Global venture capital funding in solar sector at $329 mn in Jan-March

The global venture capital (VC) funding in the solar sector was off to a slow start in 2012 calender year as deals worth $329 million were announced in January-March -- the lowest since the fourth quarter of 2010.

According to a report by Mercom Capital Group, a global clean energy communications and consulting firm, VC funding for the January-March quarter came to $329 million, the lowest dollar amount recorded since Q4 2010.

However, in terms of number of deals the sector witnessed a record 34 VC backed deals, the highest ever recorded in the solar industry.

"While VC's interest in the solar sector remains strong, their appetite for risk appears to be lower as the average VC funding round amount in Q1 was $10 million, compared to $18 million in 2011," Mercom Capital Group Managing Partner Raj Prabhu said.

A more cautious approach of VC investors towards investing in the solar sector is likely this year, experts believe.

"To add to current over-capacity problems, policy changes and lower tariff announcements in some of the largest solar markets, such as Germany and Italy, will all contribute to an uncertain 2012," Prabhu added.

The United States continued to be the dominant country for VC investments, accounting for about 80 per cent of all VC funding in the first quarter.

There was, however, a strong M&A activity in the solar sector totalling $5 billion in 15 transactions, mainly due to the $4.7 billion acquisition of Solutia, by Eastman Chemicals Company.

Other significant M&A transactions included the $275 million acquisition of Oerlikon Solar, by Tokyo Electron, and Andrem Power's $274 million acquisition of 3W Power.

The first quarter of 2012 also saw 11 new cleantech and solar-focused investment funds announcing commitment of $5.7 billion.