MONEY COMES BACK TO NEW ENERGY

Finance Market Coming Back - As Predicted
May 2011 (Cascadia Capital)

"In our Q4 report, we talked about how we believed that the financing market was coming back... even if not reflected in the Q4 numbers. Well…$2.6 billion Venture Capital and Private Equity dollars came into the sector. March alone was a $1 billion month…[Interestingly,] the vast majority of funds were put to work in existing companies who had received institutional capital in the past… indicative of a maturing industry…

"…[D]ominant trends…[include] [1] Increased investment in capital intensive sectors and companies…Clearly, the large growth equity and PE funds are increasingly comfortable putting more dollars to work in single investments in today’s market…[and, 2] Greater willingness by investors to accept risk…[although] there are some types of risk they are more comfortable with than others. Investors are willing to take execution risk, scale up risk and timing risk…[but] less willing to take on technology or customer adoption risk."

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"PE funds and corporate investors comprise a larger percentage of investor activity. The sustainable industries are beginning to mature as a sector. Business models are becoming clearer, businesses are showing they can become profitable without government support and costs are coming down with scale. Private Equity funds and corporations see the market maturing and are eager to establish a foothold in the market."

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"Similarly, we are finding a pickup in activity in the M&A markets. M&A transaction volume totaled $15.2 billion in Q1 almost doubling the $8.9 billion M&A transaction volume in Q4. Fortune 1000 corporations in a variety of industries -- oil and gas, technology, industrial, power electronics etc. are actively looking for acquisitions in the sustainability sector. They are seeing business models that are profitable and growth rates that make it an attractive sector.

"One area to note is the LED sector. Customer adoption of LED is happening at a much faster rate…[so] many large corporations do not have the product line to meet market need. Rather than internally develop products – which could take 12-36 months - corporations are buying companies that have products which can be plugged into their distribution systems."