Australian Solar Energy Businesses Restructuring for Survival
Notwithstanding the farcical goings on around the RET review, solar businesses in Australia continue to move and shake.
Its seems the last few months have been all about mergers and acquisitions which is either a sign of industry maturity or desperation, depending on your perspective. One thing that is clear is that in turbulent times and with the prospect of lower demand, consolidation of players should help strengthen our industry.
According the ASX announcements, long standing industry player Solco has continued its evolution by announcing that it intends to acquire a collective group of companies referred to as the Go Group from Urban Group Energy Holdings Pty Ltd.
This is an intriguing move by Solco, who, by getting hold of a package of retail licences, PPA models and more can potentially leapfrog into the emerging but as yet largely untapped market for “innovative electricity retailers”. Solco started out decades ago as a small solar retailer and wholesaler in southern Queensland so the mere fact that they are still alive, kicking and active is an outstanding result in itself.
Urban Group of Holdings are another beast altogether who are a diverse group but have been increasingly active and bullish in PV since kicking off in 2010 and describe themselves as “a parent group to five separate yet complementary companies”. They have had a crack at pretty much every strategy in solar; wholesale (ultimately leading to a partnership with SolarJuice), retail (through a stake in retailer BioSolar), manufacturing (through their initial investment in Sungrid) and energy retailing through new entity Go Energy. Just what their strategy or position is is hard to keep track off, especially give that a Managing Controller was appointed to BioSolar last month (according to ASIC) and rumours are that many of their almost 200 staff have been let go.
Arguably the most fascinating story to emerge recently is the take over of solar retailer and industry stalwart Energy Matters by global PV powerhouse SunEdison. Details are sketchy but according to our sources, the deal has been inked and details of what this means will follow soon. What I like about this deal is that Energy Matters have built a very cool solar business with some good runs on the board, lots of diversity and some real innovation behind the scenes. But of course, its tough at the top and my intuition tells me that this takeover could be pretty timely.
I also like this one because SunEdison are just friggen massive; likely astounding huge. They have been working hard in Australia just quietly working out how and where to play and this announcement is clearly a big step from talking to getting rolling and I think that can only be good for the industry and consumers.
Whilst the loss of Ingenero (who collapsed recently) was a sad day due to their solid reputation and some talented staff, out of the ashes it seems the phoenix may rise. MPower, who are part of the ASX listed TAG Pacific group announced this week that it had acquired certain assets out of the Ingenero group, which lead to them being awarded a construction contract with First Solar for the 1.7MW Weipa project. Word onthe street is that many Ingenero’s former staff have moved over to MPower, bolstering their strength and providing good potential for expansion into the large scale project market .
MPower have struggled a little lately, according to their annual report but a fresh new look and apparently, an enthusiasm to move very quickly into new opportunities could bode well for them and the industry. Tag Pacific’s share price spiked on the back of the announcement.
Whilst these major public announcements are a sign of change at the big end of town, there are also structural and ownership changes going on which are less obvious. Growth, survival and changes in equity are all pretty normal in industry and our multi billion dollar a year solar industry is not immune. Outside the direct solar space, we also learned that finance company CAFGA which have been very active in the solar space in recent years are now part of Evergreen Finance, demonstrating that consolidation is alive across the value chain. Expect to see new announcements around ownership and equity on more major players soon.
There is also ongoing consolidation at the smaller end of the solar industry although the pressure is arguably more acute there. For the average solar company doing 3 or 4 installs a week, the crippling effects of the RET Review induced market uncertainty are very real. Although there is a a palpable spike in demand right now, reports are coming in on a daily basis that many solar companies are simply giving up. We don’t have a handle on the numbers yet but would suggest that perhaps 5 companies a week are succumbing to the pressure.
On the flip side, some smaller companies are taking a different approach and looking for investors and others have successfully managed to sell their businesses in the past few months. Its a tough time to realise maximum value and I have also witnessed first hand how some sellers are so desperate, they are quite happy to hide debt and unpaid bills then run for the hills. Must get that bad debtor insurance organised to avoid more losses – I wonder if they have a category for “solar shonks”?
Photo Credit: Australian Solar Business Structure/shutterstock