Tuesday, October 5, 2010

Big Solar Companies Gobbling up Project Developers

Solar panel manufacturers continue to gobble up project developers like San Francisco-based Recurrent Energy, an integration that’s likely to lead to more and bigger projects in the United States and Canada.

Japanese electronics giant Sharp, the third-largest solar panel manufacturer in the world, announced Sept. 22 it would buy Recurrent Energy, which has signed contracts to develop 330 megawatts of solar projects, and has up to 2 gigawatts in some stage of development, for $305 million.

“The necessity of the transaction is driven by the success Recurrent Energy has had and the pace,” said Recurrent CEO Arno Harris. “This business, as we continue to develop and build out projects, demands a tremendous amount of capital to be deployed.”

While Recurrent would have been hard-pressed to raise the money to finance all of the projects in its pipeline on its own, deep-pocketed Sharp will have access to cheaper capital than independent developers would and will be able to finance project development. A lack of available financing has stalled tons of projects or made them too expensive to justify for independent project development firms like Recurrent over the last couple of years.

The acquisition also means Sharp will have access to a steady U.S. sales channel to sell its panels in an increasingly important market.

Lucrative incentives in Europe — especially in Germany, Spain and Italy — are being dialed back. Those incentives, until now, have made it hard for the United States to compete for a constrained supply of solar panels. Now manufacturers in and outside of the United States are looking to the North American solar market to make up for what they’re likely losing in Europe.

“The U.S. market is looked at as the next champion market — the next growth market to drive the market forward,” said Greentech Media solar analyst Shyam Mehta.

To get a foothold in the U.S. market, Sharp is following in the lead of San Jose-based SunPower Corp. and Tempe, Ariz.-based First Solar, which both manufacture panels and develop solar projects and both of which have bought development pipelines in recent years.

“The only two manufacturers that are clearly successful in the U.S. market are First Solar and SunPower,” Mehta said.

The interest in integrating solar manufacturing capacity with development pipelines and financial firepower is expected to continue to drive deals. San Francisco-based Renewable Ventures was taken over by Spanish solar developer Fotowatio in 2009, and the combined company started a joint venture with Suntech, the world’s second largest solar panel manufacturer. However, after pursuing just one project in Austin, Texas, the joint venture is now inactive.

Analysts are speculating that Fotowatio is an acquisition target, with its huge project pipeline but no dedicated source of solar panels. Other Bay Area companies could be added to that list, including Mill Valley-based Solar Power Partners and San Mateo-based Tioga Energy, which finance, own and operate commercial-scale solar projects.
Solar M&A flares

Solar manufacturers continue to buy project developers.

Date: March 2009.
Price: $400 million.
Solar contracts: 1.85 gigawatts.

NextLight Renewable Power
Date: April 2010.
Price: $285 million.
Solar contracts: 520 megawatts.

Date: November 2006.
Price: $332.5 million.

SunRay Renewable Energy
Date: February 2010.
Price: $277 million.
Solar contracts: 1,200 megawatts.

Recurrent Energy
Date: September 2010.
Price: Up to $305 million.
Solar contracts: 330 megawatts.


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