Chinese Capital Bullish on Clean Energy Sector

Investment activities in China's clean energy and technology industry remained active overall, with high-tech companies being the target of investment, according to the "China Clean Energy and Technology Industry Q2 2017 Investment Research Report" released by PricewaterhouseCoopers (PwC) on September 19th. A total of 51 private equity/venture capital (PE/VC) investment events, 33 mergers and acquisitions (M&A) events, and five public offerings (IPOs) took place in the second quarter. The report concludes that China's capital competition for the clean energy and technology industry is inseparable from the trend of national policies and regulations focusing on environmental protection and energy in recent years, reflecting green and environmentally friendly governance.

The report concludes that in order to deeply implement the Chinese President's initiative of practicing the concept of green development and building a green Silk Road, China's Ministry of Environmental Protection (MEP), Ministry of Foreign Affairs (MFA), National Development and Reform Commission (NDRC), and Ministry of Commerce (MOFCOM) jointly issued the "Guiding Opinions on Promoting the Construction of the Green "Belt and Road"" in April 2017, and the Ministry of Environmental Protection (MEP) issued the On April 1, 2017, the Energy Bureau issued the "Key Points of Standardization Work in the Field of Energy in 2017", which encourages the intelligent production of clean energy and comprehensively promotes the "Internet+" smart energy construction.

Against this background, the report shows that in the second quarter of this year, investment in China's clean energy and technology industry increased significantly, with the investment amount refreshing the single-quarter peak since the last three years. A total of 51 PE/VC investment events took place in this quarter, disclosing an investment amount of US$1.361 billion, with the number of investment cases rising by 45.7% year-on-year and the investment amount surging by 243.5% year-on-year. From the point of view of the number of investment cases, China's clean energy and technology industry investment in the secondary industry is still dominated by environmental protection, 23 investment events occurred, accounting for 45.1%; new materials field accounted for the proportion of the second quarter from the previous quarter's 14.3% rose to 27.5%, up 13 percentage points. From the point of view of the investment amount, the new energy industry with 938.2 million U.S. dollars, accounting for 68.9%.

The report further analyzed that in the second quarter, there were 33 M&A cases in China's clean energy and technology industry, disclosing an M&A amount of $924 million, of which only one was a cross-border M&A and the other 32 were domestic M&A. The environmental protection and new energy industries dominated the number of M&A cases, with 18 and 14 M&A cases completed respectively, accounting for 54.5% and 42.4% respectively. Although only 1 M&A case was completed in the new materials industry, it topped the list with an M&A value of US$392.6 million, accounting for 42.5% of the total M&A value of the whole industry.

Among other things, the report emphasized that after the peak of IPO listings in the previous quarter, China's clean energy and technology industry saw a total of five companies completing IPOs in the second quarter of 2017. compared with the first quarter, the speed of IPO review in the second quarter slipped significantly, with IPO events halving year-on-year. Meanwhile, IPO fundraising was slightly higher than in the previous quarter, reaching US$661 million. 27 companies were listed on the New Third Board, of which 20 occurred in the environmental protection sector, accounting for 74.1%.

Overall, investment targets in China's clean energy and technology sector in the second quarter continued to be dominated by well-established companies such as NSSB-listed and listed companies," said Bin Hong, China Power & Utilities Managing Partner at PricewaterhouseCoopers. Most of the New Third Board-listed companies in China's clean energy and technology industry are high-tech enterprises, and R&D innovation and technological upgrades are the key to maintaining core competitiveness. These enterprises are in a high-speed growth period and are in greater need of introducing institutional investors to maintain their competitiveness through the issuance of additional shares."