Published on May 28th, 2012 | by Amy Brown0
Investment in Nordic cleantech stays strong
With the right business models, foreign investors and supportive government policies, the Nordic cleantech sector continues to grow.
Despite tough economic times, the level of private investment in Nordic cleantech appears fairly healthy, and will continue to rely on private-public partnerships, according to a number of investors and analysts in the region.
“The venture capital culture is growing in the Nordic region. More entrepreneurs are starting companies and therefore a stronger ‘equity’ culture (owner as opposed to employee) is emerging,” says Henrik Olsen, Managing Partner at Environmental Technologies Fund. “This is leading to successful companies being built and sold.” Greater private sector investment is a necessary complement to the historically high levels of public funding for the sector (some 80 percent of funding from the Nordic governments goes towards energy-related technologies).
Constant number of deals
According to Cleantech Scandinavia, a network of investors, cleantech experts and industrial companies, there was a constant number of deals but a significant decline in the amounts during 2011. Private equity investment declined from EUR 384 million in 2010 to 117 million in 2011. The number of investments, looking at both private equity and public investments, remained the same: 183 in 2010 and 173 in 2011. Public funding continues to grow, helping to compensate for lower private investment.
The biggest deals in Scandinavia in 2011 were Amminex, a Danish company with a NOx-reducing technology that can be used to reduce emissions from diesel-powered cars, which won a EUR 19.5 million investment from French automotive equipment supplier Faurecia. The other was a EUR 10.9 million investment by Sustainable Technologies Fund and Industrifonden of Sweden in Triventus Group, of Sweden, active in renewable energy, primarily wind power as well as biogas and small-scale hydroelectric power.
Global investment also on the rise
This contrasts with trends in the global cleantech venture capital and corporate investments in cleantech, which grew 13 percent in 2011, according to the Cleantech Group. The Cleantech Group forecasts that 2012 will be an all-time record year for global cleantech investments. Deals in the solar, wind, and energy efficiency industries earned a record USD 53.5 billion in 2011, according to Reuters. That represents a 40 percent increase from 2010, according to PricewaterhouseCoopers.
The forecast is favorable in the Scandinavian countries as well, where 60 percent of all private funding are directed toward energy-related technologies. The most attractive sectors for investment currently, according to Cleantech Scandinavia, are LED lighting, wind energy, replacement of traditional materials, solar energy, and wave and tidal energy. Globally, solar is the leading sector by amount of investment, followed by energy efficiency and transportation.
“The cleantech sector has been an attractive hub for investment in Denmark for quite some time, and I expect that to continue in the future,” says Bjarne Henning Jensen, the Investment Director at Vaekstfonden, responsible for analysis and investments within cleantech.
“If you look at the most successful Danish industry, they have a strong position in the world market and have been able to engage in cooperations where they can utilize that position,” he says. He adds that focusing on a range of technologies and the right business models is another key to success and attracting capital. “Danish cleantech companies have been successful in narrowing their focus and finding the niche markets in which to commercialize their technologies.”
Foreign investors are key
Internationalization is a necessity for the small Nordic countries, especially for capital-intensive energy technologies, where there is not enough public funds and risk financing available for commercialization of those technologies. Therefore, most Nordic cleantech companies target foreign markets, primarily within the EU, early in their development cycle.
Foreign venture capitalists help facilitate this process, with their market knowledge and industry contacts. There is big interest from foreign investors in the Nordic cleantech sector, which sometimes provide the largest deals, as seen by Amminex and French Faurecia. The exit market for Nordic cleantech is dominated by foreign industrialists, notes Cleantech Scandinavia, a trend likely to continue in 2012.
“The cleantech sector in the Nordics will continue to grow, no question about it,” says Olsen. “The fundamentals are there for the region to stay ahead, with solid management teams, supportive government policies, and a straightforward IP and legal environment.”