It’s not just venture capitalists and investment banks making money on the sun. Corporations are finding vast savings in efficiency investments while others are making strategic investments for future pay-offs. Some firms are already well-placed, especially those in related or ancillary businesses, such as silicon wafer manufacturers who last year sold more to the solar industry than to chipmakers. That was just fine with Applied Materials, which expects $600 million in solar-related sales in its 2007 fiscal year and more than $1 billion by 2009. (Go to interview with CEO Michael Splinter.)
Despite this stunning growth, solar has so much further to go: it currently satisfies a little more than 0.1% of total U.S. electricity demand. The huge upside is catnip for investors dreaming of discovering the next household company name.
A Plus Grade For IPOs
A string of successful IPOs in the sector has stoked the excitement. Suntech Power opened on NASDAQ at just under $21 when it went public in December 2005 and is now $41.70, while SunPower opened at $27 in November and now trades at $91. First Solar, a thin-film producer, had a $400 million launch November 2006, rising 340% by the end of the second quarter of this year.
These successes attracted $428 million of additional investment into early stage solar technologies (thin-film and non-crystalline) last year, which trumped the $235 million of VC money that went into second generation biofuels, including cellulosic ethanol, which many hope will be the salvation for that more troubled sector.
Other investment plays are more prosaic, such as trimming our current profligate waste of energy, a business opportunity that has spawned a cluster of new companies. Comverge, Inc. is now helping more than 500 U.S. utilities make better use of their power output through their demand-response “smart megawatts” technology, helping to defer expensive new generation and transmission construction.
Comverge went public in April, opening at $21 and currently trades at $35.31 a share. Boston-based EnerNoc, , which offers similar demand-side management technologies, listed on the NASDAQ Global Market this May, opening at $26 – and now trades at $47.70.
“The performance of these two IPOs will cause many private companies to take notice and position themselves for near-term IPOs,” said a recent Jeffries report, which declared it was bullish on the sector because so much of the existing energy grid needs upgrading.
Goldman Sachs, one of the most aggressive – and presumably successful - players in the clean-tech sector, with an estimated $2 billion invested, continues to inspire followers.
One of the more recent entrants, Nomura, formed a clean-tech investment unit last year and in its first investment, made in June, took a lead role placing $14 million in SpectraSensors Inc., a leading supplier of gas analyzer products, that help control pipeline corrosion and avoid explosions.
Nomura’s share was $8 million, according to Whitney Rockley, a principal in Nomura’s clean-tech unit, based in London.They were joinedin the C-Round of financing by Chevron’s venture capital arm, along with some earlier VC investors, including American River Ventures, Blueprint Ventures and Nth Power.
With such promising prospects it may not be surprising that a recent KPMG survey found 44% of oil & gas executives favored at least 50% of public energy spending go to renewables (a quarter said more than 75% should be so earmarked), but it might surprise some that 82% cited declining oil reserves as the justification.