SolarEdge files for $125 million IPO

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SolarEdge, the Israeli-headquartered solar firm that specializes in power optimizers, inverters and data monitoring systems, yesterday submitted an S-1 initial public offering (IPO) form with the U.S. Securities and Exchange Council (SEC) with the intention of raising up to $125 million.

The decision by SolarEdge to seek an IPO is viewed within the industry as indicative of the growing strength of the module-level power electronics (MLPE) market, of which SolarEdge has rapidly become a key player.

Although smaller in revenue size than U.S. competitor Enphase, SolarEdge has shipped some 4.5 million power inverters and 201,000 inverters since its inception in 2006. When Enphase went public in 2012, the company had just 1.55 million microinverter shipments under its belt.

Revenue-wise, Enphase posted annual earnings of $149.5 million when the company floated. SolarEdge achieved similar revenue in calendar year 2014, posting $139.8 million.

In just a short space of time, SolarEdge has accrued shipments of 601 MW, with the U.S. market accounting for 72% of its latest revenues. In the past six months alone, 32.3% of its U.S. revenues have derived from a single customer, identified as ‘Customer B’ in the S-1 filing.

GTM Research’s director of solar research, MJ Shiao, suggests that only SolarCity has the necessary clout to account for such a large proportion of SolarEdge’s balance books. And for a company looking to increase its market share of the growing U.S. residential landscape, that is not a bad customer to have on board, Shiao notes.

"This customer represents significant exposure but also a launching pad in the U.S. residential space," the analyst told pv magazine.

However, Shiao notes, SolarEdge’s continued success post-IPO will lead it into direct competition with not only Enphase – who just enjoyed a record-breaking quarter and fiscal year – but also traditional heavyweights SMA and ABB, as well as newcomers to the increasingly crowded MLPE space, such as LG.

Growth of MLPE and three-phase inverters

Already strong in Europe, the benefits of a three-phase string inverter architecture at commercial level are expected to be embraced more fully in the U.S. in the near future – a development that will smooth SolarEdge’s transition into the U.S. commercial space, believes Shiao.

"SolarEdge is leveraging the three-phase string inverter architecture, and is able to offset the power optimizer premium through internal savings via its fixed-voltage inverter as well as with electrical BOS savings via string stretching."

Referring to GTM’s Global PV Inverter Landscape report, Shiao adds that there is a huge global opportunity for the MLPE market, which the analyst expects will grow from 4% global annual inverter shipments last year to more than 11% by 2018.

"In 2015, we expect total combined MLPE shipments to well exceed 2 GW," Shiao said. "Furthermore, we expect the U.S. residential market to continue growing at 50% to 55% year-over-year ahead of the ITC cliff in 2017 – a strong foundation and growth opportunity for MLPE vendors."

Salt in Europe’s wounds

A recent report by IHS forecast that the U.S. and Japan are set to account for almost half of global solar PV inverter revenue in 2015 and 2016. The report was followed shortly by U.S. microinverter supplier Enphase posting record-breaking revenues for Q4 2014 and the entirety of last year.

As price pressure intensifies and global competition sharpens its claws, the European inverter landscape could begin to look increasingly barren over the next 18-24 months.

"A successful IPO would give SolarEdge a significant war chest to tackle traditional inverter manufacturers weakened by European market woes and global pricing pressure," suggested Shiao

IHS solar analyst Cormac Gilligan agrees. "In Europe, the additional money raised would allow SolarEdge to consolidate its position in the large residential and small commercial PV markets such as the U.K., Germany, Italy and the Netherlands," Gilligan told pv magazine. "It would also enable them to further expand their sales team and after-sales service by having a local presence in each market – something which is crucial to success in Europe."

Gilligan believes that a sophisticated SolarEdge presence would pour significant pressure on to other inverter suppliers operating in Europe, particularly those unable to provide the same level of service.

A more global reach

IPO money would also allow SolarEdge to invest more heavily in R&D and bring new products to market quicker, which may allow the company to compete more effectively with Enphase in the key U.S. market.

"In particular, the additional money raised in an IPO would allow SolarEdge to make a bigger push into another key residential and small commercial market, such as Japan, where they have yet to gain JET certification for their single-phase and three-phase inverters," added Gilligan.

SolarEdge currently does brisk business on its power optimizers in Japan, and with the combined residential and commercial market set to reach more than 5.5 GW in 2015, this could be a huge opportunity for the company.