ABB, a major player in the global solar inverter market, is paying $ 470 million to the Italian company Fimer to unload the business – a recognition of the ongoing challenges in a market driven by fierce competition and increasing price pressures.
Tuesday’s deal will cost ABB a non-operating after-tax charge of approximately $ 430 million in the second quarter. Up to 75 percent must be paid to Fimer in cash. Another $ 40 million in separation costs is expected in the first quarter of 2020.
According to an ABB spokesman who spoke to Reuters about the deal, the margin improvement in the future will outweigh the cash impact of the transaction. According to Reuters, sales in the solar inverter business have declined significantly since ABB bought it in 2013.
“The divestment is in line with our strategy of ongoing systematic portfolio management to strengthen competitiveness, focus on sales quality and segments with higher growth,” said Tarak Mehta, president of ABB’s electrification business, in a prepared statement.
Lindsay Cherry, an analyst at Wood Mackenzie Power & Renewables, noted that ABB’s move comes amid broader upheavals in the solar inverter industry. “Because of price pressures and low margins in the solar inverter industry, we see companies looking for margins in different ways,” she said.
In January, for example, the German company Kaco announced that it was withdrawing from the central inverter business by selling its South Korean subsidiary Kaco New Energy Inc., which operates in the solar market for utilities and decentralized power generation, to OCI Power. Kaco said the move would allow him to focus on the string inverter business in addition to energy storage. In February, Kaco sold its solar PV string inverter company Kaco new energy GmbH to Siemens.
In March, Schneider Electric confirmed that it is withdrawing from its utility-scale inverter business in order to reposition itself in the residential, commercial and industrial segments and the Internet of Things platform EcoStruxure.
“We see more and more companies adopting or expanding their IoT platforms to stay competitive,” said Cherry. “We saw this at Schneider when they left their utility-scale business to focus in part on their IOT platform and.” with Siemens, which took over part of the string inverter business from Kaco in order to fill out its own IOT platform. “
ABB closed its US manufacturing facility in 2016 and is no longer an active player. The majority of shipments are in Europe and the Asia-Pacific region, as well as some Latin American and Middle Eastern markets, Cherry said. The company’s diverse product line includes string inverters, central inverters as well as energy storage and hybrid inverters.
With the acquisition of ABB’s inverter business, Fimer will strengthen its current line of three-phase string and central inverters. It will also gain a much larger geographic reach compared to its current markets in Latin America and Turkey, she said. “I think the acquisition of ABB will definitely help them.”
According to the latest WoodMac Global Solar Inverter report released in April, China’s Huawei and Sungrow rank first and second in global PV inverter shipments with market shares of around 22 percent and 15 percent, respectively, and Germany’s SMA ranks first and second third place around 8 percent of the market. According to the report, ABB had a market share of around 5 percent.
Huawei and Sungrow are both “definitely a lot cheaper” than many of their competitors, and lower prices are likely driving their dominance in the market, Cherry said. Huawei, the world’s largest telecommunications provider, is also able to “leverage some of these other specialties to be a really innovative company and meet the demands of the market,” she said.
Of course, Huawei’s prospects in the US solar inverter market have been questioned in recent months as US authorities accused the company of stealing intellectual property and ties to Chinese intelligence agencies, and proposed an outright ban on Huawei’s inverters. At the end of June, Huawei laid off its US employees and is expected to cease sales in the US market.
Last month, however, President Donald Trump announced plans to ease those restrictions and announced on Tuesday that the government would allow certain American companies to continue doing business with Huawei.