCs, market dynamics, an analysis of where the venture dollars have been placed in the last three to five years, and the relative maturity and growth rate of the different segments. Each of these segments could easily fill an entire paper. Here are some high-level thoughts on the technologies, markets and M&A dynamics of each.
solar energy heats up
Solar is one of the fastest growing energy tech-nologies in the global economy and in the cleantech universe. In 2005, the size of the market nearly doubled year over year to $7.6 billion and has seen an annualized growth rate of 36 percent over the last six years, according to the Solar Energy Industry Association. However, to put this in some perspective, solar energy accounted for less than 0.1 percent of electricity generated globally in 2005 (Figure 14). At present, market demand for solar cells significantly outstrips supply. Recognizing this market dynamic, entrepreneurs and venture capitalists have seized the opportunity to address this gap and driven tremendous investment in the solar supply chain and technological innovation. In addition, numerous successful equity exits for VC investors in solar companies have taken place in 2005 and 2006 which has broadened the potential buyer universe. We believe an increased need to stay ahead of the technology curve will drive a healthy M&A market for solar. Therefore, of all cleantech segments, we expect solar to see the most M&A activity in the near term.
figure 14: Sources of Energy in 2004Source:IEA, 2006
Crude Oil 38%
Biomass 4%Geothermal 1%
Hydro 2%Waste/Combustion 2%
Coal 24%
Natural Gas 21%
Nuclear 6%
Solar 0.1%Wind 2%
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The single biggest factor explaining the rapid growth of the solar industry to date has been extensive governmental support in the form of subsidies; it is also the biggest risk facing the segment. From a regional and historical perspective, German and Japanese governments have led the world in subsidies for solar production and installation. As a result, these countries account for more than 40 percent and 35 percent, respectively, of cumulative photovoltaic (PV)-system installations by capacity, while the U.S. accounts for 12 percent and China for just 2 percent. Despite recent cut backs in Japan’s subsidies, the market continues to grow there. China is increasing its share of solar cell manufacturing, and significant growth in installations is expected over the next decade as the 2005 Renewable Energy Law is implemented. This law set targets that 20 percent of primary energy in China be produced from renewable sources by 2020. However, insiders think it is unlikely that China will adopt solar technologies quickly unless there is a major cost reduction versus coal-base load generation.
Solar is still the most expensive technology to produce, per watt, as can be seen in analysis performed in Figure 16. However, these cost comparisons can be misleading, as once installed, solar does not face fuel costs, and maintenance and transmission costs are limited. On-grid solar power competes with grid prices not generator costs. Analyst Michael Rogol, formerly of CLSA Asia-Pacific Markets, explains that grid prices include generating costs, transmission and distribution costs, taxes, profits and other fees.vi The economics of solar are therefore closely tied to geographically determined grid price per kilowatt hour. To gain a clear understanding of how solar compares in terms of price per kilowatt hour, one would have to cut into grid prices in different regions, comparing costs today, in five years, and in ten years. Off-grid applications, such as remote area power supply, are more able to compete directly with alternative sources of energy without the need for subsidies.
figure 15: New PV Installation and Growth rate, 2001-2005Source:SolarBuzz, 2006
1600
1400
1200
1000
800
600
400
200
MW
90%
80%
70%
60%
50%
40%
30%
20%
10%
1460
1086
598
427345
33%
24%
40%
82%
34%
2001 2002 2003 2004 2005
New PV InstallationGrowth Rate
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The payback period for end-users of an installed solar system will depend on factors such as: the initial cost of installation (which is also on the decline), grid-electricity prices, access to governmental incentives and subsidies, the efficiency of the system, the life span of the installation and, fundamentally, how much solar radiation (sunlight hours and intensity) is in that location.
Aside from direct governmental support, there are several other factors that are stimulating the solar market:
Conventional fossil fuel prices are increasing, and as a result electricity prices are becoming more volatile. Solar typically competes with peak energy production as supplied by gas-fired turbines.
Costs of solar technologies continue to decline and are becoming more competitive as new technological innovations are being incorporated.
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Concerns about climate change are causing many governments to strengthen emissions regulations and efficiency standards, resulting in an increase in the price of conventional fossil-fuel energy sources.
A Brief Solar Energy Technology OverviewMost of the growth in the solar energy market has come from electricity producing cells and modules using photovoltaic technologies. There are several types of solar technologies which range in their level of maturity (Figure 17). By far the largest market share is held by crystalline silicon solar technologies, accounting for 93 percent in 2005. Solar concentrators (solar panels are equipped with mirrors to focus the sun rays on a small photovoltaic cell) and solar thermal electric power plants (that generate electricity by converting solar energy to heat to drive a small thermal power plant) have also increased in popularity for large scale installations due to their efficiency in silicon use. Next generation solar technologies that could
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figure 16: Comparison of Power Generation Costs, 2005 Source:International Energy Agency andDAIWA, 2006
40
35
30
25
20
15
10
5
OilNuclearGasGeothermalOilWindBiomassSolar
25-40
1-15
4-106-8
5-75-7 2-7 2-62-4
(U.S.¢/KWh)
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fundamentally change the cost structure of the solar industry include: thin-film technology (including amorphous silicon [a-Si], cadmium telluride [CdTe], copper indium selenide [CIS], ribbon crystalline silicon [c-Si] and copper indium gallium diselenide [CIGS]), organic photovoltaics, and dye-sensitized cells using nanotechnology.
In addition, a range of technology components are required to support any active solar energy system. Such components include packaging, electrical connections, inverters, wiring and mounting, and batteries (where needed, most solar systems are now connected to the grid). The solar industry also includes services for the sale, design, installation, maintenance, financing, permitting, and accessing the various government incentives aimed to support solar power use.
Given the dominance of crystalline silicon technology today, solar companies’ profitability and growth depend on raw silicon material prices. There has been
a shortage of polysilicon for the industry since early 2004, when the industry experienced an increase in demand. This shortage is not so much one of the actual raw material, rather of polysilicon refining capacity. The shortage has had a strong impact on the market:
Constrained the supply of cells;
Increased volatility and prices to end consumers;
Prompted some cell producers to lock-in forward contracts for 10+ years for silicon supply; and
Spurred innovations in the development of low or no silicon solar cells.
The common belief is that the polysilicon shortage is expected to ease in late 2008, primarily due to new manufacturing capacity coming online. This capacity expansion is expected to result primarily from the major existing polysilicon manufacturers, but also from new upstarts that have plans to
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figure 17: Technology and Market Maturity of Solar Energy Cell TechnologiesSource:SVB Alliant,2007
MARKET MATURITY
TEC
HN
OLO
GY
MA
TUR
ITY
Electrochemical
Solar Concentrators/Large-Scale Thermal
Thin-film PVRibbon Crystalline Si PV
Single-Crystalline Si PV
Multi-Crystalline Si PV
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enter the market. However, people close to the polysilicon manufacturers suspect that an imminent easing of the supply shortage is illusory, since some technical problems have been experienced in planned production expansion.
Investment Trends and M&A Forecasts for Solar Energy CompaniesSolar energy technologies have received consider-able venture funding in the past three to five years, especially those technologies that aim to make solar energy cheaper, safer, faster to produce and easier to install (Figure 18).
The popularity of solar has led to some high valuations in both private and public markets. Many see this as unsustainable and expect price corrections even though growth in the market is expected to continue. Some reshuffling within the industry is likely to occur, prompted by the drive for cost reductions, a possible winding back of government subsidies and technological advances.
Possibly a more important driver will result from the large amount of investment that has been poured into the sector over recent years. We anticipate there may be a change in landscape through the availability and acquisition of bankrupt companies, namely manufacturing facilities which are building plants expecting polysilicon to come online. If new supplies of polysilicon don’t come in time, those assets may be bought up for pennies on the dollar.
“There has been so much focus on technology innovation for cells and modules, but really it is the total installed system cost and innovations in business models that will really shape the market.”—LisaFrantzis,Director,RenewableandDistributedEnergy,Navigant Consulting
Figure 20 shows of the major supply chain stages in the creation of crystalline-silicon solar cells today. The arrows indicate how companies in the supply chain could shift due to M&A activity (see Appendix 4 for a list of solar companies).
figure 18: Solar Energy VC, 2005-2006Source:Cleantech GroupandSVB Alliant,2007
Startup/Seed
Early Stage
Expansion
300
250
200
150
100
50
Thermal/Hot Water
Installers/IntegratorsConcentratorsThin film
CrystallineSiCells/Modules
Nano & NewPVMaterials
11 11
4
6
1 2
8
4
5
19
4
11
22
35
17
Note:Numbersattopofcolumnsindicatethenumberofdealsforeachsegmentandstage.Columnheightindicatestotalamountinvested.
