Renewable energy companies could still provide substantial returns for private equity investors this year, as those with real growth potential are surviving the economic slowdown. These companies underperformed in 2008 because of their dependence on growth and technology advances. The key two barriers of growth for clean energy companies have been the recent financial crisis and the dipping oil price. Larger ones are surviving because they downsized, cut costs and raised capital before the economic crisis hit.
Global investment in forms of clean energy such as wind or solar power fell in the second half of 2008 and in the first three months of 2009 compared with the same period last year. Despite this, many clean energy companies are still growing compared with firms in other sectors, although at a lower rate than before the financial crisis. But investors are still quite optimistic. Many clean technology private equity fund managers raised a large amount of capital through new funds which means there is still a pool of capital for clean technology available.
The main challenge for investors in the short term is to identify which undervalued company are in the best position to grow in the long term and which have near-term access to financing to weather the recession.
A recent survey showed that half of institutional investors plan to increase their funding of clean energy compared with 12 months ago. As an investment option in the long run, the attractiveness of clean tech will not be affected by any crisis. Many companies are getting profit from subsidies and incentives for investing cleantech. Britain unveiled 1.4 billion pounds of initiatives to encourage investment in clean energy last month.
Hopefully in the coming months we should see clean tech companies attracting greater investments.
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