Solar “Bloodbath” Expected by Year End

In a piece today, our Reuters colleague Michael Szabo reports that a new “megafund” is predicting a “bloodbath” for the solar sector due to falling module prices and limited credit.

Given the amount of capital that’s already flowed to the sector, the fund’s prediction isn’t earth-shattering. Both Greentech Media and CleantechGroup reported earlier this year that solar power attracted more venture capital last year than any other form of clean tech companies, including alternative fuels. Greentech Media put the number at $3.87 billion, while the Cleantech Group counted $3.3 billion.

A number of solar startups like OptiSolar and Heliovolt have already paid the price for the irrational exuberance of their management teams and investors. Optisolar, which raised roughly $322 million, sold earlier this year for $400 million to the thin film solar company First Solar after its own expansion plans were socked by the credit crisis. And HelioVolt, which has raised $130 million, has delayed shipment projections of its thin film solar material until sometime next year; it also replaced its CEO with the former COO of First Solar earlier this month.

Still, the fund itself — called the WHEB Asset Management (WHEB AM) Sustainability Fund — might be worth continuing to watch. Here’s a link to its site, and here’s the news story:

LONDON (Reuters) – The cleantech industry is poised to grow this year although 2009 could be a “bloodbath” for the solar sector due to falling module prices and limited credit, the managers of a new megatrends fund launched this month said.

Clare Brook and Nicola Donnelly, managers of the new WHEB Asset Management (WHEB AM) Sustainability Fund, believe the clean energy sector will not re-test lows hit in November and March, but remain cautious.

“Following the collapse of the market, the valuations are incredibly attractive compared to where they have been, in spite of their recent run-ups,” Brook told Reuters. “We’re concerned in the short term by the solar sector as 2009 looks to be a bit of a bloodbath, but longer term we like it.”

Donnelly said falling solar module prices combined with restricted access to credit and a lack of clarity on renewable energy policies would continue to weigh on the sector this year.

The ABN AMRO Solar Energy Index has risen 41 percent since bottoming on March 6, but is still down 4 percent in 2009 and 74 percent below its all-time high in December 2007.

Despite the uncertainty, the managers felt it was a good time to launch their megatrends fund, which focuses on companies investing in climate change, water resource management and heathcare products for an aging population.

“The fund is about investing in companies that are providing solutions for the key problems that are facing the world and its inhabitants over the next few decades,” Brook said.

“We’re at an amazing crossroads in that you’ve got a huge amount of legislation to support these sectors plus stimulus packages containing vast amounts of money.”


Governments have responded to the global economic crisis by committing $2.8 trillion in economic stimulus packages, of which $430 billion or 15 percent is earmarked for development of ‘green’ infrastructure, HSBC Global Research said in February.

The U.S. launched a $787 billion stimulus plan in February that contains grants and tax breaks for the clean energy sector.

A U.S. Senate committee last week approved a comprehensive energy package that would require utilities to generate 15 percent of electricity from renewable sources by 2021.

China announced a 4 trillion yuan ($585 billion) economic stimulus package last November and is expected to make energy efficiency a key part of its next five-year development plan from 2011. Beijing is also expected to unveil subsidized prices for wind and solar power as soon as the second half of the year.

The fund is backed by WHEB Ventures, an environmental venture capital firm, and includes investors such as insurers Aviva plc and the family of the late billionaire financier James Goldsmith.

The fund launched on June 8 with 6 million pounds ($9.9 mln) under management, but Brook, a former manager at Morley Fund Management (now owned by Aviva) with 19 years experience in sustainable funds, expects to raise 50 million pounds in the first year and then a further 50 million per year after that.

“We’re hoping to outperform the MSCI World Index by a decent amount on an annual basis,” Brook said.