After two years of losses and job cuts, SMA Solar has finally got a break. On Wednesday, the world’s largest producers of photovoltaic inverters – devices that convert solar energy to useable electricity – announced a cooperation deal with engineering giant Siemens.
SMA Solar, based in Niestetal near Kassel, central Germany, will be working closely with Germany’s biggest engineering firm, and one of the largest globally, to offer products and services in the solar power market.
“We want to offer joint systems for major solar power parks,” SMA’s chief executive Pierre-Pascal Urbon told Handelsblatt.
SMA produces large inverters that convert the direct current from solar power plants to the alternating currents of electrical outlets. Siemens, based in Munich, supplies the necessary transformers and switchboards.
“The collaboration’s success will first be noticeable next year.”
SMA Solar, which listed on the Frankfurt Stock Exchange in 2008 at the beginning of the German solar market boom, has been hit with losses since Germany’s government cut subsidies to solar power electricity in 2013. Furthermore, increased competition from Asian rivals, in particular China, pushed down prices of its products.
SMA shareholders, who had to swallow cumulative losses of €254 million at the German firm the past nine quarters, welcomed the deal, sending shares to an almost nine month high.
SMA shares, which had lost three quarters of their value from March 2014 until February 2015, jumped 24.1 percent on Wednesday and rose a further 1.4 percent on Thursday morning. Siemens shares rose about 2 percent over the same time frame.
For SMA Solar, large power stations are an important business. They constitute about 40 percent of the global market for inverters, which the company estimates to be €4.2 billion, or $4.7 billion. At SMA itself, the large power stations already contribute about 35 percent of revenue, which was €805 million last year.
With Siemens’ network, SMA, a mid-sized business, will have an easier time doing business with electricity companies that are strengthening their investments in solar power plants.
Video: An SMA Solar production, showing a solar panel project in the Pacific Ocean.
German utilities, including the nation’s largest, E.ON, are trying to increase their share of renewable energy production after German Chancellor Angela Merkel decided in 2011 to shut down nuclear power plants by 2022 and generate 80 percent of electricity with renewables by 2050.SMA brings to the arrangement its contacts to so-called project developers, which plan and build the solar power plants.
Mr. Urbon, the SMA chief executive, sees the collaboration with Siemens as a further step in getting the inverter producer back on track. Mr. Urbon announced in January he needed to cut 1,600 jobs, or more than a third of a total staff of 4,667 jobs.
SMA has also brought the Danish cooling and air conditioning corporation on board as a major shareholder. Mr. Urbon hopes that he can push costs down with their joint purchasing.
For Siemens, the partnership means a fresh change. The corporation had once bet on solar thermal energy, or converting solar energy into thermal energy. As a power plant constructor this division was closer to the main business, so in 2009, Siemens bought the Israeli solar thermal specialist Solel for €284 million. “The sun is now shining on Siemens,” the then-Siemens CEO Peter Löscher rejoiced. He marketed the corporation as a “green infrastructure giant.”
But the involvement was a flop. Solel was a worse company than was thought, and solar thermal energy did not achieve a breakthrough, primarily because of the price collapse in photovoltaics. Siemens got out of the desert electricity project Desertec and completely closed down the solar division, which included photovoltaic-inverters.
Now, Siemens will collaborate with SMA Solar.
“The collaboration’s success will first be noticeable next year,” Mr. Urbon said, warning against high expectations.
The cooperation with Siemens is not exclusive. SMA and Siemens can also sell their components together with other partners. But Mr. Urbon is convinced that major customers will “place value on technically harmonized components,” which arise through the close collaboration in development and project management.
As a first step, the two companies have developed and produced a new type of container solution which combines a 2.5 megawatt inverter from SMA with a transformer and switchgear from Siemens, SMA Solar said in a statement.
Georg Weishaupt covers the building sector, solar and wind energy for Handelsblatt. Axel Höpner heads Handelsblatt’s Munich office, focusing in particular on insurer Allianz and engineering firm Siemens. Gilbert Kreijger, an editor with Handelsblatt Global Edition, also contributed to this article. To contact the authors: email@example.com and firstname.lastname@example.org.