ABB to Exit Solar Inverter Business, at a Cost of $470M

ABB, a major player in the global solar inverter market, is
paying $470 million to unload
the business
 to Italian company FIMER – an acknowledgement
of ongoing challenges in a market driven by fierce competition and
increasing price pressure. 

Tuesday’s deal will cost ABB an after-tax non-operational
charge of about $430 million in the second quarter, with up to 75
percent to be paid in cash to FIMER. Another $40 million in
separation costs are expected in the first quarter of 2020.

But 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 for the
solar inverter business have dropped 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 quality of revenue and higher growth segments,” Tarak
Mehta, president of ABB’s Electrification business, said in a
prepared statement. 

Lindsay Cherry, analyst for Wood Mackenzie Power &
Renewables, noted that ABB’s move comes amidst broader
shakeups in the solar inverter
 industry. “Because of price
pressure and such low margins in the solar inverter industry,
we’re seeing companies looking to get margins in different
ways,” she said. 

In January, for example, German company Kaco announced it was
exiting the central inverter business by
selling South Korean subsidiary Kaco New Energy
Inc., to OCI
Power, which operates in the utility and distributed generation
solar markets. Kaco said the move would allow it to focus on its
string inverter business, along with energy storage. But in
February, Kaco
sold its solar PV string inverter
company, Kaco new energy
GmbH, to Siemens. 

And in March, Schneider Electric confirmed that it is exiting
the utility-scale inverter business
, to reposition toward the
residential and commercial and industrial (C&I) segments, as
well as its internet-of-things platform, EcoStruxure.

“We are seeing more and more companies launch or expand their
IoT platforms as a means to stay competitive,” Cherry said.
“We’ve seen this with Schneider as they shed their utilty-scale
business to focus in part on their IoT platform and with Seimens,
which acquired KACO’s string inverter business in part to fill
out its own IoT platform.”

ABB shuttered its U.S. manufacturing facility in 2016 and is no
longer an active player in the market. The majority of their
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, and energy storage and hybrid inverters. 

By acquiring ABB’s inverter business, FIMER will bolster its
current product line of three-phase string and central inverters,
she noted.  It will also gain a much broader geographic reach,
compared to its current markets in Latin America and Turkey, she
said. “I think the ABB acquisition will definitely help
them.” 

According to the latest WoodMac
global solar inverter report
 released in April, China’s
Huawei and Sungrow are ranked first and second in global PV
inverter market shipments, with roughly 22 percent and 15 percent
of the market, respectively, and Germany’s SMA is ranked third,
with roughly 8 percent of the market. ABB had roughly 5 percent of
the market, according to the report. 

Huawei and Sungrow are both “definitely much more
price-competitive” than many of their rivals, and lower prices
are likely the driver behind their predominance in the market,
Cherry said. Huawei, the world’s largest telecommunications
provider, is also able “to draw on some of those other
specialties to be a really innovative company, and meet what the
market needs” in the solar inverter space, she said. 

Of course, Huawei’s prospects in the U.S. solar inverter
market have been thrown into doubt in recent months, as U.S.
authorities have accused the company of intellectual property theft
and ties to Chinese intelligence services, and have
proposed an outright ban
on Huawei’s inverters. In late June,

Huawei laid off its U.S. staff
and is said to cease its sales
in the U.S. market.

However, in the past month, President Donald Trump has announced
plans to relax these restrictions, and on Tuesday
announced
 it would allow certain American companies to keep
doing business with Huawei. 

 

Source: FS – GreenTech Media
ABB to Exit Solar Inverter Business, at a Cost of 0M