Impax Asset Management Group Plc, managing about $3.5 billion, is evaluating investments in four or five publicly traded solar companies in China, Europe and the U.S. as the oversupply of manufacturing capacity declines and prices recover.
The investor is looking at a company that leases sites for parks, a producer of inverters and a couple of low-cost Chinese makers of polysilicon and panels, Bruce Jenkyn-Jones, managing director of listed equities at Impax, said in an interview.
“If you’re investing in the stock market today in the renewables sector, the first place you would look is the solar sector,” Jenkyn-Jones said. “This is starting to turn around and there are pockets of opportunity emerging for long-term investors.” London-based Impax’s listed equities unit currently has less than 10 percent of its assets invested in renewables.
Producers have been battling a glut as China raised output even as European subsidies for renewables fell because of fiscal austerity. That cut solar panel prices 55 percent in the past two years, trimming margins and pushing more than 30 companies, including Q-Cells SE and a unit of Suntech Power Holdings Co. into bankruptcy. More are likely to follow, Jenkyn-Jones said.
While oversupply remains a problem, clean energy will be a long-term investment opportunity as long as there’s a need to cut reliance on fossil fuels and renewables costs fall, he said. The situation’s improving in India and Brazil and the California rooftop leasing market is “very interesting,” the MD said.
“Renewables was a market distorted by subsidies,” said Jenkyn-Jones. “Falling costs are now reducing subsidies, leading to more sustainable business models. Consolidation is also likely to lead to a more efficient market.”
Impax is also studying Asian companies involved in wind power such as suppliers of gearboxes and turbines, as well as maintaining some investments in wind-farm operators, he said.
The firm’s biggest investments are in energy efficiency, where the payback periods are shrinking as prices fall and regulation supports use of the technology, Jenkyn-Jones said.
The investor has increased holdings in the water industry, particularly infrastructure. Population growth and rising wealth is driving investment in Asia, and China’s current five-year economic plan includes spending on water infrastructure, Jenkyn-Jones said. The U.S. and U.K. are replacing aging networks.
Impax, an investor in closely held companies through its private-equity division, in September 2011 raised 330 million euros ($428 million) in such a fund for European wind. The fund will be fully invested in renewable energy projects by 2015.
The company managed about $3.5 billion for institutions and wealthy investors worldwide on April 30, it said on its website.