Sun setting on solar equipment industry; only to rise on stronger consolidated players

The solar-equipment industry is beginning a consolidation that’s already the biggest in at least two years as plunging prices for photovoltaic systems force weaker companies to team with competitors or close shop.


Mergers and acquisitions announced so far this year total $3.3 billion, up 33 percent from the $2.47 billion in all of last year, data compiled by Bloomberg show. Evergreen Solar Inc. (ESLR) of the U.S. today set a Sept. 20 meeting for its creditors after seeking bankruptcy protection this month. German solar-panel maker Q-Cells SE (QCE) in July said it’s open to takeover bids.

Tumbling solar-cell prices are provoking deals. Their 42 percent drop in 2011, stemming from tougher Chinese competition and declining solar-energy incentives in Europe, contributed to California’s Sunpower Corp. (SPWRA) and Roth & Rau AG (R8R) of Germany agreeing to takeovers. Ascent Solar Inc. took a Chinese partner.

A sell-off in solar stocks has made acquisitions cheaper. The Bloomberg Industries Global Large Solar Index dropped 36 percent this year through yesterday, compared with a 3.8 percent decline in the Standard & Poor’s 500 Index in that period.

“The industry is ripe for consolidation,” Michael Schostak, director of business development and communications at Auburn Hills, Michigan-based Energy Conversion Devices Inc. (ENER), a maker of thin-film solar laminates, said in an interview.

Adam Krop, an analyst at Ardour Capital Partners in New York, put Energy Conversion on his list of vulnerable companies. Aaron Chew, an analyst at New York-based Maxim Group LLC, named Daystar Technologies Inc. (DSTI) and Q-Cells.

Evergreen said it plans to sell itself at an auction. Hopewell Junction, New York-based cell maker SpectraWatt Inc. this month also filed for protection from creditors.

Q-Cells, once the world’s largest maker of solar cells, hired investment bank and bankruptcy adviser Houlihan Lokey to look at financing options, it said last week.

“It’s totally feasible that Q-Cells goes under,” Chew of the Maxim Group said in an interview. The company’s shares reached a record low Aug. 10 after forecasting a “three-digit million-euro” loss for the year.

Other German solar companies are struggling. Solon SE (SOO1) said on Aug. 16 that it will cut 15 percent of its jobs after inventory rose 45 percent in the first quarter to 160 million euros ($230 million) from a year earlier.

Roth & Rau, the German maker of solar-cell manufacturing equipment, agreed in April to a takeover by Swiss competitor Meyer Burger Technology AG, after first-quarter inventory more than tripled to 97 million euros.

Schostak of Energy Conversion said the most likely takeover targets offer commodity crystalline silicon products and that his company is talking to potential partners about integrating its flexible cells into products from roofing tiles to backpacks. He didn’t name the companies.

Daystar Technologies, a Milpitas, California-based maker of thin-film solar cells, is “in discussions” with potential investors to “provide financing, manufacturing capabilities or other opportunities,” Chief Financial Officer Chris Lail said in an interview.