All-Around Strong Performance for Global Wind Energy Investment in Q1

The global wind energy industry registered a strong quarter of investment activity in terms of venture capital (VC) funding, mergers and acquisitions (M&A) and project finance in the first three months of 2012. VC funding was particularly strong in the US wind energy sector in Q1 2012, with $240 million in transactions flowing through a record-high 12 deals, according to Mercom Capital Group's latest quarterly report. That compares to just $12 million going into two deals in Q4 2011.

Investment activity was also strong in wind energy mergers and acquisitions (M&A), with transaction numbers reaching a level not seen since Q1 2010, as well as in project finance, with large-scale wind energy project financing totaling $3.2 billion across 16 projects.

Mercom's analysts singled out global project developer's Element Power's $183 million VC funding and Indian wind turbine manufacturer and turnkey solutions provider ReGen Powertech's $20.2 million financing among the top Q1 deals. Also cited was an $18.6 million funding for Leap Green Energy, $10 million of VC capital raised by U.S. commercial scale wind developer Apex Wind Energy, and Pentalum raising $3.5 of investment capital. Pentalum develops LiDAR (Light Detection and Ranging) for remote sensing of wind energy.

Strong Wind Energy M&A

Turning to wind energy sector M&A, Q1 2012 saw the highest level of activity since the first quarter of 2010, with $872 million in 11 VC transactions. Details were disclosed for only three.

Downstream wind companies saw the greatest interest as a technology group with four M&A deals completed. VC M&A activity among manufacturers, wind components, service providers, and BOS (Balance of Systems) companies followed, respectively.

Japan's Marubeni and Innovation Network Corp. of Japan's $850 million acquisition of UK offshore wind power service provider Seajacks International topped the list of wind energy sector M&A transactions in Q1, followed by Hitachi's $12 million acquisition of Fuji Heavy Industries' wind turbine generator business and KV Ventus' $10.2 million acquisition of a 49.9% stake in offshore wind tower foundation design OWEC Tower.

Q1 Wind Energy Project Funding

All the $3.2 billion of investment in wind energy projects in Q1 went into on-shore wind energy project developments. Marena Renovables' $620 million in project funding for the 396-MW Oaxaca wind farm project ranked among the top wind energy project financings for Q1, as did the $376 million in debt raised by Wind Capital Group for the 201-MW Post Rock Wind Energy Project. Mercom also ranked Enel Green Power North America's completion of a $340 million tax equity transaction for its 350-MW Caney River and Rocky Ridge Wind Farms among the quarter's top project financings.

Other top wind project financings in 1Q included NaturEner raising $320 million in construction debt for its 189-MW Rim Rock Wind Project and CPV Renewable Energy opening a $263 million credit facility for its 166-MW Cimarron Wind Energy Project.

Onshore wind energy is on pace to meet the IEA Energy Technology Perspectives' 2°C Scenario (ETP 2DS) by 2020, having grown at a 27% constant average growth rate (CAGR) over the past decade, Mercom points out in its report.

Onshore wind energy is now cost-competitive without any special support in electricity markets with good wind energy profiles and supportive regulatory frameworks, such as Brazil and New Zealand, according to the IEA. China, the US, Germany and Spain led national totals for installed onshore wind energy capacity in the past decade, while offshore wind continues its emergence as a commercially viable large-scale renewable energy technology.

As encouraging as this is, the IEA in its "Tracking Clean Energy Progress" report warns that clean, renewable energy capacity is not being installed quickly enough to avoid the costs and effects of global climate change. Facing severe fiscal and banking systems problems, renewable energy incentives are being scaled back or eliminated in key countries. Among recent developments in the US, lawmakers may consider extending and then phasing out the wind energy production tax credit, a key driver underlying rapid growth of US wind energy capacity, Mercom notes.

*Photo courtesy: Canadian Wind Energy Association