Advanced Energy confirms exit of solar inverter business

Advanced Energy, the U.S.-based developer of precision power conversion technology and solar inverters, has announced this week that it is to officially exit the solar inverter business after struggling with poor sales in the sector.

Having posted a 24.7% quarter-over-quarter revenue decline for its inverter business in Q1 2015, Advanced Energy has taken the decision to wind down its solar inverter business, AE Solar Energy. The decision comes after efforts to engineer a strategic alternative for the business proved fruitless.

"Following on the heels of a strong 2014 and first quarter 2015 in precision power that reinforced the strength of our business model, and after an extensive strategic process over the last six months, we concluded that focusing solely on our precision power business and exiting the solar inverter business aligns with our long-term goal of maximizing value for our shareholders," said Advanced Energy CEO and president, Yuval Wasserman.

Data from IHS placed Advanced Energy third globally in 2013 in terms of market share, with the company cornering 4% of the global market. In 2014, however, the company dropped from the top 10 following a sizeable market share loss in the U.S. three-phase high power inverter market. Additional price reductions exerted greater pressure on the company, but IHS solar analyst Cormac Gilligan has remarked that a complete wind down of Advanced Energy’s solar division is surprising.

"Given its huge after-sales service network, large installed base of central inverters, leading brand awareness among EPCs and its early presence in the O&M business which is a high growth area, it is surprising that the business will be wound down rather than acquired," Gilligan said. "While its share in utility-scale may have diminished due to competitors offering newer products or more competitive prices, it is a rare occurrence that a supplier exits a booming market when there is still a huge opportunity."

That opportunity was described by IHS as a potential 12 GW inverter market in 2015 and 2016 in the U.S. alone.

According to an Advanced Energy statement, the company will record a pre-tax charge of around $260 million to $290 million related to the shuttering of its inverter operations, which will impact its Q2 2015 financials. Around $15 million of this will be allocated to employment termination costs, with $75 million to the write down of inventory, fixed and other assets. There will also be severance costs and expenses in the region of $30 million to $45 million, the company confirmed.

Efforts to sell AE’s inverter business have been unsuccessful, as were attempts to enter a joint venture, partnerships and spin-offs, and the company’s inverter struggles reflect the reality of industry that is tightening its belt as PV price pressures have moved along the supply chain.

Industry leader SMA was forced to take drastic measures earlier this year, shedding around one-third of its global staff in order to stay competitive in the wake of growing Asian competition and an increasingly globalized landscape that has brought severe price pressure to bear.

"With Advanced Energy’s exit from the market," continued Gilligan, "it will leave a large void in the commercial and utility-scale inverter market in the U.S. This represents a huge opportunity for leading suppliers such as ABB and Schneider Electric, or for recent market entrants such as TMEIC or Power Electronics to grow their presence."

Gilligan added that China’s Sungrow, Huawei and TBEA may leap at this opportunity to expand further into the U.S. inverter market.