M&A
February 15, 2011
Solyndra is one of the most hyped solar starups which has managed to raise $1 billion in funding and coming out with surprisingly little for the money.Not only did it postpone its IPO but also shut down its first factory as pricess keep diving faster than it can cut costs.Brightsource Energy on the other hand seems to have a brighter future with its unique CSP technology.Also with backers like Alstom and Bechtel,it has the heavy engineering support to construct the massive 392 MW plant.Note other Solar Thermal startups like Ausra and Soliel Systems were bought up by giant engineering conglomerartes Areva and Siemens.Brightsource along with eSolar remain the only pureplay CSP companies still surviving.
January 12, 2011
Asset Financing for utility grade projects accounted for $128 billion while a substantial amount was also raised for Green IPOs notably Enel Green Power,Goldwind,Datang,Longyuan etc.The figure does not include M&A figures not that there were any big bang acquisitions though a number of M&A activities took place in the Smart Grid space.Government individually ramped up the subsidies for Green Industries despite a failure to arrive at a meaningful global agreement to reduce carbon emissions in the Copenhagen Meet.Most of the investments tool place as countries increasingly jockey for the top spot in the emerging Green Industry.Conglomerates like Samsung,GE,Mitsubishi,Siemens have made Green Industry the focus of their management focus and investment leading to the astounding 39% growth.Note Green Advocates have said that $500 billion in annual investments will be required by 2020 to restrict carbon emissions to a tolerable level.
January 12, 2011
China using its massive foreign exchange horde to buy commodity assets around the world is an old story by now.It is now also getting into the act in the Green Energy area as China's state owned chemical group Blue Star has bought Norwegian environment chemical company Elkem from the Orkla conglomerate.Elkem is one of the largest silicon metal producers in the world and makes a solar grade polysilicon through a specialized low cost process.Orkla which is also the 40% owner of one of the world's largest silane and polysilicon producers Renewable Energy Corporation (REC) had been looking out for some time to sell Elkem.China has not been a big producer of polysilicon which is the main raw material for producing silicon based semiconductors and silcion based solar panels.The massive demand for polycrstalline modules has resulted in it being the main demand driver for polysilicon.
December 14, 2010
Posco,one of world's largest steel producers has been trying to enter the solar market like its other Korean brethren.Note South Korea has been really pushing the Green Industry in the country giving all sorts of incentives to Wind Energy,Electric Vehicles,Solar Energy etc.Korean conglomerates have responded by making huge investments into all sorts of Green Sectors.LG and Samsung have already established crystalline solar cells lines alongwith Hyundai.Hanwha has made a big bang acquisition of the 4th largest Chinese module producer Solarfun while OCI Polysilicon is on its way to become the 2nd largest producer of polysilicon in the world.Posco made its intention known about entering the solar market when it made a play for the Norwegian poly producer Elkem.This was a surprising decision considering that Posco's core strenght of steel making has little to do with production of polysilicon.
December 14, 2010
Marubeni on the other hand is looking to focus its energy on the crucial Water Service Sector be expanding its footprint in emerging markets.Water Service is a great growth sector due to numerous demand drivers like increasing population,larger per capita requirements,decreased supply.There is already a lot of theories floating around that the next big wars in the 21st century will be due to water shortages.Marubeni has plans to spend around $300 million in acquisitions in foreign markets as it looks to increase its customer base to 10 million.Note Marubeni will be helped by the Japanese government which gives considerable aid and soft loan for water infrastructure projects in developing countries.Note French companies Suez and Veolia are the biggest water service companies in the world.
December 8, 2010
NextEra Energy Resources which was previously known as FPL Energy has bought a number of Solar Energy Generating Assets in the past few months.NextEra is the largest Renewable Energy utility in the USA with around 18 GW of Capacity out of which around 6.5 GW is Gas and 7.5 GW of Wind Powered Capacity plus 2.5 GW of Nuclear Energy.NextEra Energy with its long experience in Green Energy Generation has now decided to expand its Solar Asset Portfolio buying equity stakes in Solar Thermal as well as Solar PV Farms in USA and Canada.NextEra Energy is already the biggest Wind Energy Producer in the United States and on the way to become the biggest Solar Energy Producer as well.While Wind Energy is facing uncertain times in the USA,Solar Energy is growing at a rapid clip driven by the sharp fall in Solar Panel Costs which have more than halved in the last 2 years.
