Solar consolidation: Hit the reset button

14. September 2012 | Top News, Industry & Suppliers, Markets & Trends | By:  Charles W. Thurston

Industry analysts were in agreement at the SPI 2012 conference, held on Thursday, that the solar industry is set for major consolidation over the next 1 year to 18 months. "The reset button needs to be hit; but tremendous value will be unlocked by it," reckoned Arno Harris, CEO of Recurrent Energy.

General solar photovoltaic panels

The solar consolidation period is still not over.

One of a group of panelists considering the potential impact of mergers and acquisitions, Arno characterized the solar industry as being in a peculiar situation of "profitless prosperity" now, so the coming wave of consolidation "should be a welcome thing which we accept as part of the growing pains of an industry that will survive."

The panelists suggested that while the upstream manufacturing portion of the industry – including photovoltaic module manufacturers – would be hardest hit, consolidation seemed to be just as inevitable downstream for projects and utilities. "It's going to be a rough consolidation period and for PV panel makers it will be brutal, but at some point we will bottom out and then we will have something akin to Solar 2.0, as we did with Internet 2.0," said Jesse Pichel, the principle of CleanTech LLC and moderator of the SPI discussion session, referring to the consolidation and subsequent strengthening of the Internet industry.

"I predict a politically-driven consolidation among (upstream) Chinese companies, with more diversified industrial companies acquiring upstream solar manufacturers," said Angiolo Laviziano, a co-founder and board member of Mainstream Energy Corp.

Peter Xie, president of GCL-Poly Solar Energy Power System Integration, echoed that prediction, narrowing the likely group of solar acquirers in China to state-owned enterprises, which would have the balance sheet strength to restructure the acquired companies, as well as a mandate to save jobs. Such an outcome would not necessarily translate into a rash of new global solar players, however, since "the state-owned companies are behind in the move out of China and into the international markets," he cautioned. In a more global context, Xie added, "I see a lot of technology companies in talks with larger companies now."

A union of upstream components manufacturers and U.S. distributors also was noted as likely. "I see opportunistic acquisitions by upstream companies of distributors for more of a guaranteed customer base," reckoned Laviziano.

The ranks of U.S. solar project developers, which Harris estimated at 700 today, will also see consolidation, he said. "It's hard to go through all the paces of developing a project today if you only have 10 megawatts under your belt." One potential set of acquirers for development companies may be financial institutions seeking to enter the market, suggested Laviziano.

Furthermore, within the residential and small commercial rooftop segment of the industry, consolidation is anticipated. "There could be some consolidation of the U.S. residential and commercial lease/PPA market where there is a complementary fit with another type of solar company," stated Kennedy.

Downstream U.S. consolidation also was broadly predicted by the analysts. Several suggested utilities will be forced to enter the rooftop installation business as they find themselves increasingly competing with solar companies to power homes and big-box businesses. Indeed, Danny Kennedy, founder of Sungevity, said, "The question five years from now may be why solar companies aren't buying utilities. The tail may yet wag the dog."

On the other hand, there could be some dis-aggregation within the U.S. residential rooftop segment, said Lavisiano, stating, "There could be dis-aggregation in residential resulting from the door-to-door sales business model, wherein they sell aggressively and know what they can offer."

The consolidation wave seems imminent, the analysts say, but first-half 2012 merger and acquisition statistics point to a moderate year for deals thus far. According to a recent report by Mercom Capital Group, "There were 14 M&A transactions in Q2 2012 amounting to $325 million with only six of the 14 disclosing transaction amounts. There were no blockbuster M&A deals this quarter. Instead, most were small strategic transactions with a number of them being acquisitions of business divisions for synergistic reasons."

Mercom also noted that "in some cases, acquisitions were of 'sick' companies getting rid of non-strategic businesses and assets. The largest disclosed M&A transaction was the acquisition of Zhejiang Topoint Photovoltaic, a Chinese mono- and polycrystalline maker, for $276 million by Guangxi Beisheng Pharmaceutical in an asset restructuring plan."


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Christopher Nigischer from Bremen | http://www.consider-it.de/en/archives/1312

Saturday, 15.09.2012 09:04

We totally agree with "Solar 2.0" - here is how we are working on that (http://www.consider-it.de/en/archives/1312):
Since November 2011 consider it was supporting ADLER Solar and BLG Logisctics in their business model innovation project for the solar industry. The aim was to anticipate upcoming changes in the solar industry with major effects on pv module manufacturers and to design a service portfolio that helps those manufacturers focus on their core business activities (R&D, production, marketing and sales) and establish an outsourcing offer named "Solar 2.0 - Services & Logistics".

This business model innovation project was based on the insight that upstream integration was almost complete with most of the major manufacturers. Consequently the upcoming months will see a growing level of downstream activities. Especially closing the gap to the end customer and have adequate service capabilities in place is one of the major challenges in this field. Solar 2.0 offers solutions for this challenge and is positioned as service outsourcing offering with the perspective of being rolled out globally.

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