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Upstream and Midstream vertically integrated companies will grow in dominance and integrate downstream
Midstream Producers will integrate upstream and downstream
Partially integrated companies will integrate upstream to secure silicon supply
Raw Material and Ingot producers will focus more on upstream
Horizontal Integration of specialist companies within each step of the supply chain
Upstream Midstream Downstream
RawMaterial Ingots/Wafers Cells Modules
SystemIntegraters & Installation
Balance of System
Components
CustomerUse
figure 20: The Crystalline Silicon Supply Chain: Prospective Changes to the Corporate landscape Source:SVB Alliant,2007
figure 19: Solar Energy M&A and IPOs, 2005-2006Source:SVB Alliant,2007
5
10
15
20
10
20
5
13
1 1 1
3
1
3
Thermal/Hot WaterConcentrator
ThinFilm
Nano andNew MaterialsComponents
Installer/Integrator
Crystalline SiCells/Modules
12
M & A: Total 43
IPOs: Total 18
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We expect the solar M&A market to develop in the several ways.
Upstream Pressure: Midstream companies, such as wafer and cell manufacturers, will seek to secure their silicon supplies, either by more aggressive forward contracts or outright purchasing of upstream companies, such as raw material providers. Weaker and newer upstream players are already beginning to exit from the capital-intensive upstream business, taking advantage of the current conditions. Existing raw material producers will ramp up production.
Downstream Consolidation: We expect consolidation to occur around the currently fragmented group of downstream system integrators and installers of solar cells. The shortage of polysilicon has squeezed many of the smaller players’ ability to access product, so larger consolidated groups might join forces to leverage more purchasing power. New entrants may try to roll-up some of the existing industry, or cell and module producers who have recently gone public may vertically integrate to access larger downstream markets.
Technology Hedging: Some horizontal inte-gration could also occur within the industry as midstream companies, especially larger crystalline silicon cell and module producers, seek to hedge their exposure to new lower-cost technologies such as thin-films. They will do this either by joint ventures and partnerships or smaller acquisitions. We have already seen some technology plays. For example, Shell Solar sold its crystalline silicon business to SolarWorld, instead focusing on its thin-film technologies.
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“Scale is important in the solar cell industry, so you may have fewer players with larger production capacities.”—AliE.Iz,GE Infrastructure
recent Headline Acquisition: SunPowerbuys Powerlight
Downstream systems integrator PowerLight wasboughtinNovember2006bypubliccellandpanelmaker SunPower for $332.5 million - a sign ofthecomingwaveofM&A insolarand increasedglobalcompetition.SunPower’sCEOTomWernersaid“Together, SunPower and PowerLight aim to accelerate the reduction of solar power costs to compete with retail electric rates without incentives.”The real test for thenewlymergedcompanywillcomeinlate2008,whenthepolysiliconshortagewilleithereaseorremaintight.vii
Technology Positioning:Q-Cellsinvestsinnextgenerationtechnologies
Following their successful IPO in 2005, Q-CellshasinvestedinthreenextgenerationPVtechnology companies: CSG Solar (producingthin silicon film deposited on glass); Solaria(developing low-silicon concentration PVtechnology);andEverQ(developingstringribbontechnologyforwaferproduction)whichisajointventurewithRECandEvergreen Solar. viii
We expect that no single technology will claim a winner-takes-all position, rather that different solar technologies will be employed for different applications. The most successful companies will service these different needs rather than focus on a single technology. Thus as markets become more sophisticated, companies may begin to segment into categories by type of customers, such as residential, commercial buildings and utility scale. Rodrigo Prudencio of Nth Power notes that, “As an industry, solar will start to specialize in pieces of the value chain,” which would break up some of the vertically integrated manufacturers. Barring a major exogenous shock, we believe that the solar energy industry’s remarkable growth will continue.
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efficiency technologies
Sensors, monitoring and control, or what we refer to as efficiency technologies, are becoming ubiquitous, finding their way into almost all industries as well as most commercial and residential buildings. Advances in wireless connectivity and software have further extended existing sensor applications and enabled new ones from improved industrial process controls, to buildings, transportation and logistics. Companies offering sensing, monitoring and control technologies allow users to more precisely designate resources and respond to information in real time, often with dramatic efficiency gains that result in meaningful cost savings.
Many efficiency technologies can be classified as cleantech due to their applications and resulting efficiencies. For example, process controls can help to reduce the use of materials, energy and/or water in production facilities, processes, buildings and appliances. Sensors can help reduce accidents, identify leaks, detect contaminants and often dramatically reduce waste. Combined with wireless mesh networks and overlaid with software, sensors and control systems can now be installed over wide areas.
Recent advances in sensors, monitoring and control systems have been enabled by innovations from other technology sectors, including optics, telecommunications, machine-to-machine monitoring, micro-electromechanical systems (MEMs) and automation networks, wireless mesh networking and artificial intelligence. Advances in battery design for these devices have also made many new applications possible. For example, self-powered sensors that harvest minute amounts of energy from their surrounding environments
eliminate the need for frequent battery changes and further facilitate autonomous sensor networks.
Efficiency technologies can be found in many industries. The three that have direct cleantech applications are:
Industrial Process Monitoring and Control Technologies
Environmental Controls (i.e. indoor climate control)
Transportation and Logistics Management
Some companies offer solutions that cross these three applications, examples in each category are given in Appendix 5.
1. Industrial Process Monitoring and Control concerns the augmentation of product integrity, manufacturing efficiency and plant safety. Companies under pressure to increase the efficiency of their materials and energy use, lower their waste and emissions and improve process control have begun incorporating sensors, monitors and controls to clean up their processes. The main industries using these devices are industrial processing and manufacturing industries (such as for chemicals, food and beverages, and paper products), utilities, and resource extraction. Systems integration has been a driving force in process control technology, with particular emphasis on linking sensors, actuators and other field instrumentation on the process plant floor.
1.
2.
3.
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Two recent innovations in the industrial process and control segment are:
The use of MEMs to perform electromechanical functions such as sensing, switching and actuating.
The development of biosensors, which are chemical sensors with a biological sensing element with applications in food processing, bioprocess control, and pharmaceutical development and manufacturing.
2. The Environmental Control market is made up of technologies used to monitor commercial and residential buildings, and to control major appliances. For example, the sensors used for indoor environmental control in heating, ventilation and air conditioning (HVAC) and lighting systems include thermostats, motor protectors and computerized energy controls. The growth of sensor, monitoring and control technologies in this segment is being driven by demand for making buildings of all types more energy efficient as well as a growing awareness of indoor air quality and its link to health.
The environmental control segment has been transformed in recent years by advances in web-based communications and various software applications. Large integrated systems are being installed in commercial, residential and hotel buildings to reduce energy costs and monitor and control HVAC and other safety systems. For example, research firm Frost and Sullivan predicts that by 2008, half the sensors in HVAC systems will be wireless. Wirelessly networked sensors are gaining popularity due to reduced time and expense for installation of new sensor devices and improvements in the ability to network pre-existing legacy sensors.
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3. The Transportation and Logistics Industry worldwide is facing pressure to become more technologically advanced, operate more efficiently, reduce costs, reduce cycle times in supply chains and reduce its environmental impact. With the need to transport goods across long distances, supply chains need to be monitored, organized and controlled and by doing so, environmental performance can often be improved. Aside from the mega-trends of offshoring and globalization, a major shift in the transport and logistics industry is towards the creation of more dynamic supply networks that use adaptive planning, a distributed control of supply network operations.
Technology that allows products, cases, pallets, trucks or any other moving part of a supply chain to connect to a network and be monitored or communicated with, offers many efficiency advantages for supply chain managers including the ability to track inventory and thereby better plan resource usage. As a consequence, they are also better able to track emissions and reduce waste in their systems. Radio frequency identification (RFID) sensors have already had a significant impact on the industry. The next big challenge appears to be reducing costs and reaching agreement over standards and processes for managing the large amounts of complex information that is generated. M&A Potential: Sensors, Monitoring and Control Technologies Companies providing efficiency technologies range from those that provide the basic sensor technologies to those that offer a more fully integrated solution. Start-ups and mid-size companies tend to serve specialist and new market niches, or focus on technology. Large global conglomerates, which are likely buyers in this space, include ABB,
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Danaher, Emerson Electric, General Electric, Honeywell, Invensys, Johnson Controls, Phillips, Rockwell Automation, Schneider Electric, Siemens and United Technologies.
Recognizing some of the broad trends and large potential markets, venture capital investing into sensors, monitoring and control technology companies has been robust (Figure 21). The main exit for these companies is most likely to be through a trade-sale. We have already seen some acquisition activity by the large conglomerates and industrial manufacturing companies as a relatively low cost, low risk way to expand and diversify their product lines (Figure 22). However, many large companies are also developing in-house capabilities and technologies in this area which will compete with the smaller firms directly.
