ABB exits solar inverter business

This Swiss giant is following a trend as large multinational high-tech companies see their role as redesigning infrastructure rather than supplying inverters at ever lower margins. Schneider Electric and General Electric have pulled out of the business for large scale solar and while Siemens still has a central inverter on offer, its recent acquisition of Kaco and marketing of its Junelight home storage product indicate a growing focus on its IoT platform to facilitate smart EV charging and grid applications.

Inverter big shot ABB has announced its exit from solar by agreeing Italian power electronics manufacturer Fimer can acquire its PV business.

ABB said its inverter business generated $290 million in revenue last year. A portfolio of products, systems, and services for different types of solar installations held by ABB’s electrification business will be sold to Fimer.

“We are glad to announce this further step in our development as Fimer’s focus on the solar business will be greatly enhanced by this integration,” said Fimer CEO Filippo Carzaniga. “Our commitment to positively influencing the energy market will be realized through the development of new product platforms and innovative digital technologies.” The head of the northern Italian business added: “With a strengthened portfolio we are better placed to shape the future of this increasingly strategic business.”

ABB did not disclose how much Fimer would pay for its inverter unit but did reveal it would shoulder costs of around $430 million in the recently ended three-month period as part of the transaction. That relates to ABB agreeing to cover warranty risks and other liabilities and will be paid to Fimer over six years. “ABB expects up to $40 million of carve-out related separation costs, starting in the second half of 2019”, the company said.

Regarding the reasoning behind the solar business sale, ABB said disposing of the low-margin unit would help its electrification business reach its overall profit margin aim of 15-19%.

Both companies expect the deal to be completed in the first quarter of next year and the sale is still subject to conditions being agreed with employee representative bodies. ABB said it intends to retain all 800 inverter business employees, spread across more than 30 countries. The company has manufacturing and R&D sites in Finland, India and Italy. Fimer has a plant in Vimercate, near Monza for its inverter, welding, and electric mobility businesses.

“The divestment is in line with our strategy of ongoing systematic portfolio management to strengthen competitiveness [and] focus on the quality of revenue and higher growth segments,” said Tarak Mehta, president of ABB’s electrification business. “Solar is a well-established and key focus for Fimer and as such we believe them to be a very good owner for ABB’s solar inverter business. The combination of the portfolios under Fimer will support further sales growth. Through our intelligent low and medium-voltage offering, ABB will continue to integrate solar power into a range of smart solutions including smart buildings, energy storage and electric vehicle charging.”

Big players go small

The divestment will bring ABB in line with its peers, who are increasingly focusing on internet of things platforms, smart energy and smart EV charging in the low and medium-voltage sector. Inverter businesses including General Electric, Schneider Electric and Siemens are turning their back on utility scale solar, IHS Markit’s Cormac Gilligan pv magazine.

“One of the overarching themes is that multinational industrial manufacturers have, due to the rapid reduction of solar inverter prices over the last few years, certainly squeezed profit margins. As a result, some players are refocusing on higher growth areas such as smart home and storage or smart EV charging,” said the solar and energy storage research manager for IHS. Gilligan added, the transition from subsidies to competitive tenders – and now PPAs – meant costs had become immensely competitive in the last couple of years. In such an environment, big multinational technology companies have struggled to meet profit margins and will ditch low-margin business units to lift overall figures.

Focusing on other areas enables companies such as Siemens, Schneider – and now ABB – to leverage much more efficiently their digital portfolios, where growth margins looks more promising.

Gilligan said Fimer has been particularly active with central inverters in the utility scale market. Though it has also brought to market string inverters, the analyst believes Fimer can benefit from the technology, production and knowledge transfer it will gain from the transaction. With ABB’s products, Fimer is likely better positioned to tap into the fast growing commercial and industrial sector and also cater to string inverter demand in utility scale plants.

Fimer has been very active in Latin America, and particularly in Brazil, where it was ranked the second largest supplier for the last five years. The company has also been active in Africa – especially in Egypt – and other emerging markets. With the ABB transaction Fimer can exploit its new unit’s marketing channels in India.

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