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Searching for Deeper Pockets


APRIL 26, 2009, 10:25 P.M. ET

Amid tight credit and tough market conditions, clean-technology companies without large backers are looking to better-capitalized suitors. This trend became apparent in the solar-power industry over the past few weeks.

“There are a lot of thinly capitalized developers who are struggling to figure out how to develop projects,” says Arno Harris, chief executive of Recurrent Energy Inc., who sees that weakness as a buying opportunity.

San Francisco-based Recurrent acquired the solar assets of UPC Energy Group, which will give it a pipeline containing as many as 350 megawatts of potential new projects, 100 megawatts of which Recurrent plans to develop by 2012. One megawatt of power can provide electricity to between 460 and 900 homes depending on the region. The price of the acquisition wasn’t disclosed.

Recurrent has a standing financial commitment from Hudson Clean Energy Partners, a private-equity firm in Teaneck, N.J. Hudson already committed $75 million to Recurrent in July 2008.

Act Solar Inc., whose technology boosts the power output of strings of solar panels, turned to National Semiconductor Corp. after terms of venture-capital lending became too onerous.

“We did have very good interest from the venture-capital community,” says Andrew Foss, CEO of the Santa Clara, Calif., firm. “But as valuations were shrinking, their term sheets were ever more biting.” The price of the Act Solar acquisition wasn’t disclosed.

San Francisco-based MMA Renewable Ventures, owned by Mortgage & Equity LLC, will be getting more financial heft thanks to its planned acquisition by Spanish solar developer Fotowatio SL. Fotowatio itself is financially backed by GE Energy Financial Services and other investors. MMA Chief Executive Matt Cheney says because of Fotowatio’s backing, he is now planning to acquire project pipelines. Fotowatio is paying $19.7 million for MMA.

Tempe, Ariz.-based First Solar Inc. acquired in April the project-development pipeline of Optisolar Inc. of Hayward, Calif., for $400 million in stock. This includes taking over development and ownership of a 550-megawatt solar farm that Optisolar planned to build in San Luis Obispo County, Calif., as well as 1,300 megawatts of solar plants under development in California and other Southwest states.

Meanwhile, in another sign of tight credit conditions hampering smaller companies, PG&E Corp. said recently its utility may step in to take ownership stakes in renewable-energy projects from which it hopes to get power.

“We are afraid our counterparties won’t deliver” due to the capital constraints in today’s economy, Peter Darbee, chairman, chief executive and president of the San Francisco company, said in an interview.

The Other Biofuels Industry

The ethanol and biofuel industries are struggling with a combination of high feedstock costs and relatively low prices for their output fuels — pushing many companies into filing for bankruptcy protection.

But companies developing technologies to produce fuels from nonfood sources are still attracting investment interest and are moving ahead with growth plans.

Energy giant Royal Dutch Shell PLC committed to invest more in Redwood City, Calif.-based Codexis Inc., which is developing enzymes that rapidly turn plants into fuel.

Shell’s support will enable Codexis’ enzymes to be tested in a commercial-scale biorefinery. The company will work with a joint venture between privately held Canadian biofuels firm Iogen Corp. and Shell to develop cellulosic ethanol from inedible plants such as wheat straw.

Shell also provides scientific and engineering support in a strategic partnership with Virent Energy Systems Inc., a company planning to produce bio-gasoline directly using a technology that can process various kinds of feedstock, giving it the flexibility to use food sources or not. The nonedible portion of some plants — the stalks of the sugar cane, for instance — can often be turned into cellulosic ethanol. Shell doesn’t have an equity holding in Virent.

Virent is out raising capital — it has raised $30 million from venture-capital investors and $40 million from government and strategic partners since it was founded in 2002 — and is building its first demonstration plant in Madison, Wis. It plans to have the plant up and running in the third quarter. Virent also has financial and strategic support from Honda Motor Co. and Cargill Inc.

Boston-based Mascoma Corp. recently started production at a plant in Rome, N.Y., producing ethanol from woody biomass. The plant was funded in part by state grants approved in December 2006.

Now, Mascoma plans a commercial-scale plant in Michigan, for which it has raised about $49 million from the State of Michigan and the U.S. Department of Energy. Another $250 million is needed to complete the project.

—This column was compiled by Yuliya Chernova, Mara Lemos Stein and Jonathan Shieber of Dow Jones Clean Technology Insight, a newsletter published by Dow Jones & Co. Cassandra Sweet of Dow Jones Newswires also contributed. They can be reached at [email protected].

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