Bosch Acquires Ersol Solar, Large Industrials Moving Into Solar Sector

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The recent announcement on June 2, 2008 , that Robert Bosche GmbH (privately-held) plans to buy German-based Ersol Solar Energy AG (FRA:ES6) provides another example of how global industrial conglomerates are carefully watching for opportunities in the fast-growing solar sector. 

 Bosch bought a majority stake in Ersol for 546 million euros from Ventizz Capital Partners at a 63% premium to Ersol’s closing price on May 30.  Bosch plans to make a public tender offer for the remaining 50.45% of the company, according to Bloomberg News.  Ersol’s stock rallied 63% on June 2 in response to the takeover news and has since remained near that level, indicating market confidence that the takeover will be completed.

 Ersol Solar Energy AG is a diversified solar player that has a scrap silicon recycling operation and produces polysilicon, silicon wafers, silicon solar cells, and thin-film solar cells and modules.  Ersol has about 1,000 employees.  Revenues in Q1-2008 roughly doubled year-on-year to 52.4 million euros and net income was 3.2 million euros.  Ersol’s management expects to have 180 megawatts of wafer production capacity and 220 megawatts of crystalline solar cell production capacity by the end of 2008.  Ersol has provided guidance for 300-320 million euros of revenue in 2008 and 70-80 million euros of operating profit.  Ersol said that its production output for 2008 is already completely sold out.

 What is one of the world’s largest automotive component part maker, with 46 billion euros in sales, doing buying into the solar sector?  The simple answer is diversification into the promising solar sector and away from the low-margin automotive components industry.

 The solar industry has grown at a 47% average annual rate in the past six years and is poised to grow at an annual rate of about 40% for at least the next several years.  The solar industry has reached mass production stage with about $30 billion in sales in 2007, according to Photon International.  The upside for solar is truly massive since solar power accounts for only 0.06% of world electricity generation at present (according to Photon Consulting), meaning the sector has room to grow at double-digit rates for literally decades without hitting saturation levels.

 There are a handful of large industrial conglomerates that have already been in the solar business for years.  Several Japanese-based conglomerates were pioneers in the industry and have long ranked in the top 20 global solar cell/module producers.  In 2007, Sharp (SHCAY (ADR), TSE:6753) ranked as the second largest solar cell/module producer (behind Q-Cells FRA:QCE in first place), Kyocera (NYSE:KYO ) as fourth, Sanyo (SANYY.PK,TYO:6764) as seventh, and Mitsubishi Electric Corp (TYO:6503) as twelfth, according to PV News’s 2007 rankings ( 

 Other global conglomerates have also been players in solar for years including BP, General Electric and Boeing’s Spectrolab.  Two large companies, Swiss-based OC Oerlikon AG (VTX:OERL) and U.S.-based Applied Materials (NASDAQ: AMAT ) have quickly become the two leading players in producing turn-key thin-film solar module fabrication lines that other companies can buy to produce solar modules in their own factories.  Large utilities and construction companies have also entered into the business of developing solar photovoltaic or solar thermal projects, including (among others) Spain-based Acciona (MCE: ANA , ACXIF.PK), Spain-based Iberdrola SA (MCE:IBE) and its recent spin-off off its Iberdrola Renovables unit (MCE:IBR), and FPL Group (NYSE: FPL ).

In another example of large companies moving into solar, Moser Baer India Limited (BOM:517140), the world’s second largest manufacturer of optical storage media, has entered the solar sector in a big way with both crystalline silicon cell technology and thin-film technology.  Moser Baer plans to use its world-class manufacturing know-how to drive down the costs of solar cell production and become a major global player.

 What’s going on here?  Simply put, the solar industry is growing up.  The solar industry is simply following the tried-and-true industry model where small, specialized players blaze the way with revolutionary technology and a big dose of risk-taking and fortitude.  Then the large players in the sector snap up the winners after they prove their technology and sales traction.  This is akin to the old adage of letting the pioneers in the industry get shot in the back with arrows and then buying up the ones that are ultimately successful.  The solar industry has now reached a level of maturity where there are likely to be more cases of large industrial companies buying up mid- to larger-tier solar companies.


By Richard Asplund, investment analyst and author of Profiting From Clean Energy: A Complete Guide to Trading Green in the Solar, Wind, Ethanol, Fuel Cell, Carbon Credit Industries, and more.

Disclosure: Richard Asplund does not have positions in any of the stocks mentioned in this report.


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