We expected 2010 to be the year of greentech IPOs and greentech M&A. We even picked SunPower to be one of the top ten acquirers.  But we didn't expect it all to happen this fast in February. 

Areva acquired Ausra earlier this week for several hundred million dollars.  Calisolar just announced the acquisition of 6N Silicon, an Ontario-based silicon supplier to Calisolar and the solar industry through a stock-for-stock transaction between the two private firms. Veolia bought an ice air conditioning company this week.

Today, SunPower announced an acquisition that will put 1,200 additional MW in their project pipeline in Europe and the Middle East.  

This is just the beginning of the seismic shifts we expect to see in the next few quarters as the incumbent suppliers jockey for strategic position in the solar shake-out.

SunPower acquired SunRay Renewable Energy, a project developer with a pipeline of EU projects.  SunRay Renewable Energy is an independent solar power producer focused on utility-scale projects in Italy, France, Israel, Spain, the United Kingdom and Greece. The pipeline includes one of the largest solar PV power plants financed in 2009, the 24 megawatt Montalto power plant in Italy, which launched SunPower’s relationship with SunRay.

The acquisition grows SunPower’s Utility and Power Plants (UPP) business, positioning the company to take advantage of growing adoption of UPP solar.  Julie Blunden, VP of Public Policy and Corporate Communications for SunPower, has long spoken out about how utilities are going to have to use solar to flexibly and quickly meet their RPS requirements.

We spoke with SunPower's Julie Blunden about this acquisition. 
According to Blunden, "We've had a very deliberate strategy to go downstream.  This is fourth in a series of SunPower acquisitions."  That series started with the purchase of Powerlight 3 years ago.

Blunden spoke of the the "organic growth" in their Utility and Power Plants (UPP) business in the Western US West and how those numbers add up impressively.  But in the EU, the scale is more in the 5 megawatt to 30 megawatt range. 

SunPower had an EPC and technology business in the EU but if they wanted a development business it would take some time to develop a team from scratch.

"SunRay really impressed us," Blunden said.  "We've had the opportinity to work with them and we concluded that it was a good fit for us in terms of a good relationship and their pipeline."

According to Blunden, SunRay approaches their projects with the community in mind.  She added, "Rather than just looking for a flat piece of land, it pays to think about the context of your power plant.  Where are you relative to transmission? What is the regulatory climate? The flavor of the community? Are they looking for job creation?"

SunPower will acquire SunRay from its management and another shareholder -- private equity giant Denham Capital.   The total value of the acquisition is approximately $277 million, including $235 million in cash and $42 million in a letter of credit and promissory notes. 

Thomas Weisel's take on the transaction:

  • We highlight that the definition of "pipeline" is very loose and the countries mentioned, in particular, Greece and Italy, can be a challenge from a permitting and interconnect perspective.  
  • On first blush, the ~$0.23 per watt acquisition costs compares to the consideration paid by First Solar for Optisolar's project pipeline.
  • SunPower has worked with SunRay on a few plants, including 24MW at Montalto di Castro, which was connected to grid ahead of schedule in November 2009 and is a part of a 100MW development that has been targeted to become fully operational in 2010.  
  • The transactions reflect SunPower's need to diversify its geographic mix and integrate downstream on a highly competitive global market, particularly as the build-out on the U.S. utility project environment remains choppy despite a large announced backlog.  
  • The near-term environment for residential and commercial systems is challenged and demand expectations for the industry as a whole might be overly optimistic for 2010 in particular, depending on FIT changes in key solar countries like Germany, Italy, Belgium, Czech Republic, and China.    

Deutsche Bank Equity Research's take:

  • The SunRay acquisition is a strategic market positioning move for SunPower that strengthens the business model, but is not necessarily a near-term margin/profit enabler. 
  • Attractive project pipeline; seems to be a fair price  
  • SunPower can drive its business model downstream more effectively with SunRay; also noted that the mostly cash transaction may drive a need to tap the capital markets by early 2011 to maintain operational flexibility.

This certainly won't be the last large and lucrative greentech M&A transaction we'll see this year.