SolarCity enters solar panel market with Silevo purchase

Share

In a typically zestful blog post published today on its website, solar leasing flag-bearer SolarCity has announced the acquisition of Californian solar panel maker Silevo.

According to CEO Elon Musk and co-founders Peter Rive and Lyndon Rive, the purchase signals SolarCity’s intention to "combine what we believe is fundamentally the best PV technology with massive economies of scale to achieve a breakthrough in the cost of solar power."

In purchasing its own solar panel maker, SolarCity has edged one step closer to becoming a fully integrated solar provider, securing its solar panel supply chain with the acquisition of a company renowned for its efficient, high quality panels.

Terms of acquisition

The acquisition has not required SolarCity to raise vast amounts of cash. In its advice to the investment community, the lease provider announced that the acquisition had come at a cost of $168 million in stock, the assumption of $23 million in Silevo liabilities and $9 million in cash – although the cash portion is subject to change prior to closing.

There are additional earn-outs included in the acquisition deal worth $150 million, based on "MW production and cost targets through 2016", the advice reads.

The expected payback on the investment, wrote SolarCity, was three to four years, based on manufacturing at scale costs against module market prices.

In its investor advice, SolarCity notes that it is already in "advanced discussions" with partners with regards to funding the manufacturing build out.

SolarCity also pointed to the US/Sino solar trade dispute in its reasoning behind the move towards full integration. Along with reduced transportation costs, against importing modules, SolarCity also advised that "no import tariff" would apply to its American made modules.

Technology profile

Silicon Valley-based startup Silevo ticks all the boxes attractive to SolarCity. It is an innovative, savvy and ambitious company that, like SolarCity, has regularly been bolder than the competition. The company was founded in 2007 and develops hybrid cells in its 32 MW manufacturing plant in China. The cells are comprised of silicon and amorphous silicon, separated by a tunneling oxide layer that delivers 21% cell efficiency. In using copper rather than silver for the grid lines, Silevo has been able to drastically lower its production costs. Although not yet profitable, the company did generate revenues of $16 million in 2013.

Armed with its unique solar equipment, the panel maker had been eyeing a second, 200 MW manufacturing facility in, Buffalo, New York State – expansion plans that will go ahead on a far larger scale now that SolarCity is behind the project.

"We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team," read today’s blog making the acquisition announcement, which was penned by Musk and Lyndon and Peter Rive. "At a targeted capacity greater than 1 GW within two years, it will be one of the single-largest solar panel production plants in the world."

SolarCity confirmed that no additional acquisitions are currently in the pipeline, but did not rule out further portfolio and product expansions in the future as the company pursues "clear technology leadership".

Evolution of a startup

In a possible attempt to pre-empt industry watchers querying SolarCity’s motives, the blog post stressed that the company’s acquisition of Silevo was made with a clear eye on the future. "Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed," the post read, adding that too many suppliers are producing too many low-efficiency solar cells at "uncompelling costs".

During a conference call held today, Musk added that he thought the timing was right to make an acquisition and enter the advanced solar panel market. "If we don’t do this," he stressed, "then we thought there is a risk of not being able to have the solar panels we need to expand the business in the long term."

Having recently acquired solar racking company Zep Solar for $158 million, SolarCity has now become only one of four U.S.-based solar companies to offer manufacturing, sales and installation services (the other three being First Solar, SunPower and SunEdison).