For both large and small companies in this industry, competition is around gaining market share swiftly, and setting standards and protocols in the process. According to William Lese of Braemar Energy Ventures, companies in the energy demand-response market, which is fundamentally enabled by sensors, intelligent metering and advanced control systems, need to scale up very quickly so they can lock in customers and, by doing so, become the standard in the industry. To scale up quickly, they will need to access a large pool of capital. If they can access the cash, it could accelerate acquisitions and joint ventures in the space. As the sensors, monitoring and control industry grows and becomes more sophisticated, we expect it to segment further along market-lines. M&A will also be driven by the need to deliver
platform technologies to address specific vertical applications, such as HVAC and trucking.
SomeofthelargercompaniessuchasHoneywellarelikelytodevelopaportfolioapproachtothedifferentmarkets,andleveragetheirskillinonemarketacrosstoanother.Forexample,in2005Honeywell acquired Tridium, a provider of asoftware framework that integrates, managesand controls diverse systems and devices,such as sensors, in real time via the Internet.Tridium’sprimarytractionwaswithinthebuildingautomation and energy services markets buttheyhadalreadybegungainingmomentumfortheir technology inalternativemarketssuchasindustrial automation, convergence retail andgovernment defense. Honeywell recognizedthe broad applicability ofTridium’s technologyacrossnumerousbusinessunits.
Technology companies across the sensors, monitoring and controls space will be acquired to enhance the competitive advantage of systems integrators. However, one question facing the M&A market in this sector remains unanswered. Will industrial acquirers, who have not tradition-ally paid high multiples in their acquisitions, pay up for these high growth and sometimes niche businesses?
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figure 22: Efficiency Technology, IPO and M&A Transactions, 2005-2006Source:SVBAlliant,2007
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1
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25
20
15
10
5
30
Industrial Process Monitoringand Control
Environmental and Energy Control
M & A: Total 50
IPOs: Total 1
figure 21: Efficiency Technology VC Investments, 2003-2006Source:Cleantech GroupandSVB Alliant, 2007
300
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150
100
50
Transportationand Logistics
Environmental andEnergy Control
Industrial Process Monitoring and Control
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0 44
Note:Numbersattopofcolumnsindicatethenumberofdealsforeachsegmentandstage.Columnheightindicatestotalamountinvested.
(inU.S.Millions)
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energy storage technologies: cheaper, faster, longer, cleaner
The proliferation of battery powered electronic and biomedical devices, hybrid electric vehicles, and advanced wireless sensors have fueled the need for innovation in battery technologies. In addition, the increase in investment in renewable energy generation technologies, such as solar and wind, which are intermittent by nature, and distributed energy systems more broadly, has opened up new markets and needs for back-up power generation and energy storage technologies worldwide. In many of these markets, the need for energy storage is one of the key constraining factors holding back the widespread adoption and use of clean technologies. For example, one of the major limitations to electric-powered transportation has been the size and weight of the batteries needed to store energy for free-roaming vehicles.
Aside from its enabling role for other cleantech applications, there is also a need to develop cleaner energy storage technologies. Several environmental and safety problems have prompted the search for denser, lighter, cleaner, longer-lasting and safer battery and energy storage technology. The August 2006 recall of lithium-ion (Li-ion) batteries by the U.S. Consumer Protection Commission due to several overheating incidents has brought into sharp focus the potential consumer hazards of some batteries. Concerns over the life-cycle environmental impacts of batteries are also stacking up, given the total amount of batteries and toxic materials now ending up in landfills worldwide. The partial ban on cadmium by the European Commission in December 2004 affects NiCd batteries in particular, and is indicative of a broader worldwide regulatory trend to phase out toxic metals from batteries.
As such, cleaner energy storage and battery technologies are receiving increased attention by investors and companies. One investor described energy storage as, “not necessarily an easy space, however it’s potentially very interesting and lucrative.” (Anonymous)
Technology OverviewEnergy storage technologies are used in a wide variety of industries and products, from portable to stationary applications, as seen in Figure 23.
Recent advances in energy storage technologies for both portable and stationary applications are striving to be cleaner, safer, faster, more durable, cheaper and higher performance (Figure 24). Of the energy storage technologies shown in Figure 23, some are already commercially available and others further away but in an active R&D and prototyping phase. Appendix 6 lists companies currently active in the energy storage market.
Trends and DriversThe three energy storage application markets that show the most potential for significant growth in the near to midterm are high energy and power density batteries for vehicles (e.g. hybrid electric vehicles), energy storage for consumer and portable electronics, and energy storage technologies for renewable and distributed energy systems.
1. Energy Storage for Fuel-Efficient and Hybrid VehiclesEnergy storage technologies are a crucial part of the rapidly growing market for fuel-efficient vehicles, including gasoline-electric hybrids, diesel-electric hybrids, all electric and fuel cell vehicles. Cleaner, more powerful and efficient battery technologies can also improve the environmental profile of
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figure 23: Overview of Portable and Stationary Energy Storage Technology ApplicationsSource:SVB Alliant, 2007
existing gasoline based vehicles and newer flex-fuel (biofuel), diesel and natural gas powered vehicles. Indeed, many believe that the world is on the cusp of a major transition towards hybrid electric vehicles. Analysts at AllianceBernstein project that within the next decade, more than 80 percent of all new cars and light trucks sold worldwide will be hybrid (electric and gasoline or diesel).ix Two forces driving this trend are fuel-efficiency
standards stemming from concern over energy security and climate change and rapidly growing consumer demand.
Of the components needed to make a hybrid vehicle, the energy storage system (battery pack, control unit and cooling system) is the most expensive. It is estimated to be anywhere from 30 to 50 percent of the total cost of the hybrid system.
Portable Applications
Transportation & Vehicles
Carbatteries
Hybridengines
Buses,trucks,military,scooters,Segways,trolleys,boats,recreational(e.g.golfcarts,buggies,etc.)
Consumer Products
Lighting
Entertainment/toys
Photographicequipment
Toolsandappliances
Watches
Calculators
Medicalequipment
Divingequipment
Computers and Communications
Personalcommunicationdevices(e.g.cellandcordlessphones,portablecomputers,PDAs,etc)
Industrial
Powertools
Industrialinstruments
Cranes
Elevators
Portablepowergenerators
Medicaldevices
Professionalphotographic
Lawncareequipment,etc
Stationary Applications
renewable Energy Generation
Storageforoff-gridsolar,wind,tidalandbiofuel/biomassenergygeneration
Back-up Power
Uninterruptiblepowersupplies(UPS)forhospitals,Remoteweatherstations,Manufacturing,Servers,etc.
Military Applications
Powersupplyforoff-gridneeds
Aerospace
distributed Energy Systems
Largeandsmallsystems
Electric Utilities
Combinedheatandpower
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figure 24: Overview of Energy Storage TechnologiesSource:SVB Alliant, 2007
Primary Batteries (Single Use)
Current Technologies
AlkalineManganese
Lithium
NickelZinc
SilverOxide
More Emerging Technologies
Zinc-air
Super-premiumAlkaline
Zinc-carbonChloride
Secondary Batteries (rechargeable)
Current Technologies
LeadAcid
Lithium-Ion/Polymer
NickelCadmium
NickelMetalHydride
NickelZinc
AlkalineManganese
More Emerging Technologies
NextGenerationLi-Ion
Valve-RegulatedLeadAcid
Silicone
EnzymeCatalyzed
Nano-rechargeableAluminum
FlowBatteries(Redox)
°Cerium-zinc
°Lead-flow
°PolysulfideBromide
°UraniumRedox
°VanadiumRedoxflow
fuel Cells
Current fuel Cell Technologies
Alkaline
MoltenCarbonate
PhosphoricAcid
PolymerElectrolyteMembrane(PEM)
°DirectMethanol
°DirectEthanol
More Emerging fuel Cell technologies
DirectBorohydride(typeofAlkaline)
DirectCarbon
FormicAcid
Microbial
MetalHydride
ProtonicCeramic
Redox(Flow)FuelCell
ReformedMethanol
Regenerative(closedloop)
Ultra-Capacitors
CarbonAerogel
CarbonNanotubes
PorousElectrodeMaterials
OtherMaterials
flywheels
Advances in:
Materials(e.g.carboncompositematerials,Kevlaretc)
Bearings(e.g.magnetic)
Rotors
Controls
VacuumEnclosures
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Thus energy storage technologies have become an important concern within vehicle manufacturers as well as government labs, universities and VC-backed entrepreneurial companies.
