In Q2 2011, equity financing and M&A in the energy efficiency / demand response sector were healthy, although down from the previous quarter. Q1 had been a strong "bounce-back" quarter as deals expected to close in Q4 2010 slipped into Q1 2011. In Q2, money rotated into the sector. It left capital-intensive sectors such as biomaterials/biofuels and solar and moved into the more capital-efficient energy efficiency sector. Indeed, energy efficiency was the top sector in cleantech for Q2 2011 with the largest amount of investment dollars ($428 million) and the largest number of deals (38).

 As robust as the efficiency sector is already from an investment standpoint, we believe it will explode in Q3 and Q4.

The Schneider Electric purchase of Summit Energy Services for $268 million was priced at approximately 4X revenue. Summit Energy offers a real-time, software-based energy management solution that saves energy. In addition to software margins, Summit also has a subscription-based business model, making it very attractive from a margin and visibility standpoint. Wall Street likes the Summit business model and puts a premium valuation on it.

In our opinion, the transaction signaled that the energy efficiency sector has come of age.

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