December 8, 2010
The Tata Group in India is known for its high standards of corporate governance and ethics.In an environment where Big Business openly colludes with politicians/bureaucrats to blatantly loot and plunder,the Tata Group has stood out for its success and reputation of honesty.While Stock Market Scandals and other Scams happen with great regularity,Tata have generally stayed away from the mess.The Group's Success in diverse sectors such as Metals (Tata Steel),Automobiles (Tata Motors) ,Software(TCS) have made it the most successful business conglomerate.Audacious acquisitions of overseas companies like Jaguar,Corus,Daewoo have announced the arrival of the Indian MNC.However the recent 2G telecom scam has tarnished this reputation of integrity as Nira Radia tapes reveal the chairman of the group Ratan Tata of hobnobbing with a shady lobbyist.Ratan Tata has gone to court over breach of privacy but has not explained why his group companies has appointed an obviously corrupt lobbyist.His Telecom Companies Tata Teleservices and Tata DocoMo were obvious beneficiaries of the adhoc regulation and policy in the last 10 years.A letter from Rajeev Chandrasekharan has in a succinct and factual manner raised questions about the silence of the Tata Group over the last 10 years as the Telecom Shenanigans were being played out.
December 3, 2010
Spain is having difficulties with its fiscal deficit and finding it hard to sustain subsidies for Renewable Energy.The Markets in the West have also saturated themselves in terms of growth rates.Though low cost South Korean and Chinese Wind Turbine Producers have not penetrated the Western Markets yet,they could do so in the future.Gamesa which is a Top 5 Wind Energy Company has faced a turbulent year with the owners selling stakes and the share price taking a huge dive.Gamesa is one of the worst performing Wind Energy Stocks in 2010.Gamesa is looking to restructure its operations and concentrating on the offshore wind market by focusing on higher megawatt turbines.Gamesa is leading a massive Spanish Research Effort to develop a colossal 15 MW Turbine meant for the fast growing offshore wind sector.But this is a long term plan with 2020 set as the target for the complete development of this new Turbine.Meanwhile Gamesa has become the target of takeover speculation by one of the bigger Chinese Wind Turbine players like Sinovel,Goldwind etc.Gamesa has seen its revenue fall by 28% and profits by 71% with Operating Margins of 4-5%.Things don't look too good for 2011 either though Orders have started ticking up.
November 23, 2010
India has followed the example of Korea,China,Japan,USA and others in providing a capital subsidy to promote the use of Green Transport in India.Note China and Korea have been very aggressive in providing support and subsidy to the Green Industry.USA has also been providing soft loans and capital grants for manufacturing to Electric Vehicles and Lithium Batteries besides spending millions of dollar in R&D.Obama wants the US to become a leader in Battery Manufacturing with a 40% Global Marketshare while China recently unveiled a plan to create national champions in the Green Car Industry.Japan has also been supportive of Hybrid and Electric Car Technology with Honda and Toyota looking to dominate this emerging Auto Category.
November 23, 2010
The growth in Pharmaceutical companies has been tremendous in India. It is the second largest growing sector in country dominating the $8 billion domestic pharma market which is growing at around 15-16% pa. The Indian pharmaceutical industry is the third largest in the world.Mergers and acquisitions have become an increasingly important feature of this industry with foreing pharma giants like Merck,Pfizer,Daiichi looking to buy these fast growing small Indian companies.The recent buyouts of Piramal by Abbott and Ranbaxy by Daiichi reflects the desire of Pharma MNCs to inorganically grow their generics strength.This has raised some concerns amongst the Indian government about the independence of the Pharma Industry.However pharma companies are proliferating taking advantage of India's low cost technical workforce to grow at breakneck speed.. A broad overview of the pharma companies based on the revenue generated in 2007 & market cap is given below:
October 25, 2010
Wind Energy Companies in the Developed Markets have taken it on the chin in 2010.Companies dependent on the Wind Energy Markets in the West like Vestas,Gamesa,Suzlon,Iberdola Renewables etc. have had a very bad 2010 as their stocks price keep finding new lows.A Combination of Tough Financing Markets,Low Gas Prices and Declining Electricity Demand has made the livers of Wind Executives hellish in recent times.More competition in terms of Chinese heavyweights like Sinovel,Goldwind and Koean shipbuidlers precludes an easy recovery.Green IPOs in recent times have faced huge volatility with some managing success while others have led to huge losses.China's Ming Yang Power which is a Chinese Turbine Manufacturer has seen a 30% erosion of its IPO stock price of $14 as it was priced a tad too aggressively.First Wind which is a bit different being a Wind Energy Developer similar to renewable energy developers like Enel Green Power,EDF Novellas might face a frosty reception as well.Its not a good time to be in the wind energy business as increasing competition and declining demand cause problems.Note John Deere sold off its Renewable Energy Arm for a bargain as US Climate Change Legislation seems stuck in an everlasting limbo.Without a Federal RPS and an expiring 30% Treasury Cash Grant for Wind Farms,2011 is very uncertain for Wind Energy in the USA.
