Just as private equity houses are found to be ramping up their interest in the oil and gas sector, they are at the same time backing out of green energy and cleantech, worried about the possibility of a green bubble forming.
A survey by Rothstein Kass showed 24 per cent of more than 200 PE fund managers highlighting the green sector as the most likely to produce the next investment bubble.
Thomas Angell, principal-in-charge of the Private Equity Practice at Rothstein Kass, told Reuters:
I think lot of people are jumping into (green and cleantech) figuring it’s the next place to make money. For the right technology… there’s obviously a price to be paid.
In the west, there are signs of that bubble beginning to burst already: private investment in UK renewables slumped last year to just a third of the previous year’s total. But growth from emerging economies, and especially China, has meant that globally, the green juggernaut kept rolling even during the financial crisis, with global investment rising threefold from 2005 until 2010.
Bubble or no bubble, private equity’s nervousness is already being felt: smart meter maker Landis+Gyr watched as two PE houses backed out of bidding for the company in recent weeks. But in the end L+G did their deal, selling the company for $2.3bn to Toshiba.
With many energy companies having built up a large warchest in the aftermath of the crisis, it may be some time before money for green investment runs out.