Companies Investing in Clean Energy Honored by Cleantech Group

Lurking just beyond the riveting list of high-achieving new companies in the "2013 Global Cleantech 100" report released on Oct. 9 are two special mentions reserved for the organizations that are making the most substantial investments in this category. 

Overall, the study, which has been compiled for the past five years by the aptly named Cleantech Group (a consulting firm based in Washington, DC), heralds the emerging industry players that are "most likely to succeed" within the next five years. The majority are innovative start-ups, arrayed in 15 categories; among them, energy efficiency, biofuels and biochemicals, conventional fuels, smart grid, transportation, and water and wastewater. This year, energy efficiency remained the fastest-growing sector in cleantech, with 27 companies on the list, up from 22 in 2012 and 19 in 2011. 

While the sector remains hot and seed money continues to be available, the factors and faces behind the growth are changing: The role of venture capital firms in the cleantech expansion is dwindling, even as corporate investors with deeper pockets and an eye on product development are stepping in to take their place.

Top cleantech investors

In addition to lauding the 100 uber-achieving newbies, the report looks at the companies that currently are amassing the largest percentage of cleantech stock in their portfolios. At the awards ceremony, attended by Energy Secretary Ernest Moniz:  

  • Corporate Investor of the Year went to GM Ventures of Detroit. The automaker's investment group has added a number of GCT 100 innovators to its portfolio, including Envia Systems (components for lithium-ion batteries), Proterra (battery-powered buses), and RelayRides (a car-sharing platform).
  • Financial Investor of the Year went to VantagePoint Capital Partners of San Bruno, Calif. The venture capital firm's portfolio includes seven cleantech companies: Genomatica (green chemicals from garbage), glo (nanowire LED lighting), Liquid Robotics (autonomous marine vehicles), Next Step Living (home energy diagnostics), Ostara Nutrient Recovery Technologies (environmentally responsible fertilizer), Tendril (home energy management), and Trilliant (smart grid communications). 
The report also notes 11 other investment houses that hold a large proportion of GCT 100 stock in their portfolios, including KPCB, Baremar Energy Ventures, Bright Capital, Rockport Capital, DFJ,  Khosla Ventures, Foundation Capital, IFC, Aster Capital, TPG, and RobecoSAM. 
 
However, according to an analysis released by the London-based professional services firm PricewaterhouseCoopers earlier this year, investment activity by venture capital firms dropped 12% in total dollars and plummeted 15% in terms of the number of deals closed, during Q1 2013, as compared to Q4 2012. Specifically, $5.9 billion in venture capital was invested in 863 deals during the first quarter of this year; while $6.7 billion was invested in 1, 013 deals during the fourth quarter of 2012.
 
The average deal size was down by 48%, seed funding was down by 68%, and follow-on funding decreased by 60%. The reason, analysts believe, is that VC firms are becoming increasingly daunted -- and tapped out -- by the high-profile bankruptcies in the sector, such as Solyndra, Evergreen Solar, and Fisker Automotive. 
 
Fortunately, corporate investment has picked up the slack. Indeed, General Motors is just one of several multinationals that has started its own financing branch -- betting on new automotive technologies that may help to hone the company's competitive edge in electric/hybrid vehicle propulsion, charging, fabrication, and telematics.
 
Another is Google Ventures, which has supported several up-and-coming cleantech concerns, including Silicon Valley-based Nest, which producers programmable thermostats; and Redwood City, Calif.-based Silver Spring Networks, a smart grid communications company that went public last March. 

"As long as the traditional venture firms remain constrained, it's a great time for corporates with cash to do some deals,"  Sheeraz Haji of the Cleantech Group told Mercury News recently. "Corporates are really interested in start-ups, and start-ups want corporates to participate. The interest is really high on both sides."

Market strength
The group also offered congratulations to its annual Graduate of the Year -- the company that had made the the most impressive and lucrative exit from the list during the past 12 months -- SolarCity (NASDAQ: SCTY  ) of San Mateo, Calif., a GCT 100 alumni (2009-2012) that issued shares in an initial public offering in December 2012.  
 
The report noted that SolarCity, the largest U.S. full-service photovoltaic solar installer, had conducted the first promising cleantech IPO in eight months, following that of solar microinverter producer Enphase Energy (NASDAQ: ENPH  ) , in March 2012. Indeed, in the past six months, SolarCity's shares have increased in value by 131.5%, to a closing price of $46.46 on Monday. (Enphase, which went public at a price of $6 per share, currently is trading at $8.75.)
 
Commenting on the success of SolarCity, the Cleantech Group stated that, "it arguably helped break the run of bad news and paved the way for other GCT 100 companies to follow." Two such companies are:
  • Montreal-based BioAmber (NYSE: BIOA  ) , a developer of green chemicals from agricultural feedstock that went public in May 2013 at $10  per share and currently is trading at $6.40. In a recent memorandum,  Andrew I. McDonald, founding partner at the New York City-based firm, LifeSci Advisors, was bullish on BioAmber. "[It] has all of the pieces in place needed to become a successful commercial scale chemical manufacturer and leader in the green chemical industry," he said. "They have already demonstrated large-scale production of succinic acid at their demonstration plant, and the fully funded plant they are building in Sarnia, Ontario, will be mechanically operational by the end of 2014."
  • California-based Silver Spring Networks (NYSE: SSNI  ) , a provider of networking communication solutions that went public in March 2013 at a price of $17 and currently is trading at $15.03. "While recent deal losses in Japan and the United Kingdom were disappointing, the company remains well- positioned for international expansion, as evidenced by wins in Singapore, Malaysia, Australia, New Zealand, and Brazil," wrote Goldman Sachs analyst Simona Jankowski in a report dated Sept. 25.
     

High hopes

Indeed, there are high hopes in the industry for a profitable fourth quarter, despite the uncertainties of government and venture capital funding, and the global economy. Among the still-private companies on the cusp of going public are the three regional winners for Company of the Year:
  • North America:  Nest (Palo Alto, Calif.), the much-hyped designer of a networked "learning" thermostat for the home
  • Europe & Israel: Organica Water (Budapest, Hungary), a provider of Fixed-Bed Biofilm Activated Sludge wastewater treatment plants
  • Asia Pacific: Hydrexia (Queensland, Australia), developer of solid hydrogen storage systems based on magnesium alloys
To qualify for consideration for the GCT 100, companies had to be independent, for-profit, cleantech ventures that are not listed on any major stock exchange. This year's competition drew from 5,864 companies derived from global nominations, as well as from the Cleantech Group's i3 market intelligence platform (ergo, the promotional agenda behind the awards). The i3 platform tracks over $7 billion of deal flow across 22,000 cleantech companies annually.

A 90-member expert panel, including leading financial investors and representatives of multinational enterprises such as 3M, BP, Ecolab, General Electric, General Motors, IBM, Johnson Controls, and Veolia Environnement, gave input on the short-listed 300 to get to the final list of 100 companies from 18 countries. Perhaps they were thinking about their next investments?

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