Meyer Burger becomes 2nd largest Solar Equipment Manufacturer in $10 Billion Market acquiring German Roth & Rau

11 Apr, 2011
Applied Materials,Centrotherm,Europe,Meyer Burger,Solar Cells,Solar Energy,Solar Panels

Meyer Burger (MBTN.S) the 6th largest supplier of solar equipment in the world jumped up 2 places by acquiring the 7th largest global solar equipment manufacturer Roth  & Rau of Germany for a little over $500 million.German Solar Companies have benefited from its domestic market being the largest solar market in the world giving birth to top solar companies like Q-Cells,Solarworld,SMA Solar.The combined company will have revenues of over $900 million overtaking another Germany Solar company Centrotherm with $825 million in revs.Note Applied Materials continues to be the market leader in the solar equipment market with $1.5 billion in solar equipment revenues just like it is the leader in the semiconductor equipment market.Note while European solar module producers have seen their marketshare and revenues crumbling in the face of the Chinese onslaught , there domination of the solar equipment continues. European Solar Companies had found things going tough in 2009 as the solar market changed radically with the Lehman crisis.As the prices of the raw material Polysilicon crashed and Chinese competition increased,these companies started bleeding red ink in a prodigious manner.The high cost structure of these companies with factories in Europe stood naked against the competition.With high debt loads,there was a high chance that these companies would go bankrupt.Most of them like Q-Cells,REC started to move manufacturing to Asia while Solarworld moved to Europe.

In contrast to the waning fortunes of the Solar Panels companies,the rise of the Asians has massively benefited the Solar Equipment Companies of Europe who have enjoyed huge sales and orders as Chinese companies add massive gigawatt scale wafer,cell and solar panel capacities.Note Meyer Burger revenues in 2010 rose more than 90% year on year and profits tripled on the back of Solar Demand in 2010 increasing by more than 150%.The acquisition fills in significant gaps in Meyer Burgers c-Si cell processing capabilities having already made several strategic acquisitions in recent years to bolster its equipment product offerings downstream into module manufacturing and certain other manufacturing equipment areas.The continuing growth of the solar market ( around $70 billion annual revenues) has made solar panel producers heavily invest in solar manufacturing equipment which is made mainly by European and American companies.

Roth & Rau Leaps After Agreeing Meyer Burger’s $516 Million Bid

Roth & Rau AG rose above the takeover price in Meyer Burger Technology AG’s 357 million-euro ($516 million) agreed bid to combine their solar-equipment units as photovoltaic panel sales are set to surge this year.

Hohenstein-based Roth & Rau, which makes gear to produce solar cells for panels, agreed to a 22 euros-a-share bid by Meyer Burger, the Swiss company said in a statement. Meyer Burger has acquired an 11.3 percent stake from key shareholders. Roth & Rau rose as much as 15 percent to 22.70 euros in Germany.

The companies aim to consolidate their business units that make photovoltaic products, Pauli said in the statement. “This is just another step to sustainably reduce the costs of solar power,” Pauli said.

Meyer Burger, a Swiss maker of industrial cutting equipment and solar-power materials, will finance the offer from its existing cash position and through a syndicated bank loan, the company said.

Chinese firm breaks into VLSI Research’s Top 10 PV equipment supplier rankings for 2010

Applied Materials was the clear market leader overall. Revenue from both its thin-film and crystalline silicon segments reached nearly US$1.5 billion in 2010. Ranked second for another year was centrotherm photovoltaics with revenue of US$825 million. According to the market research firm, centrotherm was the top supplier of cell and module equipment for the crystalline silicon market in 2010. It achieved this despite the cyclicality in the polysilicon business, another key market it is involved in.Another firm that continues to benefit from the growth in ingot/wafer markets was ranked third in 2010, GT Solar. The company gained from revenue of US$775 million, representing 168% growth, compared to the previous year, enabling the DSS furnace market leader to move one position higher than it reached in 2009.Meyer Burger jumped two places to be ranked sixth on the back of sales reaching US$570 million. Ulvac, the top Japanese equipment supplier in the PV industry also gained one position, moving from seventh to sixth with sales of US$380 million. German-based Roth & Rau also moved up behind Ulvac to seventh on the back of sales of US$325 million.

Companies just outside the Top 10 included Jusung Engineering, Despatch Industries, Amtech Systems, ALD Vacuum Technologies, and NPC.According to VLSI Research, 2010 was a record-breaking year, with sales of PV manufacturing equipment crossing the US$10 billion mark (US$10.4 billion) for the first time.

Solar ETF Analysis and Review- Guide to Buying (TAN,KWT)

3 Mar, 2011
China,First Solar,Germany,MEMC,Meyer Burger,Solar Energy,Solar Panels,Taiwan,Trina Solar,USA

There are only 2 Solar Energy ETFs in the Market right now – TAN and KWT.Note buying solar ETF provides a less risky way of investing in solar energy as some stocks can dramatically underperform in this fast growing industry.However Solar ETFs will on the other hand perform much worse than the best performing stocks in the solar universe.This is because their holdings are also concentrated on some of the lesser quality companies.KWT and TAN are better investments for the less informed and less sophisticated investors.Amongst the 2 ETFs,KWT is the better option than TAN for a number of reasons which are described below.

The Guggenheim Solar ETF (NYSE:TAN)

1) Index - This ETF follows the equity index called the MAC Global Solar Energy Index

2) Expense Ratio - The Expense Ratio of this ETF is somewhere in the middle with 0.95%

3) Valuation - The average holding of the 34 securities is $1.6 billion with a P/E of 14.6x and P/B of 1.3x which is not very high considering the high growth characteristics of this industry.TAN has been trading between $6-9 in  the last 12 months with the current price of $8.

4) Top Holdings - The ETF’s top holding First Solar accounts for around 20% which is quite high.This is the biggest negative apart from the fact that Taiwan does not get enough money.The other holdings like Trina Solar,REC,Meyer Burger and MEMC are lower at around 5-7%.The complete holdings of the 34 securities are listed here.Around 10 stocks have 1% or lower percentage.

5) Geographic Diversification - The company is quite well diversified with USA 41%,China 27% and Germany at  17%.

Market Vectors Solar Energy (ETF) ( NYSE:KWT)

The other Solar ETF KWT is much smaller than TAN at $25 million.However the ETF has performed better than TAN over the last 1 year though over the long term the performance has been more or less the same.

1) Index - This ETF follows the equity index called the Ardour Solar Energy Index

2) Expense Ratio - The Expense Ratio of this ETF is same as TAN at 0.96%

3) Valuation - The total holdings is $40  billion .KWT has not performed to good with around 28% decline in the last year.However its performance has been much better than TAN due to its better portfolio.

4) Top Holdings - The ETF’s top holding First Solar accounts for around 10% .The other holdings like Trina Solar,REC and MEMC are in the 8-9% range.The complete holdings of the 29 securities are listed here.

5) Geographic Diversification - The company is  more diversified with USA and China at 30% and Germany at  17%.Taiwan also gets good prominence unlike TAN at around 14%.

Summary

KWT is a much better ETF than TAN despite its much lower market cap.KWT performance has also been better as TAN is give too much weighed to First Solar.Buying a Solar ETF at this point of time may be a good investment as valuations are quite low and sentiment quite negative.The Solar Industry is also much closer grid parity which means the industry will soon be free of government subsidies.

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