Analysis: Bluestar Elkem's REC Solar Group play


The story of consolidation within the PV industry has continued, with the latest being one of the few ‘non Asian owned’ solar manufacturers being potentially snapped up by a Chinese state-owned giant. Bluestar Elkem has put an offer for REC on the table that will give it the opportunity to test the waters of PV manufacturing, while providing it non-Chinese solar manufacturing, and a potential “test fab” for PV manufacturing using the non-Siemens silicon it produces.

“My initial reaction was: at least it wasn’t Shungfeng [Photovoltaic International] this time,” said Bloomberg New Energy Finance’s (BNEF) Jenny Chase, when reflecting on Bluestar’s Elkem’s $640 million purchase offer to REC Solar shareholders. Chase added that it is news to few that REC Solar was seeking a “large acquirer” following its spin off from its silicon operations.

“I wonder if [Bluestar] Elkem is thinking that it is relatively difficult to sell upgraded, metallurgical silicon at the moment because ordinary silicon is just so cheap and everybody knows how to deal with that,” said Chase. “So Elkem could be thinking, ‘if we have a partner who is pretty good at doing the whole rest of the value chain, then we will have a better chance and at least can find out if this works.’”

China-based Frank Xie from IHS said that the China National Chemical Corporation, Bluestar Elkem’s parent company, could represent a “strategic trial” for the state-owned giant. “The original chemical group is testing water the PV manufacturing industry as one of expanding directions,” said Xie. He noted that the China National Chemical Corporation turned a before-tax profit of RMB2 billion (US$330 million) in 2013.

On the REC Solar ASA side, IHS notes that the injection of funds could provide the company with the financial backing required to expand its Southeast Asian manufacturing operations.

“The move could help REC Solar to maintain its position in a strongly growing photovoltaic industry,” said IHS analyst Stefan de Haan. “Cost pressure is tough, and the next huge expansion projects involving significant investments are already under way. Bluestar could be the strategic partner required for REC Solar to compete against other leading manufacturers in that environment.”

For BNEF’s Jenny Chase, the offer of acquisition also shows that only the early signs of a PV market rebound is enough to see investment flow.

“It is also a sign that hope always springs eternal in the solar industry,” said Chase. “It seems that very often there is more capital that can be raised as soon as there is any hope in the market – which is good if you’re a buyer of solar modules.”

REC Solar ASA is minority shareholder in the U.S. commercial PV installer REC Solar. The U.S. operations inform pv magazine that it is not involved in the Bluestar transactions.