The new generation of cleaner energy storage technologies serving the efficient-vehicle market currently include rechargeable batteries nickel metal hydride (NiMH) and, to a lesser extent, Li-ion and fuel cells of different kinds. Most hybrid vehicles today use NiMH battery technology. However, hybrid vehicles are optimized to use only 20 to 25 percent of the energy stored by the NiMH battery in order to extend the life of those batteries out 10 to 15 years for the life of the vehicle. This means that more battery-units per vehicle are needed. R&D efforts have focused on increasing the power density of the NiMH batteries while reducing weight and costs. Going forward, alternative batteries with higher densities have been sought. In particular, advanced lithium batteries are expected to lower costs, weight and space requirements further and improve batteries’ durability, energy and power density. Fuel cell technology development for vehicles is generally considered to be further off, primarily due to concerns over how to cost effectively and safely supply hydrogen fuel.
2. Energy Storage for Portable Electronics and ComputersFor all battery technologies, small and mid-sized manufacturers face tremendous competition from large multinational corporations. There has already been substantial consolidation, especially in the primary battery market. Briggs & Stratton, Energizer, and Gillette’s Duracell subsidiary combined controlled almost 40 percent of the portable power supply market in 2004.x With minimal product differentiation, price is a key competitive factor.
The large companies have achieved economies of scale, control over distribution channels, a high degree of brand recognition and manufacturing capabilities resulting in high barriers to entry and slim margins.
Rechargeable batteries currently account for only 10 percent by unit volume of all batteries sold (90 percent going to single use disposable batteries). However, rechargeable batteries now account for 63 percent of industry revenue.xi In response to this market structure and high revenue for rechargeable batteries, entrepreneurial companies with innovative battery technologies have tended to favor niche and emerging markets such as medical devices, power tools, micro batteries for RFIDs and thin-film paper based batteries for smart cards and the like.
“Industrial customers for batteries are more likely to have specialized needs, such as micro batteries for medical devices or monitoring and sensing markets,” explainsWilliamLeseofBraemar Energy Ventures.
Nonetheless, progress rolling out new tech-nologies in the major markets has been slow. Commercializing new battery technologies is capital intensive, requiring new manufacturing plants or equipment and a long-term commitment to funding R&D for a particular technology. New entrants competing in these markets will have to exhibit greater performance improvements over current technologies, at the same or lower price. Even if they achieve this, they still have the problem of brand building, distribution and adoption. Smaller players will either require a generous supply of capital or may be at the mercy of buyers when forced to sell instead of continuing to fund.
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Micro-fuel cells using methanol are considered one of the most promising technologies to replace Li-ion batteries for portable computers, cell phones and other mobile electronics. However, the technology faces significant hurdles before it is ready for commercialization. Some of these hurdles include concerns over the current inability for cells to deliver short bursts of peak power, fuel distribution, size, heat dissipation, the life of a cell and safety concerns. Nonetheless, the promise is that these cells can potentially provide 10 times the energy storage capacity of a lithium battery, have quick recharge times and a low environmental profile. Several semiconductor and consumer electronics companies (including Hitachi, Intel, LG, NEC, Panasonic, Sanyo, Sony and Toshiba) are actively researching micro-fuel cells and some are developing joint ventures with start-ups in the space. As can be seen in Figure 25, companies have received considerable VC backing for micro-fuel cell development.
3. Energy Storage for Distributed and Renewable Energy The significant growth in renewable energy installations such as wind and solar energy generation, has prompted the need for cheaper and cleaner energy storage technologies. Energy storage is needed to ensure a reliable energy supply for industry and residents accessing renewable energy. While many energy customers are buying and installing renewable energy in part because of its reduced environmental footprint, the relative cleanliness of the energy storage technology has become important. For off-grid applications such as back-up and remote power access or military uses, the added benefits of a clean and efficient energy storage system include reduced noise, emissions and fuel costs.
The types of larger stationary energy storage technologies gaining ground for such applications are fuel cells, flywheels and other larger scale battery technologies (such as flow batteries).
VC Investment in Energy Storage TechnologiesVenture investments in the energy storage space offer some insight into which technologies and applications might experience significant growth. Companies with advances in rechargeable batteries dominated – from Li-Ion, Zinc-Air, NiMH, NiZn and improvements in lead-acid batteries. Other popular areas for VC investing are in expansion stage fuel cell companies, and for less amounts in total, micro-fuel cells.
M&A Projections for Energy Storage
We believe few private companies in the sector will be able to compete as standalone entities. However, significant investment into these companies has and will continue to lead to smaller, cheaper, more powerful, efficient and cleaner energy storage technologies which we anticipate will be attractive targets for acquisition by large incumbents wanting to hedge their technology risk, leverage their existing infrastructure and access new markets.
Fuel cell companies lead the sector from a total investment standpoint. Despite investments to date, there is still significant development required to commercialize a number of these technologies. When coupled with the fact that the technology has not developed as hoped, in part due to issues around access to fuel (primarily hydrogen), we anticipate investor fatigue will lead to some company shut downs or distressed sales for intellectual property.
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figure 26: Energy Storage M&A and IPOs, 2005-2006Source:SVB Alliant, 2007
figure 25: Energy Storage VC Investments, 2003-2006Source:Cleantech Group andSVB Alliant,2007
450
400
350
300
250
200
150
100
50
2
23
21
0
5
13
Thin-filmBatteries
2 2 1
Chargers andCapacitators
1 1
5
Flywheels
7
22
40
FuelCells
3
11
20
Micro-Fuel Cells
Rechargeable Batteries
Startup/Seed
Early Stage
Expansion
Note:Numbersattopofcolumnsindicatethenumberofdealsforeachsegmentandstage.Columnheightindicatestotalamountinvested.
10
8
6
4
2
7
1 1
8
Fuel Cells –PEM
Fuel Cells –Other
AlkalineBateries
Lithium-PolymerBatteries
Nickel ZincBatteries
Lithium-IonBatteries
3
1 1
M & A: Total 13
IPOs: Total 9
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Several large OEMs have internal development efforts for more efficient, longer lasting batteries for their portable consumer products. Some of these OEMs are supplementing their internal efforts by partnering with the private sector. We believe this can be a good strategy for private battery/micro-fuel cell companies to achieve faster market adoption rates. The cautionary tale and caveat here is whether or not these private companies protect their intellectual property (IP) in the process. These partnerships and joint development efforts are typical as a first step in an M&A process which leads us to the conclusion that large OEM players may be likely acquirers of battery and micro-fuel cell companies.
In addition to the above trends, we believe the energy storage market may be ripe for roll-ups in the coming years. The economies of scale and scope across different geographic regions and with differing technologies would help smaller players to gain market share and more quickly become a meaningful player in the space.
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water technologies
The water industry has in the last ten years undergone large-scale privatizations and a period of consolidation. It is also facing pressure to become more efficient, cleaner, more affordable and reliable.
Water Supply and DemandIndustrial development has put increased pressure on the water supply by driving the need for more water per capita as well as producing more contaminants that often end up in the water system. Regulations worldwide are increasing the stringency of standards for water and wastewater quality. Technological breakthroughs have focused on improving information about water quality and use, filtration technologies, water and wastewater treatment devices, and water reuse technologies and processes. Other trends worth noting are the matching of quality of water to its intended use (e.g. clean water for drinking and grey water for gardens or toilets), increasing demand-side efficiency measures such as water metering, and a trend towards more decentralized water systems (e.g. residential rain-water collection and onsite water recycling).
The worldwide water market in 2005 was sized at $365 billion, and the U.S. water industry alone generated $107 billion in revenue in 2005.xii The Environmental Protection Agency’s 2006 “Drinking Water Infrastructure Needs Survey and Assessment” called for the investment of $277 billion over 20 years in drinking water infrastructure rehabilitation and upgrade in the U.S. Internationally, the aging, and sometimes outright failing, water infrastructures need a major upgrade. Furthermore, many developing regions do not have a true water infrastructure, adding additional stress
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to their economies and social systems. The largest potential water market based on population is China, where the infrastructure for drinking water and wastewater delivery and treatment is still under construction. The Chinese government plans to spend $120 billion over the next few years to ensure its citizens have access to clean, reliable supplies of drinking water.xiii
Similar to the energy sector, there are large efficiency gains to be had in better controlling water resources and infrastructure.
From a supply point of view, the prospect of a water crisis is possible in several countries due to over-exploitation of groundwater supplies, pollution of existing water sources and crumbling or under-capacity of water distribution infrastructure. Effects on the water system by climate change could also be a wild card in the supply profile of water resources.