September 24, 2010
Independent Solar Project Developers are fast becoming extinct as Solar Panel Producers are fighting to gobble them up.The Solar Pipelines developed by these project developers have become very valuable for Module Producers who want to lock in to their captive demand.Despite a 140% y/y growth forecast in Solar Demand this year,the Solar Panel Production has managed to keep up.Huge amounts of capacity have been built up with Demand still precariously dependent on European Government Subsidies.There is always the danger of a Spanish meltdown happening in a crucial market which could lead to a major decline.Sunpower,First Solar and MEMC have been at the forefront of such acquisitions spending hundreds of millions of dollar in acquireing these developers.Most of these Project Developers have reaped a huge windfall as they had not constructed even 10% of their pipelines.The value given to these acquired companies was for their PPA,developement,environment permits,land acquisitions etc.
September 20, 2010
US Energy Utilities have been buying up Green Companies at a rapid clip these days taking advantage of the fall in valuations of Green Companies recently.Exelon bought Deere's Wind Assets while NRG Energy bought Green Mountain Energy.Constellation Energy already has around 10% of its 9 GW of Electricity Capacity being sourced from Green Sources.Its Smart Grid buy is synergistic to is Energy Trading Core Business.It will help in expanding its customer base and sourcing new opportunities.For CPower Investors which are mainly PE players,it would be a good exit as competition in the Demand Response is increasing .
September 17, 2010
NRG Energy is one of the largest utilities in the US with around 22 GW of Installed Capacity.However like Exelon,the share of Renewables is relatively low at just 2% of its overall Energy Capacity.Though the US Administration has all but given up on an Energy and Climate Legislation,Big Utilities recognize the need to generate low carbon electricity.Some sort of Carbon Emissions Restraint will be imposed on Utilities sometime in the future with EPA itching for action in restricting CO2 Emissions.Green Sector Stocks have fallen like a rock in 2010 due to the Copenhagen Disaster and lack of movement on a Climate Bill by the US government.Therefore it makes sense for US utilities to buy Renewable Energy Assets on the Cheap.Exelon bought Deere Energy Wind Farms at a dirt cheap price.NRG Energy which has around 550 MW of Wind and Solar Capacity bought Reliant Energy last year for $300 mm.It has augmented its Renewable Energy Portfolio with another $350mm buy of Green Mountain Energy.
September 9, 2010
Enbridge the Canadian Energy Company which is mainly into the business of Gas and Oil Distribution has been aggressively expanding into Renewable Energy in the past […]
September 7, 2010
Polysilicon Demand has been skyrocketing in the recent years due to Exponential Growth of the Crystalline Silicon Solar Cells.This made Elkem decide on building a 5000 ton solar specific plant in Norway through a new cheaper process of refining Silicon called Metallurgical Silicon.However the 2008 GFC and poly Oversupply has made this process suspect as $400/kg poly prices went crashing down by 90%.Timminico,a Canadian Producer which was in the process of setting up a giant mg-Si plant has almost collapsed as orders for this less refined Polysilicon Form dried up.
September 5, 2010
.Cisco has said that the Smart Grid Opportunity will be 100-1000 times bigger than the Internet as the Electricity Infrastructure of the world is modernized.Pike Research estimates expenditure on Smart Grid to become $200 Billion by 2015 from $20 Billion at Present.Already large sums of money from the ARRA Stimulus are going to be spend by US Utilities on Smart Grid Projects.There are a host of Software and Hardware Companies in the Race for the Smart Grid Pie.IBM,Google,Microsoft,Honeywell,GE,SAP,Oracle every big company wants a piece of this Multi Billion Dollar Pie.However Cisco is the one putting serious money and effort into its Smart Grid Initiative.
