China's Renewable Energy and Cleantech Industry Retains Strong Investment Momentum

China's renewable energy and cleantech industry experienced strong investment momentum in Q1 2016, according to PwC's MoneyTree China Renewable and Cleantech Investment Report (Q1 2016).

A total of 31 PE/VC investments were successfully made in the period, up 106.7% on a year-on-year basis. The disclosed investment amount reached US$657 million, increasing by 425% on a year-on-year basis. A total of 46 renewable energy and cleantech industry enterprises were listed on NEEQ in Q1, 2016.

In Q1 2016, policies and regulations supporting China's renewable energy and cleantech industry focused predominantly on the environmental protection sector.

The National Development and Reform Commission issued Guidelines for Issuing Green Bonds  on 8 January 2016, which clarify that support from green bonds will be focused on 12 projects, including energy conservation and emission reduction, as well as green urbanization.

In addition, trends point to closer integration of internet, advanced information & technology, renewable energy and the cleantech industry. Such trends align with government efforts encouraging Internet companies to take a more active role in the establishment of waste information platforms at various industrial parks, as a means to promote overall integration of environmental data resources.

Smart energy

In particular, smart energy areas covered in "Internet +" are among those that have attracted the most attention from the government, including both the NDRC and National Energy Administration.

"China being the first country to issue policies on green bonds by government in the world, small-and-middle-sized enterprises in China will greatly benefit from it by narrowing the funding gap through issuing bounds or increasing credits with carbon emission permits, intellectual property and prospective earnings,” says Gavin Chui, PwC China Energy, Utilities and Mining Industry Leader.

“Further, integration of Internet, advanced information & technology, renewable energy and the cleantech industry will help to drive the rise of new technologies, new modes of operation and new commercial activities that can form a potent force for sustainable industrial development.”

The report highlights that a total of 31 PE/VC investments occurred in Q1 2016, with investments totalling USD 657 million. Among these 20 investments, or 65%, were made in the environmental protection sub-sector.

The majority of investments were made at either the expansion or mature stage. At the expansion stage, enterprises listed on the NEEQ were predominantly focused on public share transfer.

Early stages

PwC China Power & Utilities Partner Lisa Wang says, "Attention should be paid to the fact that China’s renewable and cleantech investment is occurring at earlier stages. In Q1 2016, while most of China’s renewable and cleantech investments took place in the A and B rounds, activity in the Pre-A and angle rounds, though still minor, reflected investor optimism in these early investment rounds."

The report records 21 mergers and acquisitions (M&A) in Q1 2016, with the total value of M&A deals amounting to USD 1.015 billion. Among these 21 M&A deals, only one was made transnationally.

Also of note, ten occurred in the environmental protection sector, eight in the new energy sector, and three in the new material sector. However, in terms of the amount invested, only 7% of total investment value was invested in the environmental protection sector while 62% and 31% were invested in the new energy sector and the new material sector respectively.

As a consequence of fluctuations in China's capital markets, no IPOs occurred in Q1 2016, in China's renewable energy and cleantech industry. Currently, over ten companies are underway with the pre-disclosure process. According to the Report, 46 renewable energy and cleantech enterprises were listed on NEEQ in Q1 2016.

"Those listed enterprises are from the environmental protection sector. They select the NEEQ because they are not qualified for IPOs due to limited scale. At the same time, the NEEQ provides a valuable source for funding for renewable energy and cleantech enterprises.

“With the rise of the slicing scheme by the NEEQ, as well as other continuous improvements, we believe that an increasing number of promising renewable energy and cleantech enterprises will list on NEEQ," added Gavin Chui. 

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