Increased demand for water is due to international population growth, rapid urbanization and the migration of populations to some of the most water-stressed regions on the planet. An estimated 1.1 billion people currently live without clean drinking water.xiv Clean water is essential not only for the health of consumers but also to many industries’ processes and operations. In fact, agriculture currently accounts for some 66 percent of fresh water used, followed by industry at 20 percent, households at 10 percent and evaporation from reservoirs is estimated at four percent (Figure 27).
Water is expensive to trade internationally, so localized technological solutions are key. The problems afflicting the global water supply present
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opportunities for those companies able to deliver the necessary technology and solutions to meet those challenges at an affordable price. For example, precision drip irrigation substantially raises the efficiency of water use for agriculture, given that only 40 percent of water applied to crops is actually used by the plants, most of it lost to evaporation.
Water Technology Investment and M&A Trends Watertech is a subsegment of the larger water industry vertical. The watertech subsegment is comprised of technology and equipment manufacturers that serve several markets including utilities providing drinking water and wastewater services, industrial manufacturers, agriculture producers and direct retail consumers (Figure 28). It currently consists of the full range of companies, from large to small, nimble to slow-moving and everything in between. Appendix 7 lists companies active in the water-tech market currently.
Recently, we have seen many non-traditional (non-utility) companies and investors entering into the water business. With the exception of desalinization, these companies tend to focus on technologies rather than facilities or infrastructure. VC investments have recently increased into water technology companies (Figure 29). Investors are focusing on water treatment, filtration and purification of input water; conservation and efficiency technologies such as leak detection analytics; and technologies that treat wastewater and enable its reuse. Investments tend to be directed towards technologies such as advanced filtration and treatment, efficient pumps and valves, analytics and testing, meters and instrumentation, process controls, and wastewater treatment and re-use.
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figure 28: The water Supply ChainSource:Sustainable Asset Management, 2006andSVB Alliant,2007
figure 27: worldwide fresh water UseSource:World Water Council,2006
Industry 20%
Reservoir Evaporation 4%
Agricultural Production 66%
Households 10%
Pre-Treatment ProcessWater
Pipes e.g. Cooling Flushing,Processing,Cleaning
IndustrialTreatments
UntreatedWater
KeyInput
EnablingTechnology
Primary Distribution Distribution Transformation Service
Waste WaterTreatment
Industrial Water Use
Irrigation Crops and Livestock
CropTransport
FoodProcessing
Food Sewers and Treatment
UntreatedWater
Agricultural Water Use
Treatmente.g. membranes
DrinkingWater
Pipes,Bottles
SanitaryInstallations
Health andHygiene
Recycling,Sewers, and Treatment
UntreatedWater
Residential Water Use
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Signature deals in water Technology M&A
VC lore proclaims it is hard to exit a water-tech company. However, this view haschanged recently. The water industry hasexperiencedsomerearrangingofownershipandM&Aactivity.
General Electric purchased Zenon for $690million in March 2006, and Ionics for $656millioninNovember2004.
U.S. FilterpurchasedofMemtecin1997;U.S. Filter was, in turn, purchased by Siemens in2004for$960million.
Industrial chemical giants Dow and Dupontare also increasing their stake in the watertreatmentandfiltrationbusiness.DowrecentlylaunchedDow Water Solutions,a$350millionrevenue business unit created to develop,manufacture,andselltechnologiesaddressingthewatermarket.
3M, Home Depot and ITT Corporation havealso been active water technology companyacquirers.
Later stageprivateequity investorshavealsobeenveryactiveinthewatertechnologyspace.Forexample, theU.S. Aqua Fund invested inCulligan, Nalco, Utilities Inc.,andWater Pik.
Acquisitions by large companies have begun to create the scale needed for these technologies to serve a larger, more international customer base. Many larger conglomerates such as General Electric are combining their expertise in water, energy and industrial building to deliver total infrastructure solutions to lesser-developed countries.
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Going forward, we can expect further M&A activity in the water technology industry. Below are some trends driving this:
Water technologies service large international markets and need large companies for their distribution capabilities and access. This may require the smaller players to seek assistance from larger players via M&A or partnerships.
Applications are found in many markets and not just utilities (i.e. most manufacturing facilities require water). This is likely to expand the buyer base for water technologies.
The conservative nature of the water market, namely utilities, may result in longer times to adopt new technologies. However, the deregulation of water utilities and the rise of public and private partnerships in the provision of water to citizens are rapidly changing the landscape.
Emerging markets and developing countries will continue to have a huge demand for water technologies. Also water stressed regions such as the Middle East are looking internationally for technologies to provide efficiencies and solutions. Companies need local expertise and capability to access these markets and therefore may execute joint partnerships or acquisitions to do so.
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figure 30: water Technology M&A and IPOs, 2005-2006Source:SVB Alliant,2007
figure 29: water Technology VC Investments, 2003-2006Source:Cleantech GroupandSVB Alliant, 2007
30
25
20
15
10
5
Wastewater Treament & Re-useConservation & EfficiencyTreatment, Filtration, Purification
M&A: Total 54
IPOs: Total 326
2
17
1
11
140
120
100
80
60
40
20
Wastewater Treament & Re-useConservation & EfficiencyTreatment, Filtration, Purification
Startup/Seed
Early Stage
Expansion
11
22
21
4
5
13
5
9
2
Note:Numbersattopofcolumnsindicatethenumberofdealsforeachsegmentandstage.Columnheightindicatestotalamountinvested.
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Clearly there is opportunity in cleantech, as many investors and companies have realized, but what about the risk? In addition to company specific risk associated with investing in early stage technology companies, each cleantech segment will have its own subset of risk factors. Below are some of the risks that are somewhat unique to cleantech as a whole but common across the different cleantech segments.
Market Risks One frequently mentioned concern for cleantech is the slow rate of market utilization and adoption. Cleantech companies frequently try to sell their products upstream against competing, deeply entrenched incumbents and behaviors. Gina Domanig of Emerald Technology Ventures gives some caution, “Just because everyone is rushing to invest, doesn’t mean buyers (of the products) are rushing to buy.”
Regulatory Risks Lack of consistent regulation worldwide on environmental externalities has been a persistent problem for cleantech and hence caused investor trepidation. Moreover, various incentive programs to support particular clean technologies have come and gone, and have affected both supply and demand for technologies serving these markets. In the U.S., clean energy industry associations have been lobbying federal and state governments to provide not just regulatory support, but longer-term and reliable regulatory support to enable the sustainable growth of cleantech industries and mitigate regulatory risk. Although most VCs are averse to relying on regulation for the success of their investment, regulation has historically been necessary for energy-related industries to grow in the face of strong incumbents.
Financing Risks Despite the recent influx of capital into cleantech, there is still considerable concern about funding financing gaps since many cleantech companies are substantially more capital intensive than traditional technology companies.
Early Stage: Much of the attention has fallen on energy-related investments, leaving certain segments, such as green building, or crossover segments, such as industrial biotech, to receive minimal incubation or understanding from venture capitalists.
Later Stage: Investors will need to gain additional comfort to facilitate growth. Project finance, private equity and other sources of debt will be needed to bring many of these technologies to scale. Some specialty financing facilities have emerged to serve these needs and government support in the form of loan guarantees, such as those from Export-Import Bank of the U.S., and production tax credits have also fostered growth.
Overvaluation Risks We believe there have been examples of a valuation bubble in certain areas within cleantech due to investor demand for cleantech deals, media coverage and general industry hype. Already there have been some high stock prices and private company valuations, especially in the solar and biofuels markets. Some of the valuations have been adjusted by the market, however many valuations remain extremely high based on their near-term financial projections. The concern is that with a rush of new money into the space, some companies may get funded that perhaps shouldn’t or may be overvalued.
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Risks and Reality Checks of Cleantech Investing
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
Exit Timing RisksOne of the myths often encountered is that there is a longer time to exit for investors in cleantech companies, and that more patient capital might be needed. Most VCs we spoke with indicated their cleantech investments are not expected to have different exit timings than other portfolio companies. In fact, exit timing factors into the selection criteria for cleantech investments. The fact that cleantech applications cross multiple disciplines and multiple sectors may help to diversify some exit timing risks within a given portfolio.
“It’s not all gold out there, and there are a lot of traps. As an investment sector, cleantech provides some great money making opportunities but there are also areas which may be considered overheated and could lead to disappointment.”—HenrikOlsen,Environmental Technologies Fund
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Cleantech is in the limelight now, however there will be a fair amount of volatility as it finds its feet in mainstream investment markets. The ebb and flow of cleantech investing going forward will be determined in part by larger investment cycles in venture and public markets, general economic conditions and, perhaps fundamentally, by any large shifts in government policy. The combined muscle of venture capital, hedge funds and private equity will put pressure on politicians to shift their agendas to environmental issues in both Washington D.C. and the European Union. The current situation implies more volatility and more risk, but also more opportunity.
