CORRECTED-Activ Solar eyes distressed German assets

Fri Oct 26, 2012 12:38pm EDT

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(In 13th paragraph, corrects spelling to Dunayskaya, from Donetskaya.)

By Georgina Prodhan

VIENNA Oct 26 (Reuters) - Solar parks developer Activ Solar is on the lookout for assets from German solar firms that are in distress as a result of falling government subsidies and cheap competition from Asia, the company's chief executive told Reuters.

Vienna-based Activ Solar has built some of the world's biggest solar farms in Ukraine and also makes polysilicon, the basic material of solar cells, but so far has had little interest in manufacturing panels or modules itself.

However, new legislation due to come into force in 2014 in Ukraine, Activ Solar's core market, may force it to use more locally sourced content, which could mean manufacturing modules itself as there are no other large solar companies in Ukraine.

Sound German companies suffering from overexposure to Germany and Italy could also be of interest if they have state-of-the-art technology that could be exported abroad to help Activ Solar establish itself in new markets, Kaveh Ertefai said.

"This is an opportune time to look at acquisitions and we're certainly pushing very hard to build on our execution capabilities. Acquisition could certainly be a fast track way of doing this," he said in an interview this week.

"Some of these companies are in good shape but just because Germany and Italy accounted for 60 percent of the market last year they've been caught out by austerity programmes and subsidy cuts," he added.

Falling government subsidies for solar power and the emergence of strong Asian solar players has caused an oversupply of cells and a shakeout that has already forced some of the industry's biggest names out of the market.

Germany's Q-Cells, once the world's largest maker of solar cells, had to file for insolvency in April and has since been bought by South Korea's Hanwha.

According to a recent report by Greentech Media's GTM Research, overcapacity in the solar industry is likely to cause at least 180 panel makers to go bust or be acquired by 2015.

GTM identified Germany's Solarworld and Conergy along with Spain's Isofoton and Solaria Energia y Medio Ambiente as possible buyout targets.

Solar development companies that could be attractive for their low exposure to commodified manufacturing include Phoenix Solar, Vogt Group and S.A.G. Solarstrom.

UKRAINIAN FOUNDATION

Activ Solar is majority-owned by Christian Dries, owner of Austrian aviation firm Diamond Aircraft Industries, with the rest owned by Activ Solar's management.

The company uses project financing to build its utility-scale solar plants -- it has just completed construction of its sixth Ukrainian plant, a 43 megawatt (MW) plant in Dunayskaya Odessa -- and sells them on to investors.

Ukraine has been a natural base for Activ Solar to build its business following its acquisition of the Soviet-era PJSC polysilicon production plant in Zaporozye in 2008.

In addition, CEO Ertefai has political connections through his father-in-law, lawmaker Serhiy Klyuyev. Ukrainian incentives for developing solar energy are generous, and the country is keen to reduce its dependence on Russia for gas.

But financing costs are high due to Ukraine's political risk, and uncertainty about the future implementation of energy policy is heightened by parliamentary elections this weekend.

Activ Solar wants to diversify into new markets including the United States, Chile, the Middle East and Morocco. Then the company could be ready for a public listing, Ertefai said.

"We've got quite a bit to do before we can offer something that's really a slam dunk for investors. I don't really see a window for at least 3-5 years," he said. (Editing by Keiron Henderson)

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