Solar Thermal Energy Companies

Siemens Acquires Solel for Solar Market Strength

Written by Brian Hicks
Posted October 21, 2009

Siemens (NYSE: SI) is moving from country to country and from strength to strength in the renewables sector.

This month, the German engineering giant added Israeli solar-thermal company Solel Solar Systems to its Environmental Portfolio. Here, we'll see that Solel's recent progress and Siemens' green growth goals make this is a well-timed acquisition that points to further opportunities for large-cap clean energy investments.

Siemens shelled out nearly half a billion bucks ($418 million) for Solel, which has already established itself as a player in key clean energy markets.

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Solel currently operates 750 MW worth of installed capacity at 15 solar-thermal plants around Spain. The company got a $2.6 million grant from the Spanish government in September, meant to help the company finance Spain's first solar field component plant south of Madrid. There, Solel engineers will produce solar receivers that focus the energy generated at parabolic trough power plants.

Siemens will take on that project now, gaining a leg up in the country Ernst & Young ranks in the top 5 most attractive renewable energy markets in the world.

In Spain and elsewhere, Siemens will couple Solel's high-efficiency receiver production with its own market-leading steam turbine division.

Every bit of synergy helps Siemens push beyond its own advantageous German base — Germany is the #2 overall clean energy market in the world, according to E&Y's Q4 2008 All Renewables Index.

Globally, Siemens expects to take a big bite of the rapidly growing solar-thermal market, which it says will be worth 20 billion euros by 2020.

That's a figure that big companies can't say no to.

And the greening of Siemens, GE (NYSE:GE) and other industrial giants presents us with a new category of global mega-cap shares that are gradually becoming, well, Green Chip Stocks.

When Blue Chip Stocks Go Green

Now, being an industrial behemoth with a U.S. market cap of over $87 billion, Siemens dwarfs most pure plays on renewable energy. Some investors may like the underdog feel of clean energy stocks — after all, until the past few years, the mainstream media paid little attention to anything green. . . and oil prices didn't seem to justify high-dollar acquisition strategies like the one Siemens is currently pursuing.

Siemens isn't shelling out hundreds of millions for Solel on a whim. In fact, solar isn't even the primary motivation for this green grab, if you listen to Siemens CEO Peter Loscher. When the Solel deal was announced, Loscher said, "After the rapid and highly successful expansion of our wind power business, we now want to continue this success story in the solar sector."

Indeed, Siemens is bringing in wind turbine orders at an incredible clip for a recent market entrant. . .

On October 13, Siemens announced six new wind turbine orders in North America, worth over $900 million. A quarter of the 565 MW in turbines Siemens ships will head to Ontario, which has become the hub of Canadian wind energy market momentum. Wind-blown states like Wyoming, Oklahoma, and California (the nation's top renewable energy market), will get the rest.

This is big, and this is real. We've heard fair criticism of multinational firms that engage in "greenwashing," which means they put a ton of public relations money into magnifying relatively small moves towards sustainability. With emissions reductions mandates now being developed in national capitals ahead of the Copenhagen Climate Conference (COP-15) in December, even those baby steps by blue chips will evolve into long strides. So on one hand, Coca-Cola won't necessarily become a "green" company, but Atlanta executives will have to reevaluate their industrial logic like never before.

Siemens, on the other hand, is fusing its own in-house research and resources with valuable startups like Solel. Solar-thermal plant designers will now be able to source steam turbines and receivers from one company, which is huge. Easier procurement means economies of scale are achieved more quickly, costs come down, and more drawing-board plans move into the range of reality.

We've been keeping you up to date on the state of renewable energy finance throughout the credit crisis, and M&A is a major piece of the puzzle for keeping clean energy on track to provide more capacity and enable investors to profit (Wall Street-traded Siemens shares are up 67% in the past six months).

Rest assured, there's plenty more on the way when it comes to top-down industrial stimulus for clean energy stocks.

Regards,

Sam Hopkins
Sam Hopkins

P.S. You've read about the evolution of clean energy and sustainability in Green Chip Stocks for years now. But there's another way to tell the story, and a new film highlights another area where the green shift is taking place. You can watch the whole video, Scraphouse, online right here.