George S. May Business Blog

A few interesting points surrounding the Siemens-Solel deal

Pending approval by responsible authorities, Siemens AG is set to acquire solar thermal power company Solel Solar Systems Ltd. The purchase price is around $418 million and should be finalized before the end of the year.

There was a very interesting piece in the WSJ that covers the reasoning behind the proposed buy-out, the future and the expected response from Siemens competitors.

The full feed below:

For a $400 million deal, Siemens’ acquistion of Israeli solar-power firm Solel is pretty interesting.

On Thursday, Siemens bought Solel Solar Systems, the “granddaddy” of firms operating in the increasingly hot solar-thermal space. Solel cut its teeth in solar thermal projects in California deserts more than two decades ago, and specializes in making a key component for solar thermal projects. (That’s solar power that uses the sun to heat liquids to make steam to turn a turbine, a large-scale but still very expensive flavor of solar power.)

On the one hand, this is part of the greening of big industrial conglomerates like Siemens—and General Electric. Siemens makes lots of power-generation equipment, from gas turbines to wind turbines. The acquisition is a way to bolster Siemens’ solar portfolio, in an area that Siemens executives expect to be a $32 billion market in ten years’ time.

The question is: Does the German company have one particular project in mind—like the $500 billion European plan to turn the Sahara Desert into a huge solar plantation? Siemens is already a leading player among the dozen or so mostly German firms that make up the Desertec Initiative; the Solel deal might just put it in the catbird seat. From the WSJ:

“The picture puzzle in the growth market of solar thermal energy is complete,” Siemens Chief Executive Officer Peter Loescher said. Siemens now have all components needed for projects like Desertec, according to Rene Umlauft, head of Siemens’ renewable energy division […] “Siemens is best positioned now to get a substantial part of contracts granted in the course of the Desertec project as they have the broadest portfolio in technology needed,” JP Morgan analyst Andreas Willi said.

One thing to keep an eye on will be whether—and how–Siemens’ smaller rivals respond. Spain’s Acciona, for instance, is a big player in solar-thermal power in Europe and the U.S. And Acciona is eager to get a piece of the Desertec action.

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