Sustainable Industries
Market Insight
We see significant promise in nine core sectors of the sustainability marketplace:
- Materials
- Agriculture
- Air Quality and the Environment
- Energy
- Manufacturing / Industrial
- Recycling / Waste
- Transportation
- Water / Wastewater
- Green Building and Construction
We're also deeply impressed by the innovative drive that characterizes so many emerging growth companies in the world of sustainability.
And deal flow in sustainable industries is strong.
Based on the inquiries we're getting and the transactions we're closing, our belief is that financing activity in the sustainable markets will continue to expand over the next 12 months as these quintessential and dynamic 21st century opportunities take even greater shape.
The numbers show the way forward.
Private capital investments in sustainable industries reached $3.1 billion during the first three quarters of 2007. On an annualized basis, this represents $4.1 billion, a major increase over the $2.9 billion invested in 2006. Companies located in the State of Washington are among the nation's leaders when it comes to these types of transactions.
As part of this market growth, we cite a few sustainable industry transactions Cascadia helped engineer:
- Cascadia advised Clear Water Compliance Services, a comprehensive water quality service company based in the State of Washington, when it raised $25 million in Series A preferred equity and senior debt from Plainfield Asset Management LLC, a Greenwich, Connecticut hedge fund.
- Cascadia helped HaloSource, another Washington State-based company, expand its global water purification efforts through structured debt financing. The Masdar Clean Tech Fund, created by the government of Abu Dhabi, Credit Suisse and Consensus Business Group, provided financing.
- And Cascadia advised Imperium Renewables when it secured $113 million from the Seattle City Employees Retirement System.
Trends to Watch
Many sustainable industries offer huge upside right now; and many companies in the New Energy Economy are creating unprecedented value. There are a host of stories worth considering, but at this moment we suggest the following:
- The quality and supply of global water is a huge and pressing issue that won't go away, so technologies that help in this regard are sure to remain attractive.
- Cutting-edge battery technology is essential to the legions of hybrid and electric vehicles that are on the drawing board and being manufactured. We especially like companies that develop software for next-generation transportation batteries. Software is the brains of the vehicle.
- Advanced solar inverters are being developed in an effort to bring efficient utility-scale solar projects to fruition. This is a key component, and one that bears watching.
- In terms of waste to fuel/energy, garbage, refuse and single-use biomass are in plentiful supply, and demand for alternate energy continues to grow by leaps and bounds. The key in the wake of questionable ethanol financings, however, is to focus on bountiful and unencumbered inputs so each transaction's cost basis is clear and controlled up front.
- Finally, green building and construction. Buildings account for a $222 billion annual energy bill in the United States. And all that brick and mortar and glass and steel draws down about 50 percent of the national energy demand when every energy-related factor necessary to serve buildings and their occupants is included. Last year, the commercial green building industry represented a $15 billion market growing at an annual rate of 40-50 percent.
Financing the Future
The innovative new world of sustainable industry doesn't fit the traditional financing mold. Many of the companies in these increasingly global markets require project financing for infrastructure, for example. Over the past 12 months, we've tried hard to be flexible in our capital-raising efforts, and we've also attempted to increase capital efficiency in the process. In large measure, we think we have succeeded.