While not every cleantech segment will experience the same rate of growth, we expect more M&A and growth in the segments which we chose to highlight: solar; water technologies; energy storage; and efficiency technologies. We identified two main avenues for M&A, large conglomerates and industrial companies making cleantech acquisitions to access new markets or complement existing businesses, and existing cleantech companies making consolidation plays. Private equity investors are likely to play an increasingly important role, especially in clean energy markets. We also expect some new entrants, perhaps migrating out of other technology segments, as demand for cleantech products and services increases worldwide. In the near term, the current focus will continue to be on investment, but it will eventually transition to M&A.
With acquirers setting certain criteria for what they would buy, will there be enough of the right type of cleantech companies to fit these parameters? We may see more large companies making more exceptions to their stated policies as competition heats up. For large industrial
companies to maintain their positions, they will need to adopt progressive technologies, perhaps out of their historic comfort zones, in order to maintain their competitive advantage. Often, it may be quicker and more valuable to buy these technologies rather than build them.
Just how long the cleantech moniker can capture the breadth of the technological innovation is less clear. It has the potential to split into larger cleantech categories of energy, water and materials. But does it really matter if it’s called cleantech or not? The value in the term cleantech has come from the attention it has drawn to a vibrant and fast growing economic force. Investment and eventually exit opportunities will abound due to the rampant rise of technologies which more efficiently and cost effectively improve our net impact on the environment.
Concluding Remarks: Cleantech Spreads its Wings
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EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
SVB Alliant is an investment banking firm providing M&A and private capital advisory services to technology and life science companies. SVB Alliant’s expertise spans the technology landscape, with deep subject-matter and execution experience in semiconductors, communications, storage, security, networking, peripherals and capital equipment, the Internet, software and services and life sciences. The firm has offices in Palo Alto, California and Boston, and an affiliate in London. SVB Alliant is a member of global financial services firm SVB Financial Group, with SVB Silicon Valley Bank, SVB Analytics, SVB Capital, SVB Global and SVB Private Client Services. Additional information is available at www.svballiant.com.
About SVB Alliant
If you would like more information on the cleantech industry, contact:
Investment Banking
Melody Jones SVB Alliant 650 330 3076 [email protected]
Commercial Banking
Matt Maloney SVB Silicon Valley Bank 650 320 1104 [email protected]
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Contact Information
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Appendix 1: Examples of Technologies in Each Cleantech Segment
Segment Clean Tecnology Examples
Air & Environment AirpurificationandfiltrationproductsMulti-pollutantcontrols(e.g.sorbents)CatalyticconvertersFueladditivestoreducetoxicemissionsRemediationLeakdetectionPollutionsensorsandgasdetectors
Agriculture Naturalpesticidesandherbicides(e.g.organicfungicides,beneficialinsects,anti-microbial)Naturalfertilizers(e.g.organicfertilizers)Farmefficiencytechnologies(e.g.sensorsandmonitoringofcontrolledinsecticideandfertilizeruse)Micro-irrigationsystems(e.g.dripirrigation)ErosioncontrolCropyieldimprovements
Energy Generation Renewableenergyconversiontechnologies(marine,tidal,solar,wind,biomass)GeothermalheatandelectricitygenerationWastetoenergygenerationCogeneration(combinedheatandpowerunits)Biofueltechnologies(e.g.cellulosicfermentation,ethanol)CleancoaltechnologiesMicro-powergenerators(e.g.vibrationalenergy)Electro-textiles
Energy Infrastructure PowerconservationPowerqualitymonitoringandoutagemanagementPowermonitoringandcontrolIntegratedelectronicsystemsforthemanagementofdistributedpowerDemandresponseandenergymanagementsoftware.Advancedmeteringandsensorsforpower,e.g.usingactiveRFIDnetworks,WiFi,MeshNetworks
Energy Storage FuelcellsforstationaryandmobilestorageMicro-fuelcellsAdvancedrechargeablebatteries(NiMH,Li-Ion,ZincAir,Thin-film,enzymecatalyzedetc)HeatstorageFlywheelsSuperandUltracapacitors
Energy Efficiency Smartmetering,sensorsandcontrolsystemsinapplicationsEnergyefficientappliances(e.g.LEDlighting)ChemicalandelectronicglassEnergyefficientbuildingmaterials(e.g.windows,insulation)Smartandefficientheating,ventilationandairconditioningsystems(HVAC)BuildingautomationandsmartcontrolsAutomatedenergyconservationnetworks
Manufacturing & Industrial ChemicalmanagementservicesSensorsforindustrialcontrolsandautomationAdvancedpackaging(e.g.packingandcontainers)PrecisionmanufacturinginstrumentsandfaultdetectorsProcessintensification
Materials GreenchemistryAdvancedandcompositematerials(e.g.electro-chromicglass,thermoelectricmaterials)Biomaterials(e.g.bio-polymers,catalysts)Nano-materialswithcleantechapplications(e.g.nano-powders,adhesives,gels,coatings,additives)ThermalregulatingfibersandfabricsEnvironmentally-friendlysolvents
Source:The Cleantech Group,2007
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Segment Clean Tecnology Examples
Transportation Differentmodesoftransport(e.g.electricandbatteryvehicles,hybridvehicles)EfficientenginesHybriddrivetechnologiesLightweightstructuresforvehiclesCar-sharingtoolsTemperaturepressuresensorstoimprovetransportationfuelefficiencyLogisticsmanagementsoftwareandRFIDsFleettrackingTrafficcontrolandplanningtechnology
recycling and waste Treatment
RecyclingtechnologiesWasteexchangesandresourcerecoveryBio-mimetictechnologyforadvancemetalsseparationandextractionWastedestruction(plasma,gasification,biological/composting)
water and wastewater HighpuritywaterDesalinationFiltrationandpurificationContaminatedetectionandmonitoringControlsystemsandmeteringforwateruseAdvancedsensorsforwaterpollutantsSeparationofwaterintouse-types(i.e.graywaterseparatedfromdrinkingwater)Wastewaterrecyclingandre-useBiologicalandmechanical(non-chemical)wastewatertreatment
Appendix 1: Examples of Technologies in Each Cleantech Segment (continued)
Source:The Cleantech Group,2007
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
47
Appendix 2: Most Active VCs in Cleantech as of december 31, 20061
firm location2dedicated or General Type
Number of reported Cleantech
Investments
Nth Power West Dedicated VC 20
RockPort Capital Partners East Dedicated VC 19
SAM Sustainable Asset Management Worldwide Dedicated VC 15
Chrysalix Energy Canada Dedicated VC 14
Draper Fisher Jurveston West General VC 12
Perseus LLC East General VC 12
Harris & Harris Group National General VC 11
NGEN Partners, LLC West General VC 11
Altira Group LLC West General VC 10
E2 Venture Fund Worldwide General VC 9
EnerTech Capital East+Canada Dedicated VC 9
OPG Ventures Inc. Canada Dedicated Corp.Venture 9
Technology Partners West General VC 9
CDP Capital - Technology Ventures Canada+France General VC 8
DFJ Element National Dedicated VC 8
Kleiner Perkins Caufield & Byers West General VC 8
NGP Energy Technology Partners East Dedicated PE 8
OnPoint Technologies East Dedicated VC 8
VantagePoint Venture Partners National+Canada General VC 8
BDC Technology Seed Fund Canada General VC 7
Conduit Ventures UK Dedicated VC 7
SJF Ventures East Dedicated VC 7
Sustainable Development Technology Canada Canada Dedicated VC 7
3i Worldwide General VC 6
Braemar Energy Ventures East General VC 6
Fonds de Solidarité FTQ Canada General VC 6
Hydro Quebec Capitech Canada General Corp.Venture 6
Intel Capital Worldwide General Corp.Venture 6
NEA Worldwide General VC 6
Polaris Venture Partners National General VC 6
Siemens Venture Capital Worldwide General Corp.Venture 6
Ventures West Canada General VC 6
Angeleno Group West Dedicated VC 5
Apax Partners Worldwide General PE 5
Asia West LLC Worldwide Dedicated VC 5
Commons Capital East Dedicated VC 5
Cordova Ventures South General VC 5
Cornell Capital Partners Worldwide General VC 5
EcoElectron Ventures West Dedicated VC 5
Pangaea Ventures Ltd. Canada+East Dedicated VC 5
1.BasedondatafromGalante’sVentureCapital&PrivateEquityDirectory2006EditionandcompanyWebsites2.WestreferstotheWesternU.S.andEastreferstotheEasternU.S.
