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Clean Energy Poised for Mergers on $400 Billion Slump (Update1)
2010-11-10 14:05:10.654 GMT
(Adds Gamesa shares in 10th paragraph.)
By Ben Sills and Christopher Martin
Nov. 10 (Bloomberg) -- Wind turbine and solar panel makers
may be vulnerable to takeovers after clean-energy stocks lost
almost $400 billion in value this year and factories expanded
faster than product demand, investment bankers said.
UBS AG said Gamesa Corporacion Tecnologica SA became a
target in October after the Spanish wind-turbine maker fell by
more than one-half and cut its 2010 sales forecast by about 15
percent. Trina Solar Ltd., a Chinese solar-cell producer, said
it's interested in teaming with or investing in developers in
Europe, where solar-panel makers have extra capacity.
"It's just a matter of time before we see more
consolidation," Marc Schmid, head of renewable energy
investment banking at Credit Suisse AG in London, said in an
interview. "With potential oversupply in solar and wind, the
pressure may be rising and that could trigger more activity."
China's Shanghai Electric Group Co. and Dongfang Electric
Corp. may follow General Electric Co., United Technologies Corp.
and Siemens AG in buying companies to enter markets, analysts
said. The biggest manufacturers are jockeying for position in
clean power and energy efficiency that will need $9.7 trillion
in capital investment through 2020, HSBC Plc has estimated.
United Technologies, the U.S. jet-engine maker, last month
agreed to buy the Clipper Windpower Plc stock it didn't already
own in a transaction that valued the purchased company at 139.5
million pounds ($222 million). Officials at Shanghai Electric
and Dongfang couldn't be reached for comment.
In the same month, GE acquired the waste-heat power
generation business of closely held Calnetix Inc. and announced
a partnership with Japan's Showa Shell Sekiyu KK to make solar
panels. Japanese liquid-crystal display maker Sharp Corp. said
last week it completed the purchase of U.S. solar-project
developer Recurrent Energy LLC for $305 million.
Siemens AG bought Israeli solar-thermal developer Solel
Solar Systems Ltd. last year for $418 million.
Oversized Factories
Global annual manufacturing capacity for solar panels may
reach 23,500 megawatts next year, exceeding demand by almost 40
percent, according to John Hardy, a solar analyst at Gleacher &
Co. in Connecticut. Wind turbine makers will increase capacity
to 64,200 megawatts, 30 percent more than expected orders,
Bloomberg New Energy Finance forecasts.
The glut may make Gamesa, which hired former investment
banker Jorge Calvet as chief executive officer last year,
vulnerable to a bid from Dongfang or Shanghai Electric, both of
which are looking to tap the European market, UBS said. Chinese
manufacturers may look to buy a solar-panel maker, said Lars
Dannenberg, a solar analyst at Berenberg Bank in London.
Gamesa Shares
Shanghai Electric Company Secretary Li Chung Kwong wasn't
able to take a call requesting comment, according to his
secretary. Dongfang's Gong Dan didn't return messages left at
his office.
Gamesa shares rose as much as 3.7 percent in Madrid today
and traded up 1.7 percent at 5.45 euros at 2:38 p.m. local time.
The company has received no approaches from potential buyers and
has no knowledge of any bids, said a spokeswoman who asked not
to be named, in line with company policy.
China's Trina wants a partner to help develop projects and
is looking at potential investments in southern Europe, Chief
Financial Officer Terry Wang said in an interview on Oct. 13.
Even so, fund managers may stay away from renewable-energy
stocks rather than speculate on takeover premiums this year.
The benchmark 87-member WilderHill New Energy Index has
lost about 15 percent this year, or $400 billion in value, and
has rebounded about half as much as the MSCI World Index in the
last three months. Investors bailed out of companies from Gamesa
and California's SunPower Corp. to German panel makers
Solarworld AG and Solar Millennium AG, which have dropped 36
percent and 42 percent this year, respectively.
517 Deals
The average size of alternative-energy takeovers has
actually fallen this year, with 517 deals averaging $75 million
each, according to Bloomberg data on Nov 8. The year earlier
period saw the same number of deals averaging $104 million.
"There will come a time when some people are going to
decide that they are sub-scale," said Chris Thiele, head of
European utilities at Morgan Stanley in London. "So you could
see bigger deals as well."
As the industry shifts from expansion to consolidation,
German solar panel makers with weaker balance sheets may be the
most vulnerable, Schmid said.
Hamburg-based Conergy SA and Solon SE of Berlin have the
tightest cash positions of the seven German members of the
Bloomberg Global Leaders Solar Index, according to Bloomberg
data. Their cash and near-cash items are about 9 percent of
sales compared with Solarworld's 70 percent.
Some analysts disagree with Schmid, arguing that German
panel makers are too weak to be takeover targets. Berenberg
Bank's Dannenberg said Conergy and Solon are more likely to go
bust because their brands are weak and their equipment outdated.
Unappealing Targets
"There are companies that are close to bankruptcy --Solon,
Conergy, Q-Cells," he said. "Why should you take something
like that over?"
Conergy has a policy to not comment on buyout speculation,
spokesman Alexander Leinhos said. At Berlin-based Solon AG,
spokeswoman Therese Raatz said the market is big enough for many
companies. Q-Cells couldn't comment on financial questions until
after its Nov. 12 earnings, spokesman Paul Schreiter said.
Instead of an acquisition, companies may reap better
returns hiring an operator such as Centrotherm Photovoltaics AG
to build a plant from scratch, Dannenberg said. That's what
Hyundai Heavy Industries Co. did in Korea and Samsung Group may
adopt a similar approach, he said.
Some manufacturers, particularly German, may have to become
buyers to remain in business, said Gordon Johnson, a solar
analyst at Axiom Capital Management Inc., who forecasts global
demand for panels will fall 13 percent next year.
"Q-cells, Solarworlds, Evergreens are going to be forced
to buy the Chinese and if they don't they will lose big time,"
said Johnson. "Even some of the bigger companies are at risk of
going under."
Evergreen Solar spokesman Chris Lawson declined to comment
on whether the company was seeking a buyer or planned any
acquisitions.
Many manufacturers "are not that well-capitalized," said
Edward Fenster, CEO SunRun, the largest U.S. residential solar
developer. "I'd expect to see some of the big power companies
get involved. We've received interest from all of them. We're
not looking for a buyer."
For Related News and Information:
Renewable-energy markets: RENE <GO>
Top renewable-energy news: GREEN <GO>
Climate-change stories: NI CLIMATE <GO>
Global carbon-dioxide emissions: EMDA <GO>
Emissions markets data: EMIS <GO>
Power markets: VOLT <GO>
News on global emissions data: EMIS <GO>
--With assistance from Jeremy van Loon in Berlin, John Buckley
in Amsterdam and Ying Wang and Feifei Shen in Beijing. Editors:
Todd White, Peter Langan
To contact the reporters on this story:
Ben Sills in Madrid at +34-91-700-9603 or
bsills@bloomberg.net;
Christopher Martin in New York at +1-212-617-5198 or
cmartin11@bloomberg.net.
To contact the editor responsible for this story:
Reed Landberg at +44-20-7330-7862 or landberg@bloomberg.net.
