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August 06, 2009
Investor Confidence in Cleantech Rebounds in Second Quarter
    by Robert Kropp

Analysis by Ernst & Young finds significant increases in venture capital investment in the second quarter, and increased private equity and asset based financing as well.

US venture capital investments in cleantech companies improved to $572 million in the second quarter of 2009, a 73% increase over first quarter investment totals, according to an analysis by Ernst & Young. The number of financing rounds in the second quarter also increased, to 48, a 100% increase over the first quarter.

Despite the indications that investor confidence in cleantech investment is returning, the numbers for the second quarter of 2009 were still lower than those of a year earlier, before the full force of the economic crisis decimated financial markets worldwide. The amount of capital investment in the second quarter of 2009 was 59% less than in the second quarter of 2008, while the number of financing rounds was 16% less. The second quarter of 2008 was the second-highest quarter for cleantech investment on record, according to Ernst & Young.

The category of Energy and Electricity Generation received the largest amount of venture capital investment, raising $157 million in the second quarter, a 181% increase over the first quarter. Investment in solar companies tripled in the second quarter to $148 million.

Investment in the Energy Efficiency category increased by 168% in the second quarter, to $152 million. Investment in Alternative Fuels increased to $53 million, and investment in Transportation increased to $65 million.

Private equity financing and asset backed financing also improved in the second quarter. According to New Energy Finance, private equity investments in clean energy increased by 12%, to $240 million. Asset based financing of clean energy ventures increased significantly in the second quarter, from $307 million to $2.9 billion. Wind energy companies were the primary beneficiaries of asset backed investment, although solar companies received significant support as well.

Investor confidence in the US cleantech market benefited from government support, as the American Recovery and Reinvestment Act (ARRA) of 2009 directed the release of $47 million for the completion of eight smart grid demonstration projects in seven states. In addition, guidance from the US Department of the Treasury regarding direct payments in lieu of tax credits to companies that create and place in service renewable energy facilities is expected to further increase investor confidence in cleantech in the third and fourth quarters.


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