NRG Energy, Inc. (NYSE: NRG) has agreed to buy the project pipeline of US Solar, which is an affiliate of Arclight Capital Partners LLC, for an undisclosed amount. According to NRG, the purchase nearly doubles the company’s solar development projects to 1,150 megawatts. Nine projects are involved in the acquisition, ranging in size from 20 megawatts to 99 megawatts, and all could be in operation between 2011 and 2013.
The acquisition follows last month’s acquisitions by First Solar, Inc. (NASDAQ: FSLR), MEMC Electronic Materials, Inc. (NYSE: WFR), and SunPower Corp. (NASDAQ: SPWRA). First Solar agreed to pay $285 million for a 575 megawatt project pipeline from NextLight Renewable Power. MEMC paid $76 million for Solaicx, a privately-held company that has developed a low-cost wafer manufacturing process, and created a joint venture with a private equity firm that could lead to the acquisition of up to $1.5 billion in solar projects. SunPower paid $277 million to acquire a privately-held company that added some 1,200 megawatts to its solar project pipeline in Europe.
NRG did not state the total megawatts involved in the acquisition, but extrapolating from what it did say, the amount involved is probably around 500 megawatts. Based on the price First Solar paid for NextLight’s 575 megawatt pipeline, NRG likely paid $220-$250 million.
The wave of consolidation currently sweeping over the solar industry is certainly going to continue as the larger, more successful technology companies move downstream into the project business. Prices for wafers and for thin-film are falling and the tech companies are moving downstream in an effort to boost revenues and shore up profits.
Power suppliers, like NRG, need to diversify their generation portfolios, and more companies are likely to join the hunt for diversity in smaller solar and wind development companies that have built up a project pipeline but may also have difficulty financing those projects. For the acquired companies, it’s far better to be acquired and get a nice payout rather than to accumulate debt.
Now’s a good time to be a small solar project developer with a nice project development pipeline. Technology companies and utilities are seeking out opportunities to increase profits or to diversify or both.
