Solar Companies Raised Record-Breaking Capital in 2023: Mercom Capital Report
According to a recent report from Mercom Capital Group, solar companies raised more capital in 2023 than in any other year in over a decade. The report, which focuses on funding and merger and acquisition (M&A) activity in the solar sector, revealed that total corporate funding in the sector increased by 42% year-over-year, with $34.3 billion raised in 160 deals. This marks a significant increase from the $24.1 billion raised in 175 deals in 2022.
Raj Prabhu, CEO of Mercom Capital Group, expressed his surprise at the continued growth and investment in the solar sector, despite challenging market conditions and high-interest rates. He attributed this strong investment activity to various factors, including the Inflation Reduction Act, the global focus on energy security, and favorable policies worldwide. Prabhu highlighted that solar continues to attract significant investments and that the sector is defying expectations.
VC Funding Strong in Solar Sector, Reaching $6.9 Billion in 2023
Venture capital (VC) funding in the solar sector remained strong in 2023, reaching $6.9 billion, just 1% lower compared to the previous year. The report revealed that there were 26 VC funding deals of $100 million or more during the year. Of the total VC funding raised, $4.7 billion (68%) went to Solar Downstream companies, while Solar PV companies raised $1.9 billion. Balance of System (BOS) companies raised $311 million, and Service Providers raised $32 million.
The top VC-funded companies in 2023 included 1KOMMA5°, Enfinity Global, Silicon Ranch, CleanMax Solar, and Juniper Green Energy. While VC funding experienced a slight decrease from the previous year, it remains a significant source of capital for solar companies and demonstrates continued investor confidence in the sector.
Public Market Financing for Solar Sector Soars to $7.4 Billion in 2023
Public market financing in the solar sector experienced a substantial increase in 2023, totaling $7.4 billion. This represents a 45% increase compared to the previous year’s figure of $5.1 billion. The strong performance of public market financing indicates growing investor interest and confidence in solar companies. This influx of capital will enable solar companies to fund their operations and investments, further driving the growth of the sector.
Debt Financing in Solar Sector Hits a Decade High, Reaching $20 Billion in 2023
The report revealed that announced debt financing in the solar sector reached a decade high in 2023, totaling $20 billion. This represents a significant increase of 67% compared to the previous year’s figure of $12 billion. The report attributed this surge in debt financing to various factors, including the use of securitization, which contributed $3.4 billion in 11 deals. Debt financing plays a crucial role in funding large-scale solar projects and allows solar companies to access the capital needed for expansion and growth.
M&A Activity Declines in Solar Sector, Hindered by Economic Uncertainties
While funding activity in the solar sector remained strong in 2023, with record-breaking capital raised, merger and acquisition (M&A) activity experienced a decline. The report highlighted a 25% decline in M&A transactions, with 96 corporate M&A deals compared to 128 in the previous year. Macroeconomic and geopolitical uncertainties, recession worries, elevated interest rates, and higher borrowing costs were identified as factors that hindered M&A activity.
Solar Downstream companies led the way in M&A activity, acquiring 84 solar companies in 2023. Manufacturers, Service Providers, and Balance of System (BOS) companies also participated in M&A transactions but to a lesser extent. Additionally, the report revealed a decline in large-scale solar project acquisitions, which decreased by 31% year-over-year.
In conclusion, the Mercom Capital Group report highlights the strong performance of the solar sector in 2023, with record-breaking capital raised. VC funding, public market financing, and debt financing all experienced significant growth, indicating continued investor confidence. However, M&A activity declined, primarily due to economic uncertainties and elevated interest rates. Despite these challenges, the solar sector remains an attractive investment opportunity, driven by favorable policies, energy security concerns, and the global focus on clean energy.
Analyst comment
Positive news: Solar Companies Raised Record-Breaking Capital in 2023: Mercom Capital Report
Analyst perspective: The solar market is poised for continued growth as solar companies raised the most capital in over a decade. This is due to factors like favorable policies, energy security concerns, and the global focus on clean energy. VC funding, public market financing, and debt financing all saw significant increases, indicating investor confidence. However, M&A activity declined due to economic uncertainties and elevated interest rates. Overall, the solar sector remains an attractive investment opportunity.