September 1, 2010
Empire Building through Unrelated Expensive Acquisitions make Reliance Industries Stock Underperform
Reliance Industries is known to have one of the smartest management teams in the country.The Reliance Group led by Mukesh Ambani is well connected with proven record in executing huge projects in the Oil and Gas Arena.However outside of their core competence,the Group has suffered.Its Retail Entry has not been much of a success despite big bucks being poured in the last 3-4 years.It entry into marketing of oil based fuels has also meandered without going anywhere.Now the Reliance Group has announced an entry into the Hotels Sector by acquiring a 14% stake in East India Hotels at a significant premium over the market price from the promoter Group.This ~$220 million investment is totally unrelated to Reliance's activities and make no strategic sense.
September 1, 2010
Wind Energy in the USA has hit an Air Pocket in 2010 with Low Prices for Gas and lack of a Federal Push for Green Energy.The end of 30% Cash Grants for Wind Investments by 2010 end may lead to a worse 2011,if the incentives are not extended by the Congress.Note Wind Energy is the cheapest form of Green Energy with prices of 8-10c/KwH and the second most prevalent form of Renewable Energy after Hydro Power.China has become the largest installer of Wind Energy in 2009 with 13 GW showing a 100% CAGR over the last 2-3 years.
August 20, 2010
While US-China relations remain normal with the biggest trade relationship in the world,there is always an undercurrent of mistrust between the world’s two largest economies.Chinese companies […]
August 17, 2010
To reduce its expense Vedanta will only pay Rs 355/share to minority shareholders in the open offer while offering Cairn Rs 405/share .This will include Rs 50/share for a non compete agreement.This seems a ruse to shaft minority shareholders as I don't think Cairn poses much of a threat to Vedanta from further Oil Explorationin India.I don't know how Vedanta's returns from the Cairn's oil fields can be impacted through Oil Exploration by Cairn's parent in the future.Indian stock market regulator had earlier rejected Heidelberg's premium to be paid to SK Birla Group when buying Mysore Cements stake.The controlling premium has been paid in earlier M&A by foreign promoters to Indian promoters.The area of controlling premium remains a grey one and I think it is being exploited by Vedanta to lower its open offer price.It remains to be seen if SEBI rules in the favor of the minority shareholders.
August 3, 2010
South Korean Conglomerate Hanwha subsidiary Hanwha Chemicals has taken a controlling 49.99% stake buying 36 million shares fro m Solarfun at $10.72 (4.6% premium) and the complete shareholding of promoters Good Energies (controls German Q-Cells as well ) and Chairman Mr. Yonghua Lu .Solarfun is the 4th largest Chinese company which has been executing well on a vertical integration strategy.
August 3, 2010
Huawei faces blacklisting from India on Security Concerns Huawei has been blacklisted by the Indian government from supplying telecom equipment due to security concerns.Despite strong lobbying […]
June 20, 2010
Satyam scam tainted Indian infrastructure company Maytas has agreed to sell a 20% stake to Saudi BinLaden Group.Note Maytas Infrastructure was an integral part of the […]
June 18, 2010
Taiwan Companies Ramping up their Solar Plans Taiwan based semiconductor company TSMC ( Taiwan Semiconductor Manufacturing Corporation) is getting serious about investing in Solar Energy.Other Taiwanese […]
June 11, 2010
Panasonic hits upon a Green Goldmine in Sanyo Panasonic has hit upon a Green Goldmine with its acquisition of Sanyo .It is now capitalizing on Sanyo’s […]
June 11, 2010
Caja Madrid which was looking for a Bailout from the Spanish Central Bank is merging with another large Caja Bancaja.The Central Bank is pressurizing the Cajas(Socially […]
June 10, 2010
Apple has been the Leader in Technology Wars Technology has become a very competitive sector with 5-10 Global Companies taking on each other on multiple fronts […]
June 7, 2010
The detente between the Ambani brothers which lead to the rescinding of the non-compete agreement has resulted in Reliance Industries Ltd (RIL) being the biggest Winner […]
June 2, 2010
Unique Indian Telecom Market The Indian Telecom Market is a unique market in many ways due to the following reasons Fastest Growing Telecom Market in the […]