Germany's SMA, the photovoltaic inverter market leader, had some painful news as it issued its 2012 financial guidance. On a positive note, the firm's inverters are being deployed at the Agua Caliente project, one of the world's largest PV power plants.
SMA's sales are anticipated to drop to between $1.57 billion and $1.96 billion, down from 2011's $2.23 billion. The guidance is based on the expectations "of lower demand for photovoltaic plants as a result of a "radical" cut in subsidies, especially in Germany," according to a release from the firm. The release continues, "EBIT margin for 2012 is seen to be in the range of 5 and 10 percent. SMA's Board noted that the target profitability was above the German electrical industry but lower than SMA Solar's prior-year results. Additionally, the company plans to invest over 100 million euros for research and development aimed at decentralized energy production and integrating energy storage solutions."
SMA's guidance saw the German subsidy cuts lowering demand for "medium to large-scale PV plants," especially in Germany, and noted that "[i]t cannot be predicted whether Asian and American markets can fully compensate for the decline."
SMA is an industry bellwether, and it comes as no surprise that 2012 will be a challenging year for incumbents such as SMA, First Solar, and Suntech and a struggle for existence for startups in a consolidating market. Updated market share data will clarify whether SMA's revenue decline is directly in proportion to the market's decline or if SMA is losing market share to competitors.
A more positive note for SMA -- and a possible sign that large-scale installations in the U.S. and elsewhere could compensate for German market declines -- is the eventual deployment of 400 units of SMA's Sunny Central inverters at the 290-megawatt Agua Caliente solar project in Yuma County, Arizona. Construction is in progress with completion expected in 2014. Agua Caliente is being built by First Solar and is owned by NRG Energy. First Solar will build, operate and maintain the project. PG&E has a power purchase agreement in place for the electricity generated by the project.
GTM Research Solar Analyst MJ Shiao had this to say, "German demand accounted for roughly 46 percent of SMA's inverter sales through the third quarter of 2011 so it's no surprise that the anticipated FIT reductions will hit them especially hard. However, SMA's move into the U.S. and other emerging markets will help curb some of the anticipated loss. Other European inverter manufacturers are faced with the same need to diversify geographically, but have been faced with barriers including local certification delays (e.g., UL listing) and brand adoption."
Shiao added, "The basic market thesis for PV inverters for the next year is fairly simple: immense ASP pressure, eroding demand in traditional markets, and a cost structure that is difficult to push downwards. With larger diversified companies investing heavily into solar inverters (like GE, Emerson, etc.), as with all other parts of the value chain, consolidation is coming."