How do you tackle the fragmented U.S. solar market? Acquisition, of course. That strategy continues to appeal to solar equipment manufacturers, and the latest convert is LDK Solar, which announced Thursday an agreement to spend $33 million for a 70 percent stake in Silicon Valley-based Solar Power Inc.
The deal will give Solar Power a much needed capital to continue building solar energy projects. The company hasn’t fared well financially over the past year. Revenue for the third quarter of 2010 reached about $4 million, compared with $22.3 million from the year-ago period. Solar Power posted a loss of $2.6 million for the third quarter last year while it was able to generate a net income of $1.7 million in the same quarter in 2009, according to the company’s filing with the U.S. Securities and Exchange Commission.
The deal will give China-based LDK access to the U.S. market, where Solar Power has installed megawatts of projects, including a 6-megawatt installation in Sacramento, Calif., which uses the company’s own solar panels and 22 single-axis tracking systems.
LDK has undergone ambitious expansion plans in recent years, and not just to boost its core silicon and silicon wafer businesses. It also is now a cell and solar panel manufacturer. The company reported reaching production capacity of 11,000 tons for polysilicon, 2.6 gigawatts for wafers, 120 megawatts for cells and 760 megawatts for solar panels last November, according to its SEC filing.
LDK’s agreement with Solar Power requires Solar Power to move its focus away from its other business of manufacturing solar panels and system components in Shenzhen, China and concentrate on project development in the United States, LDK said. LDK will control of the solar panel manufacturing operation and even look for opportunities to set up manufacturing in North America.
The acquisition shows yet again a belief that the best way to enter the still young U.S. market is to gobble up local project developers. Sharp bought Recurrent Energy for $305 million last year. In 2010, the industry also saw First Solar snapping up NextLight for $297 million; First Solar also bought a portion of Edison Mission’s project pipeline. Other notable acquisitions before 2010 included silicon wafer maker MEMC Electronic Materials’ purchase of SunEdison for $200 million plus $17 million for employee retention and an additional $123 million if Edison is able to meet certain goals.
Solar Power targets commercial and utility market, which is set to grow quickly thanks mostly to state mandates requiring utilities to buy renewable electricity.
The U.S. market currently has about 5 gigawatts of photovoltaic projects that already have utility buyers, according to GTM Research. About 5.6 gigawatts of solar power plants could come on-line between 2010 and the end of 2014, GTM said.