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Capital is chasing clean-tech firms

Banks, government agencies and venture companies are courting California enterprises seeking overseas clients for alternative energy.

January 31, 2007|Cyndia Zwahlen | Special to The Times

Interest in alternative fuel is heating up as global demand for clean technology turns the spotlight on the small California companies at the vanguard of environmental innovation.

Courting the state's growing clean-tech small businesses are banks, federal export finance officials and even venture capitalists, who have traditionally shunned the capital-intensive sector. They are focused in part on helping the small companies reach the overseas clients who are increasingly hungry for their technology.

"It is very important that we go to California and reach out to these small businesses to help them succeed in the international market," said Linda Conlin, vice chairwoman of the Export-Import Bank, an independent federal agency with a congressional mandate to boost service to small business and increase U.S. exports that benefit the environment.

The outreach, including several new initiatives, seems to be working.

The export value of environmentally beneficial transactions backed by the bank's popular working-capital program more than doubled to $385.7 million in the fiscal year ended Sept. 30 from $184.5 million in the previous year. Small businesses account for the majority of companies that use the agency's working-capital guarantee program, which backs loans made by the Ex-Im Bank's partner financial institutions to pay for materials to build products ordered by customers overseas.

Blue Sky Energy Inc., a six-person company in Vista, is one example of a California small business that has had success as a clean-tech exporter with Ex-Im's help.

Sales at the company, which designs controllers for solar-panel systems, have grown 25% annually for the last two years to just under $1 million last year, said Melanie Cullen, who co-owns the wholesale company with her husband, Rick.

She credits the recent growth to the company's ability to insure its accounts receivable in Australia and South Africa, among other countries, through Ex-Im's insurance program. Insuring its receivables guarantees that the company will be paid, which makes it more feasible to offer credit to customers.

"It has helped us immensely. Our customers can place larger orders and they don't have to cough up the money upfront," said Cullen, who is also vice president of operations and marketing.

She expects a similar boost in sales this year as planned product introductions attract larger orders from bigger customers. The larger orders probably will require the company to access Ex-Im's working-capital program, she said.

Double-digit growth at companies such as Blue Sky and the larger trends of rising prices and diminishing supplies of traditional fossil fuels have caught the eye of the venture capital community.

Cullen said she was surprised by the number of financiers wandering the halls at the recent Solar 2006 industry trade show in Northern California

"I have never seen so many venture capitalists and bankers in my life," she said.

They are apparently finding promising prospects to back.

Venture capital investment in clean-technology companies jumped 78% last year to $2.9 billion, compared with $1.6 billion in 2005, according to data released this month by Cleantech Venture Network.

"Venture-backed clean-tech start-ups are on a trajectory," said Jason Matlof, a partner at Battery Ventures in Menlo Park, Calif. "In five years people will look back and it will be deemed as one of the big venture trends, similar to the Internet trend."

Venture capitalists also took note when some of the biggest recent initial public offerings were made by clean-tech companies, said Matlof, who is behind his firm's new push into the sector.

California's SunPower Corp. is one example.

The San Jose maker of solar-electric power products went public 14 months ago. This month it announced it had purchased another clean-tech firm that benefited from the Ex-Im Bank's programs, Berkeley-based PowerLight Corp., for about $330 million.

PowerLight is so far the only company to benefit from the Ex-Im Bank's new, longer repayment term for renewable-energy export projects. PowerLight was able to sell its solar power technology to a South Korean buyer, who borrowed $7.8 million for 15 years, which is 50% longer than the standard 10-year term.

The City National Bank loan was backed by Ex-Im's guarantee. The money will be used to buy and install PowerLight's solar power system above a convention center parking lot.

The longer term, which is available under a two-year trial period that started July 1, 2005, makes smaller renewable-energy deals more feasible, said Tom Burr, senior vice president and manager of the export finance group at City National.

That's a boon for small businesses that want to tap the growing overseas market for alternative fuel and other environmentally friendly projects.

"China and other emerging markets like Korea are going to be very, very aggressive about green technology," Burr said. "It's a huge market."

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