Subject line: Bosch Acquires Ersol Solar, Large Industrials Moving Into Solar Sector
The recent announcement on
June 2, 2008
, that Robert Bosche GmbH (privately-held) plans
to buy German-based Ersol Solar Energy AG (FRA:ES6) provides another example
of how global industrial conglomerates are carefully watching for opportunities
in the fast-growing solar sector.
Bosch bought a majority stake in Ersol for 546 million euros from Ventizz
Capital Partners at a 63% premium to Ersol’s closing price on May 30.Bosch plans to make a public tender offer for the remaining 50.45% of the
company, according to Bloomberg News. Ersol’s
stock rallied 63% on June 2 in response to the takeover news and has since
remained near that level, indicating market confidence that the takeover will be
completed.
Ersol Solar Energy AG is a diversified solar player that has a scrap
silicon recycling operation and produces polysilicon, silicon wafers, silicon
solar cells, and thin-film solar cells and modules.Ersol has about 1,000 employees. Revenues
in Q1-2008 roughly doubled year-on-year to 52.4 million euros and net income was
3.2 million euros. Ersol’s
management expects to have 180 megawatts of wafer production capacity and 220
megawatts of crystalline solar cell production capacity by the end of 2008.Ersol has provided guidance for 300-320 million euros of revenue in 2008
and 70-80 million euros of operating profit.Ersol said that its production output for 2008 is already completely sold
out.
What is one of the world’s largest automotive component part maker, with
46 billion euros in sales, doing buying into the solar sector?The simple answer is diversification into the promising solar sector and
away from the low-margin automotive components industry.
The solar industry has grown at a 47% average annual rate in the past six
years and is poised to grow at an annual rate of about 40% for at least the next
several years. The solar industry
has reached mass production stage with about $30 billion in sales in 2007,
according to Photon International. The
upside for solar is truly massive since solar power accounts for only 0.06% of
world electricity generation at present (according to Photon Consulting),
meaning the sector has room to grow at double-digit rates for literally decades
without hitting saturation levels.
There are a handful of large industrial conglomerates that have already
been in the solar business for years. Several
Japanese-based conglomerates were pioneers in the industry and have long ranked
in the top 20 global solar cell/module producers.In 2007, Sharp
(SHCAY (ADR), TSE:6753)
ranked as the second largest solar cell/module producer (behind Q-Cells FRA:QCE
in first place), Kyocera (NYSE:KYO
) as fourth, Sanyo (SANYY.PK,TYO:6764)
as seventh, and Mitsubishi Electric Corp (TYO:6503) as twelfth, according to PV
News’s 2007 rankings (www.prometheus.org).
Other global conglomerates have also been players in solar for years
including BP, General Electric and Boeing’s Spectrolab.Two large companies, Swiss-based OC Oerlikon AG (VTX:OERL) and U.S.-based
Applied
Materials (NASDAQ:
AMAT
) have quickly become the two leading players in producing turn-key
thin-film solar module fabrication lines that other companies can buy to produce
solar modules in their own factories. Large
utilities and construction companies have also entered into the business of
developing solar photovoltaic or solar thermal projects, including (among
others) Spain-based Acciona (MCE:
ANA
, ACXIF.PK), Spain-based
Iberdrola SA (MCE:IBE) and its recent spin-off off its Iberdrola Renovables unit
(MCE:IBR), and
FPL
Group (NYSE:
FPL
).
In another example of large companies moving into solar,
Moser Baer India Limited (BOM:517140), the world’s second largest manufacturer
of optical storage media, has entered the solar sector in a big way with both
crystalline silicon cell technology and thin-film technology.Moser Baer plans to use its world-class manufacturing know-how to drive
down the costs of solar cell production and become a major global player.
What’s going on here? Simply
put, the solar industry is growing up. The
solar industry is simply following the tried-and-true industry model where
small, specialized players blaze the way with revolutionary technology and a big
dose of risk-taking and fortitude. Then
the large players in the sector snap up the winners after they prove their
technology and sales traction. This
is akin to the old adage of letting the pioneers in the industry get shot in the
back with arrows and then buying up the ones that are ultimately successful.The solar industry has now reached a level of maturity where there are
likely to be more cases of large industrial companies buying up mid- to
larger-tier solar companies.
_____________________
By Richard Asplund, investment analyst and author of Profiting
From Clean Energy: A Complete Guide to Trading Green in the Solar, Wind,
Ethanol, Fuel Cell, Carbon Credit Industries, and more.
Disclosure: Richard Asplund does not have
positions in any of the stocks mentioned in this report.
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