48
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
Appendix 2: Most Active VCs in Cleantech as of december 31, 20061 (continued)
firm location2 dedicated or General Type
Number of reported Cleantech
Investments
Sevin Rosen Funds National General VC 5
Solstice Capital National General VC 5
Venrock Associates Worldwide General VC 5
Advent International Worldwide General PE 4
Austin Ventures South General VC 4
Business Development Bank of Canada Canada General VC 4
Calvert Group East General VC 4
Contango Capital Management South General VC 4
El Dorado Ventures West General VC 4
Endeavor Capital East General VC 4
Expansion Capital National Dedicated VC 4
Firelake Capital Management West General VC 4
Illinois Ventures LLC Mid-West General VC 4
JPMorgan Partners Worldwide General VC 4
Khosla Ventures West General VC 4
Mallin Ventures Europe Dedicated VC 4
RBC Capital Partners Worldwide General VC 4
Reservoir Venture Partners Mid-West General VC 4
Rho Ventures National General VC 4
Rustic Canyon Partners West General VC 4
Sigma Partners National General VC 4
Advantage Capital Partners National General VC 3
ARCH Venture Partners National General VC 3
Battelle Ventures East General VC 3
Benchmark Capital Worldwide General VC 3
British Columbia Discovery Fund Canada General VC 3
Burrill & Company West General VC 3
Cargill Ventures Worldwide General Corp.Venture 3
Carlyle Group Worldwide General VC 3
Duke Energy Ventures Worldwide General Corp.Venture 3
Danfoss Ventures Europe General Corp.Venture 3
Desjardins Venture Capital Group Canada General VC 3
DFJ New England East General VC 3
Early Stage Partners Mid-West General VC 3
Enterprise Partners West General VC 3
Foundation Capital West General VC 3
Foursome Investments Ltd UK Dedicated VC 3
Garage Technology Ventures West General VC 3
GE Equity Worldwide General Corp.Venture 3
Globespan Capital Partners Worldwide General VC 3
1.BasedondatafromGalante’sVentureCapital&PrivateEquityDirectory2006EditionandcompanyWebsites2.WestreferstotheWesternU.S.andEastreferstotheEasternU.S.
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
49
Appendix 2: Most Active VCs in Cleantech as of december 31, 20061 (continued)
firm location2 dedicated or General Type
Number of reported Cleantech
Investments
H.B. Fuller Ventures National Dedicated Corp.Venture 3
Horizon Ventures West General VC 3
Innovatech Grand Montreal Canada General VC 3
Inverness Capital Partners National General VC 3
Mohr Davidow Ventures West General VC 3
Navigator Technology Ventures East General VC 3
NJTC Venture Fund East General VC 3
Norsk Hydro Technology Ventures AS Europe General Corp.Venture 3
SAS (Silicon Alley Seed ) Investors East General VC 3
Sequoia Capital Worldwide General VC 3
Sierra Ventures West General VC 3
Unilever Technology Ventures West General Corp.Venture 3
VenGrowth Capital Funds Canada General VC 3
Warburg Pincus LLC Worldwide General PE 3
Yasuda Enterprise Development Co Worldwide General Corp.Venture 3
Zero Stage Capital East General VC 3
1.BasedondatafromGalante’sVentureCapital&PrivateEquityDirectory2006EditionandcompanyWebsites2.WestreferstotheWesternU.S.andEastreferstotheEasternU.S.
50
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
80%
60%
40%
20% 0%
(20%
)
2005
Jan
3
Feb
8
Mar
16
Apr
21
May
26
July
1
Aug
8
Sep
t
13
Oct
18
Nov
22
Dec
29
Mar
14
Apr
19
May
24
June
29
Aug
4
Sep
t
11
Oct
16
Nov
20
Dec
27
2006
Feb
6
NA
SD
AQ
The
Cle
ante
ch In
dex®
Wild
erH
ill C
lean
Ene
rgy
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x®
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ill N
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loba
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an E
dge
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. Ind
ex
Ap
pen
dix
3:
Cle
ante
ch I
nd
ices
an
d P
erfo
rman
ce, 2
005-
2006
Sou
rce:
Cap
ital I
Q, 2
007
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
51
Ap
pen
dix
4:
lan
dsc
ape
of
So
lar
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erg
y C
om
pan
ies
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stal
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ase
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Sou
rce:
SV
B A
llian
t, 20
07
52
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
Ap
pen
dix
5:
lan
dsc
ape
of
Eff
icie
ncy
Tec
hn
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gy
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s
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g A
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echn
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Sou
rce:
SV
B A
llian
t, 20
07
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
53
Cleaner rechargable Batteries (several types)
A123SystemsActivePower(FKA:MagneticBearingTechnologies)AtomicAtraverdaAxeon(FKAMPower;acquiredAdvancedBatteries)AxionPowerInternationalBostonPowerColdwattEffpowerElectroEnergyEnerDelEnergyConversionDevicesEnerSys(acquiredModularEnergyDevices)E-OneMoliEnergy(Canada)EverceleVionyxFireflyEnergyGAIALi*OnCellsMicroPowerElectronicsNanogramDevicesNEXcellBatteryCo.OxisEnergyPolyStorCorporationPowerCartSystemsPowerGenixSystemsPowerSmartPureEnergyReVoltTechnologySchneiderElectric(AcquiredAmericanPowerConversion)SIONPOWERTechnologyTexacoOvonicBatterySystemsUnirossBatteriesZMatrixPowerZMP
Consumer Battery Manufacturer
AEATechnologyBYDCompanyLimitedCenturionInternationalChinaBAKBatteryDuracell(P&G)EEMBCo.,.EnergizerHoldingsExideGlobTekGPBatteriesInternationalGreatPowerBatteryCo.,HardingEnergyHitachiIntelLexelLGMatsushitaBatteryIndustrialCo.,(Panasonic)Maxwell(Hitachi)MoltechPowerSystemsNECPower-SonicRayovac(SpectrumBrands)Renata(SwatchGroup)RocketSANYOElectricCo.,.SonyCorporationTecumsehToshibaTycoElectronicsBatterySystems(TEBS)YuasaZeniPower
Appendix 6: landscape of Energy Storage Companies
Ultracapacitors
AdvancedAutomotioveBatteriesEEStorEnpirionFyreStormMaxwellTechnologiesMontenaNECTOKINNessCapCoPowerPreciseSolutionsPowerZyme
flywheels
AFSTrinityBeaconPowerCorporationGyro-GearPentadynePowerCorporationUrencoPowerTechnologiesUSFlywheelSystemsVYCON
Industrial Products Battery Manufacturer
ABSLPowerSolutionsAGMBatteriesArotechCorporationBattery&WirelessSolutionsC&DTechnologiesDelphiEastPennEpsilorElectronicIndustries(BoughtbyArotechin2004)GoldPeakIndustriesHoppeckeJapanStorageBatteryCo.,JohnsonControls(alsoacquiredOptimaBatteriesandVarta)KohlerLithion(YardneyTechnicalProducts)LithiumTechnologyCorpQuantumFuelSystemstechnologiesSaftTadiranValence
Thin film Batteries
CymbetCorporationEnfucellInfinitePowerSolutionsOakRidgeMicro-EnergyOorjaProtonicsPowerPaper.RolltronicsCorporationSolicoreSuperconductiveComponents(SCIEngineeredMaterials)ThinBatteryTechnologiesUltralifeBatteries(&acquiredAbleNewEnergy)
Charging Equipment
AccelRatePowerSystemsENQSemiconductorEnrev(FKA:AdvancedChargerTechnology)InnergyPower(FKA:PortableEnergyProducts)QuantanceRidgeEnergyStorageandGridServicesXantrexTechnology
Source:SVB Alliant, 2007
54
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
fuel Cells
