Solar Industry Thinks M&A as Prices Plunge
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The 40 percent decline in renewable energy system prices will likely force many smaller and struggling solar manufactures to merge in an effort to stay alive and avoid bankruptcy.
Companies in which analysts believe will be able to survive include China's Suntech Power Holdings Co (NYSE: STP), Trina Solar Ltd (NYSE: TSL) and Yingli Green Energy Holding Co Ltd (NYSE: YGE) from China; First Solar Inc (Nasdaq: FSLR) and SunPower Corp (Nasdaq: SPWR) from the U.S. and Germany's SolarWorld, reports Reuters. The article highlights Germany based Conergy AG, Q-Cells SE, Solar-Fabrik AG, and Sunways AG are all possible merger targets.
The industry is currently experiencing a large amount of oversupply as China's state-run banks opened billions of dollars in credit lines to the industry, which resulted in an abundance of smaller firms that sell modules or the wafers and cells to build the models. The demand for renewable energy has also gone down since the U.S. and other European countries have cut back or completely eliminated previous tax incentives for business and its citizens.
After watching a number of smaller model producers go under, China's Ministry of Industries and Information Technology is now asking Beijing to develop a system with two major solar makers with production capacity of five gigawatts and eight to ten smaller companies with the capacity to produce 1 gigawatt. Reuters reports that Suntech currently has the largest production capacity with 2.4 gigawatts.
Larger, cash-flooded companies looking to jump into the solar industry might not seem like a new story for some. A notable previous merger within the industry includes Hanwha, who purchased roughly a 50 percent stake in Chinese Solarfun Power Holdings to form Hanwha SolarOne (Nasdaq: HSOL). Also, earlier this year Total SA (NYSE: TOT) purchased a majority stake in SunPower.
Reuters reports customers are now beginning to purchase more from solar producers who are financially sound and look to be around for a longer period than a year or so. Zhengrong Shi, Suntech's chief executive officer, noted in November the six largest module suppliers experienced a market share jump from 26 percent to 55 percent.
Companies in which analysts believe will be able to survive include China's Suntech Power Holdings Co (NYSE: STP), Trina Solar Ltd (NYSE: TSL) and Yingli Green Energy Holding Co Ltd (NYSE: YGE) from China; First Solar Inc (Nasdaq: FSLR) and SunPower Corp (Nasdaq: SPWR) from the U.S. and Germany's SolarWorld, reports Reuters. The article highlights Germany based Conergy AG, Q-Cells SE, Solar-Fabrik AG, and Sunways AG are all possible merger targets.
The industry is currently experiencing a large amount of oversupply as China's state-run banks opened billions of dollars in credit lines to the industry, which resulted in an abundance of smaller firms that sell modules or the wafers and cells to build the models. The demand for renewable energy has also gone down since the U.S. and other European countries have cut back or completely eliminated previous tax incentives for business and its citizens.
After watching a number of smaller model producers go under, China's Ministry of Industries and Information Technology is now asking Beijing to develop a system with two major solar makers with production capacity of five gigawatts and eight to ten smaller companies with the capacity to produce 1 gigawatt. Reuters reports that Suntech currently has the largest production capacity with 2.4 gigawatts.
Larger, cash-flooded companies looking to jump into the solar industry might not seem like a new story for some. A notable previous merger within the industry includes Hanwha, who purchased roughly a 50 percent stake in Chinese Solarfun Power Holdings to form Hanwha SolarOne (Nasdaq: HSOL). Also, earlier this year Total SA (NYSE: TOT) purchased a majority stake in SunPower.
Reuters reports customers are now beginning to purchase more from solar producers who are financially sound and look to be around for a longer period than a year or so. Zhengrong Shi, Suntech's chief executive officer, noted in November the six largest module suppliers experienced a market share jump from 26 percent to 55 percent.
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