AE widens inverter reach with PV Powered

Advanced Energy Industries has agreed to acquire PV Powered, a maker of grid-tied PV inverters, in a $90M deal that will extend AE’s reach to lower-end inverter areas, and greatly increase capacity.

March 25, 2010 – Advanced Energy Industries has agreed to acquire PV Powered, a maker of grid-tied PV inverters, in a $90M deal that will extend AE’s reach to lower-end inverter areas, greatly increase capacity.

“The addition of PV Powered’s transformer-based inverters with power levels below 500kw for the small to mid range commercial inverter market allows Advanced Energy to target a portion of the market that we have not yet addressed,” said Hans Betz, AE’s CEO, in a statement. “As a combined company, our comprehensive portfolio of both transformerless and transformer-based inverter products will serve the entire spectrum of commercial project sizes from 30kw to multi-megawatt utility installations, placing us firmly at the heart of the emerging and fast-growing solar inverter market.”

Terms of the deal are for $50M paid at closing ($35M cash, $15M in stock), and up to $40M in “earn-out” based on full-year 2010 results. In an interesting description, the companies state that “throughout 2010,” PV Powered “will operate as a wholly-owned subsidiary” selling and supporting its branded inverters; Advanced Energy apparently will keep PV Powered’s facility in Bend, OR, for at least three years.

Financially speaking, AE says the deal will add about $40M-$50M to its annual revenues in 2010 — $30M-$35M commercial and $10M-$15M residential; PV Powered posted $21M in sales in 2009. Gross margins on those products is expected to be 26%-29%, with PV Powered adding about $3M-$4M in operating expenses. (AE’s own gross margins in 4Q09 were 36.8%, up from 30% in 3Q.)

“Clearly, the acquisition enables AE to very quickly grow its footprint in the solar inverter market,” agreed Barclays Capital analyst CJ Muse in a research note. PV Powered focuses on the 30kW-260kW range, vs. AE’s 250+kW inverters; it’s also transformer-based, augmenting AE’s transformerless Solaron inverters. The deal also bumps up AE’s inverter capacity from 250MW/year to 750MW/year, and will nearly its share of the inverter market (to $876M by 2012, vs. $450M). Nevertheless, Muse has a word of caution: “we still remain concerned about the commoditized nature of solar inverters,” he writes.

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