In case you haven’t heard the big news, SolarCity acquired solar panel manufacturer Silevo this week. What could this mean for the overall solar picture? Below are two things to consider with this deal.
1. Ongoing Increase in Solar Company Values & Investments
In recent days, SolarCity’s stock price has increased in value by 25%. Other solar companies had their value jump tooo, including Yingli Green Energy by 8% and ReneSola by 10%.
The value of the deal was $200 million up front. This includes $168 in stock, $23 million in liabilities, plus $9 million in cash. Afterwards, potential earnouts exist of $150 million in stock over the next two years, based on cost targets and production.
As solar companies jump in net worth, financial institutions will be more bullish about this market. Roadblocks seen in third party lending could decrease with banks finding this as a tantalizing proposition to diversify their asset mix.
2. Move Towards Providing Everything Under One Roof
Just like how individual companies provided internet, telephone, and television services all in one, SolarCity is joining the solar industry’s movement towards a new and more efficient system, a system in which individual companies provide both manufacturing and solar panel installation, and maybe even manage the financing. SolarCity Chairman Elon Musk noted in a teleconference that the time was right to purchase Silevo to support SolarCity’s long-term goal of being a top energy provider. Silevo’s Triex panels can reduce the amount of panel space needed by 25% according to the company, while getting the same amount of energy per kilowatt.
In the third quarter of 2013, SolarCity dominated US solar residential installations, with 32% of the market share. That was four times more than its nearest competitor, Vivint Solar. It makes sense for SolarCity to do everything under one roof in the future, especially with its market dominance.
Other US solar companies already in this vertically integrated space include SunPower, First Solar, and SunEdison, but of those three, only SunPower targets the home solar market. It’s unclear yet if installation leaders like Sunrun, Sungevity, and Vivint Solar will follow suit.
Overall this looks like a game-changing move that will have impact on how solar is distributed and the overall marketplace.