Solar Industry Secures Decade-High CorporateFunding of $34.3 Billion in 2023

Global corporate funding in the solar sector in 2023, including venturecapital (VC) investments, public market funding, and debt financing,reached $34.3 billion, a 42% year-over-year (YoY) increase from $24.1billion. This was the largest amount raised in over a decade.

The numbers were revealed in Mercom Capital Group's newly releasedAnnual and Q4 2023 Solaring and M&A Report.

While the total funding rose, the number of deals dropped 8.5% from 175to 160.

"Despite facing challenges from inflation and higher interest rates, thesolar industry demonstrated remarkable resilience in 2023. This resiliencecan be attributed to a strong global commitment to achieving energytransition goals and significant demand driven by the lnflation ReductionAct, mainly thanks to lucrative incentives - investment tax credit andproduction tax credit. These incentives effectively offset the adverseeffects of higher interest rates, ensuring the financial viability of solarprojects and maintaining the sector's attractiveness to investors," notedRaj Prabhu, CEO of Mercom Capital Group.

According to the report, global VC and private equity funding in the solarsector in 2023 came in strong with $6.9 billion in 69 deals, just 1% lowerthan the $7 billion raised in 2022. There were 26 VC funding deals of $100million or more in 2023.

In terms of attracting VC funding, solar downstream companiesdominated the landscape. These companies secured 42 dealsamounting to $4.7 billion (68%) in the January - December period. Solalphotovoltaic companies raised $1.9 billion, while the balance of system(Bos) companies raised $31l million. Service providers raised $32 million in2023.

The top VC deals in 2023 were - $471 million raised by 1KOMMA5° $428million raised by Enfinity Global, $375 million raised by Silicon Ranch, $360million raised by CleanMax, and $350 million raised by Juniper GreenEnergy

The solar sector witnessed a substantial increase in public marketfinancing during the year. A total of $7.4 billion was raised, representing a45% YoY increase from $5.1 billion in 2022.

In 2023, announced debt financing came to $20 billion, 67% highercompared to $12 billion in 2022. This is the highest amount raised since2010. Securitization activity was a key contributor, with $3.4 billion in 11deals.

M&A activity declined 25% YoY, with 96 corporate M&A transactions in2023 compared to 128 in 2022. The largest transaction was by BrookfieldRenewable, which agreed to acquire Duke Energy's unregulated utilityscale commercial renewables business in the U.S. for approximately $2.8billion.

"While funding activity has been strong, macroeconomic and geopoliticauncertainties, recession worries, and elevated interest rates havesignificantly slowed down both corporate and project M&A activity in2023," noted Prabhu. "Higher borrowing costs have put a damper on M&Atransactions, with cautious investors biding their time for more favorablevaluations. Solar projects continue to attract interest, but high valuationsand a lower risk appetite, compounded by unpredictable projectcompletion timelines due to interconnection delays, labor shortages, anoscarcity of components, have all contributed to a drop-off in project M&Aactivity"

Solar downstream companies led corporate M&A activity in 2023.acquiring 84 solar companies, followed by manufacturers with five.service providers with four, and balance of system companies with threeacquisitions.

There were 231 large-scale solar project acquisitions in 2023 compared to268 in 2022. Almost 45.4 GW of solar projects were acquired in 2023against 66 GW in 2022, a 31% YoY decline.

Over 45 GW of large-scale solar projects were acquired in 2023, with 35%of the total acquired by project developers and IPPs. Investment firmsacquired 23%, followed by utilities with 17% in 2023.

Prabhu anticipates that the second half of 2024 may see animprovement in market conditions, depending on the actions of the UsFederal Reserve. The uncertainty surrounding interest rates and inflationcreates a cautious outlook for the first quarter, with expectations ofpotential positive changes later in the year

In all, 250 companies and investors are covered in this 127-page report,which contains 103 charts, graphs, and tables.