The presentation embedded below was one of my favorite from Solar Power International.  Jack Calderon of Lincoln International was one of a few investment bankers that either presented at the conference or participated in a panel discussion.  Jack’s presentation is the one that sticks out in my mind because it tells a story of the solar industry on a macro level that is consistent with the trends that I am seeing on a micro-level.  I can’t think of a better way to describe the solar market’s current phase than “a survival based frenzy”.  At all levels, up and down the supply chain, companies are getting aggressive in making moves geared towards being survivors of what will eventually be a great shakeout in the industry.

Panel suppliers are getting aggressive in pricing of panels and are also acquiring development companies or development pipeline to ensure that there is an outlet for their production.  Developers are getting aggressive in the RFPs to utilities and are getting aggressive with the owners of solar development suitable land.  We have no idea what the winning strategy will be in the end, but right now the race seems to be to get hardware deployed as soon as possible.  Nobody wants to die on the vine because of an overly cautious strategy while they watch their competitors get things done.

I have broken the presentation up into two parts for the purposes of offering my notes.  The first embedded document is related to solar M&A.  The embedded document at the bottom of the post is related to Lincoln International.  You can also find Lincoln International on the web at www.lincolninternational.com

Pages From Lincoln International Presentation From SPI (2)

The Lincoln International presentation has a few striking graphs and statistics.  Here are my notes:

• Through only 9 months, M&A activity in the solar industry has easily eclipsed 2008 activity.
• Activity among integrators/developers (that would be strongly related to our land development market) has been a big driver in the growth of M&A.
• Vertical integration of the industry has also been a big driver of growth.  My own uneducated theory is that this will be a near term phenomena.  I think we’ll see vertical integration while panel manufacturers try to control their own destiny.  After they reach a critical mass I think we see that trend reverse itself and the panel manufacturers will divest themselves of the parts of their business not core to production.  As I blogged last week, development is a business that isn’t for everybody.  I think somebody on a panel at SPI also noted that eventually the panel manufacturers won’t want to be seen as being in competition with their customers (apologies to whoever said this if I have plagiarized their point).
• Growth of M&A activity in Europe was a key driver in the growth of the broad solar M&A market.
• In terms of value, the integrator/developer spectrum of the market saw significant growth.  This is sort of surprising to me for a few reasons (also, take the comments that follow as being mostly centered on what we have seen in the California utility scale development market).  First, I suspect that there is a supply demand issue at play here.  The limited number of developers that both know what they are doing and also have significant development pipeline likely created upward pressure in the market.  However, I think the reality is that most of the development pipeline out there is essentially worthless today.  It might be worth something in the future, but today it is essentially worthless.  We have been looking at a lot of deals lately for projects that are a year or more underway and yet very little value has been created in that year.  How many deals are out there where you can cross off one of the major obstacles to getting the project built (secured permits, finalized PPA, finished interconnection study, or secured project financing).  So buyers of development pipeline that are getting development pipeline that doesn’t have any major entitlements are essentially speculating.
• Apologies again to any presenter whose thoughts I have plagiarized here.  Thanks to Lincoln International for sending the presentation for me to post.

Pages From Lincoln International Presentation From SPI (2)-2

Related posts:

1. Development and Solar Power International We just finished listening to an excellent panel discussion on...
2. Update from Solar Power International Note: Because our firm specializes in GIS-based site acquisitions for...
3. Solar Power Int’l in Anaheim Next Week It will be interesting to see the results of the...