Sharp today announced it would buy Recurrent Energy, the large solar developer, for $305 million.
Recurrent, which had been shopping itself around since August, will operate as a subsidiary and keep the Recurrent name. Recurrent CEO Arno Harris will continue to run the group.
The deal will effectively bring together two companies that are both in need of strong allies. Sharp is one of the largest and historically strongest solar module makers in the world and Recurrent is one of the largest independent solar power project developers. With Recurrent, Sharp has a group that can bid on solar power projects, and then build them with Sharp modules. Recurrent has a 2-gigawatt product pipeline: that could sure soak up a lot of modules.
There is no obligation on the part of Recurrent to buy Sharp modules and Recurrent is free to pick the best technology for the job, but one can anticipate the two working together quite a bit. Sharp modules and other high-end modules from companies like Suntech and BP Solar can be quite similar in terms of price and performance: the biggest difference, arguably, is the name on the box.
First Solar toppled Sharp from the top spot in the solar market in large part by acting as its own developer.
Recurrent, meanwhile, has found itself being forced to bid on projects against developers like First Solar and SunPower who happen to have their own module-making capabilities. With Sharp as a parent, Recurrent won't have to worry about access to capital, price gouging or the rare conflicts of interest.
With Recurrent now in the arms of Sharp, some speculate it might even be the sunset of the independent developer.
"After Recurrent goes, there is really only one established pure-play utility-scale project developer left in the U.S. -- Axio Power. And Axio is in the process of undergoing some kind of strategic transaction as well."
Who might be buying Axio? First Solar and SunPower come to mind. Suntech, Yingli, and Trina -- the Chinese trio of solar module makers -- are also strong candidates. Chinese companies, however, are also far more cost-conscious than U.S., Japanese or European companies. Thus, don't expect Suntech or Trina to launch a HP-Dell bidding war for anyone. Side note: the 2-gigawatt pipeline that Sharp gets with the Recurrent deal will likely impact the sales of the some of the above companies.
Solar project developers with strong project pipelines are a hot property. Owning a project developer or an IPP allows a firm such as, say, a solar module manufacturer to capture more of the solar value chain and provides a captive outlet for product.
SunPower and First Solar have acquired a number of project developers, and even silicon manufacturer MEMC has looked to get vertical with investments in Tioga Energy and the acquisition of Sun Edison. Recurrent Energy uses Suntech panels on their San Francisco reservoir project.
Recurrent Energy is developing a fleet of distributed-scale solar projects in North America and Europe. The VC-funded firm develops ground-mount and roof-based solar power plants that are interconnected at utility substations or on a distribution network.
One of Recurrent's most prominent projects was a public-private project that just closed long term debt financing -- the 5-megawatt solar power system located at the Sunset Reservoir in occasionally sunny San Francisco, California. The company secured approximately $18 million for the project from Prudential Capital Group, which provided 24-year term debt financing. Recurrent Energy also has PPAs with utility Southern California Edison.
The project will be one of the largest municipal solar power systems in the United States and will more than triple San Francisco’s total municipal solar energy output. It is expected to be fully operational by early fall of 2010.
According to Recurrent's CEO Arno Harris, “We have more than 330 megawatts of distributed-scale projects in our contracted portfolio across North America and Europe." Recurrent has a pipeline of over 1.3 gigawatts of distributed-scale solar projects in development across North America and Europe. The firm also has projects in France, Spain, Canada and Israel.
Investors in Recurrent include Mohr Davidow Ventures and Hudson Clean Energy Partners. It was MDV's first greentech exit.