ActaSpAAcumentricsAdventTechnologiesAFS(AlternativeFuelSysytems)AnsaldoFuelCellsSPAAnuvuorporatedAperionEnergySystemsApolloEnergySystemsAsiaPacificFuelCellTechnologies,.AstrisEnergiAvistaLabsAxaneFuelcellSystems(partofAirLiquide)CellkraftCenergieCeramicFuelCellsCeresPowerCleanFuelGeneration(CFG)ClearEdgePowerCMRFuelCellsDAVIDFuelCellComponentsDeeyaEnergyDelphiDistributedEnergySystems(ProtonEnergySystemsandNorthernPowerSystems)DupontEVisionEcoSoulENECOFranklinFuelCellsFuelCellControl(AlternativeFuelSystems)FuelCellTechnologiesFuelCellEnergy(AlsoacquiredGlobalThermoelectric)GEPowerSystemsGEFC(GoldenEnergyFuelCellCo.,)GenCellCorporationGeneralHydrogenCorporationGeneralMotorsGinerElectrochemicalSystemsH2ECOnomyhavePOWERHeliocentrisEnergiesystemeHokuScientificHorizonFuelCellTechnologiesHydrocellHydroGenLLCHydroGen.HydrogenicsIdaTech(IdaCorp)IndependentPowerTechnologiesIntegratedHydrogenSolutionsLimitedIntelligentEnergyIonAmericaCorporationIonicPolymerSolutionsIshikawajima-HarimaJohnsonMattheyFuelCellsKainosEnergyLynntechIndustries(NowFideris)ManhattanScientificsMasterflexMesoscopicDevicesMicrocellCorporationMillenniumCell(AlsoacquiredGeckoEnergyTechnologies)MorganFuelCellMorphicTechnologiesABMotorolaNedstack
NuElementNuVantSystemsPalcanFuelCells.PemeryCorporationPlugPowerPorvairFuelCellTechnologyPowerAirProtonMotorFuelCellProtonexTechnologyCorporationQinetiQFuelCellSystems/LIFECarQuantumTechnologies(alsoAcquiredAdvnacedLithiumPower)ReGenTechReliOnRolls-RoyceSafeHydrogen.SchatzEnergyResearchCenterSFCSmartFuelCellShanghaiFengpuRealEstateCo..ShanghaiShen-LiHighTechCo..SiemensSOFCo-EFS(McDermottInternational)SRESolucoesRacionaisdeEnergiaSulphCatchBVSulzerHexisSuperProtonicSurePowerCorporationT/JTechnologiesTeledyneEnergySystems(TeledyneTechnologies)ThirdOrbitPowerSystemsTopsoeFuelCell(HaldorTopsoe)UmicoreVIASPACEXCELLSiS(Ford/Daimler)ZongshenPEMPowerSystemsZoxyEnergySystemsZtekCorporation
Appendix 6: landscape of Energy Storage Companies (continued)
Source:SVB Alliant, 2007
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
55
Micro-fuel Cells
3P-EnergyACALEnergyAdaptiveMaterialsAkerminAltergySystemsAMREL/AmericanRelianceAngstromPowerArdicaBallardCellTechPowerCellexPowerProductsDirectMethanolFuelCellCorpElectroChemElectro-Chem-TechnicEner1EnerageEnerFuel(SubsiduaryofEner1)HyEnergySystemsHyperionInnovationsINIPowerSystemsIntegratedFuelCellTechnologiesITMPowerJadooPowerSystemsLilliputianSystemsMagpowerMechanicalTechnology(MTI)MedisTechnologiesMetallicPowerMTIMicroFuelCellsNeahPowerSystemsNuveraP21PacificFuelCellPemeasFuelCellsPolyFuelRenewPower(PartofTekion)SiGenSt.AndrewsFuelCellsTekionToshibaTruliteUltraCellUTCFuelCellsVersaPowerSystemsVollerEnergyGroupVRBPowerSystems
Appendix 6: landscape of Energy Storage Companies (continued)
Source:SVB Alliant, 2007
56
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
Appendix 7: landscape of water-tech Companies
Infrastructure Process Systems Products & Equipment Services & Analytics
BIOTEQCorporation Air2Water AlfaLavalAB BiothaneCorporation
InnovativeWater&SewerSystems,Inc. Altela,Inc. AshlandInc. ChemTreat,Inc.
PoseidonResourcesCorporation AppliedProcessTechnology,Inc. AxonicsLtd. ChinaWaterGroup,Inc.
SiemensWaterTechnologies Aqua-AerobicSystemsInc BasinWaterInc. DanaherCorp.
Aqua-Chem,Inc. BioQuest DynamOx,Inc.
Aquagenex,Inc. CalgonCarbonCorp. EarthFirstTechnologiesInc.
AquaHabiStat CLARCORInc. Ecology&EnvironmentInc.
AquariusTechnologiesInc. CulliganInternationalCompany HydroResources,Inc.
AquatechInternationalCorporation CunoInc(3M) JacobsEngineeringGroup,Inc.
AxelJohnsonInc(AxWaterGroup/Kinecto)
CynnovationLimited JouleMicrosystemsCanadaInc.
CASTionCorporation CytecIndustriesInc. MainstreamWaterSolutions
CerOX DehydrationEnvironmentalSystems NavigantConsultingInc.
ClearfordIndustriesInc. DionexCorp. NWPServicesCorporation(AKA:NationalWater&Power)
EcoWasteSolutions DonaldsonCompanyInc. PathogenDetectionSystemsInc.
Ecovation,Inc.(FKA:AnAerobics,Inc.) DowChemicalCo. RoperIndustriesInc.
HendrxCorp. eFilter Sensicore,Inc.
Juvegroup EimcoWaterTechnologies SPXCorp.
Megola,Inc. ESCOTechnologiesInc. TetraTechInc.
MoogInc. EuroTechHoldingsCo.Ltd. TycoInternationalLtd.
RainsoftInc. F.B.LeopoldCompany URSCorp.
SeprotechSystemsInc. FlexibleSolutionsInternationalInc. WellspringInternational(FKA:WaterManagementServices)
SevernTrentServicesInc. FlowserveCorp.
SolmeteX,Inc. FranklinElectricCo.Inc.
TLCEnvirotech GelIndustries
Water&PowerTechnologies,Inc GeneralElectricCo.
WaterHealthInternational GreenRock
ZentoxCorporation H2OInnovation
HaloxTechnologiesCorporation
HawkinsInc.
Hydranautics,Inc
HydroGlobeLLC
HydroPointDataSystems,Inc.
InPipeTechnologies
IngeAG
ITTCorporation
JWCEnvironmental
KochMembraneSystems
LackebyWaterAB
LesTechnologiesElcotechInc.
LightstreamTechnologies,Inc.
MesaLaboratoriesInc.
Source:SVB Alliant, 2007
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
57
Appendix 7: landscape of water-tech Companies (continued)
Infrastructure Process Systems Products & Equipment Services & Analytics
Met-ProCorp.
MicropackCorporation
MilliporeCorp.
MioxCorporation
NalcoHoldingCo.
NCSRT,Inc.
Novazone,Inc.
OvationProductsCorporation
PallCorp.
ParadigmEnvironmentalTechnologiesInc.
Parker-HannifinCorp.
PentairInc.
PerkinElmerInc.
Pionetics
Procter&GambleCo.(PUR)
Robbins&MyersInc.
SealTechCompany,LLC.
Smart-HoseTechnologies
Smith&Loveless,Inc.
SutronCorp.
ThermoenergyCorp.
TriosynCorporation
UltraSonicSystemsGmbH
VansonHaloSource(FKA:Halosource)
WattsWaterTechnologies,Inc.
WesTechEngineering
Source:SVB Alliant, 2007
58
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
AIM AlternativeInvestmentMarket(partoftheLondonStockExchange)
a-Si amorphoussilicon
CdTe cadmiumtelluride
CIGS copperindiumgalliumdiselenide
CIS copperindiumselenide
CO2 carbondioxide
c-Si ribboncrystallinesilicon
DJIA DowJonesIndustrialAverage
ETF exchangetradedfund
HVAC heating,ventilationandairconditioning
IP intellectualproperty
IPO Initialpublicoffering
IT informationtechnology
LPs limitedpartners
LSE LondonStockExchange
M&A mergersandacquisitions
MEM micro-electromechanicalsystems
NOx nitrogenoxide
PV photovoltaic
R&D researchanddevelopment
RFID radiofrequencyidentification
SO2 sulfurdioxide
VC venturecapitalist/venturecapital
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Acronyms and Abbreviations
EArTH, wINd, ANd fIrE: A ClEANTECH PErSPECTIVE
59
“Cleantechandgreentecharetermscurrentlyusedinthemarketplacetodescribecompaniesandproductsthatlooktoimproveupontheuseofnaturalresourcesandreduceenvironmentalimpactwhilealsoprovidingreturnstoinvestors.”
Cleantech Group, www.cleantech.com,2005.
General Electric, www.ge.com/ecomagination.
GlobalSubsidiesInitiative,IISDandEarthTrack,2006.
M&AdealssourcedfromMergerstatusingSICcodesforrelevantindustrysegments.Eachtransactionwasthenscreenedtodetermineifitincludedacleantechcompanyandthenthesedealswerebucketedintotheappropriatesub-categories.ThisdatawasthenreviewedbytheCleantech Group LLC.
CLSA,2005.
“SunpowerBuysPowerLight:$265M",Red Herring,November15,2006.
Q-Cells,www.qcells.de.
“The Emergence of Hybrid Vehicles”,ResearchonStrategicChangeReport,AllianceBernstein,June2006.
Freedonia,2005.
Jefferies,2006.
EBIUSA.com,2006.
ISEWaterIndex,International Securities Exchange,2006.
World Water Council
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vi.
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viii.
ix.
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xii.
xiii.
xiv.
references
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