by Jon Mainwaring
Think of the European solar energy sector and it is generally German solar firms that spring to mind. Germany is home to several listed solar energy companies and even London’s largest listed solar firm, PV Crystalox, has some of its key operations based in that country.
However, while Germany does indeed have a well developed solar energy market, there are a handful of other solar markets in Europe that have led to home-grown solar energy firms. One such market is Spain, and recent years have seen its own solar companies grow large enough to join the Madrid Stock Exchange.Solaria Energia y Medio Ambiente is a vertically integrated solar energy business. In addition to manufacturing both solar cells and thermal panels, it also installs large solar projects for third parties as well as operating solar plants of its own.
The €154 million market cap business was founded eight years ago and has been listed in Madrid since June 2007; it was the first solar company to float in Spain.
Solaria Energia manufactures solar panels for the generation of electricity at its facilities in Puertollano, near Ciudad Real, and Fuenmayor in La Rioja region. These panels, which are based on both monocrystalline and polycrystalline silicon photovoltaic cells, are used in both off-grid installations (rural electrification, telecommunications, signage and water-pumping systems) as well as grid-connected systems (solar energy parks and homes). They can be deployed on both fixed structures and on tracking systems that follow the sun throughout the day in order to achieve optimal electricity generating performance.
In addition, Solaria Energia makes and sells thermal solar receivers used to convert solar energy into heat for hot water systems in homes, swimming pools, industrial facilities, hotels and hospitals. This technology is also used to power refrigeration units.
As well as manufacturing, Solaria Energia delivers ‘turnkey’ projects for investors wanting to invest in photovoltaic (PV) parks. This means that the company not only plans and designs the PV systems used in a solar park, but also supervises the construction of the park as well as processing all the necessary licences and administration required. It then handles maintenance on behalf of the park’s owner.
Solaria Energia has delivered eight such turnkey projects, ranging from 1MW to 10MW, in Spain. So far this year, the delivery of turnkey plants has contributed 22% to the firm’s overall revenues.
Solaria Energia is also a generator of electricity, with 22MW of PV plants currently in operation at Villanueva, La Rioja and Puertollano in Spain. The firm has a further 28MW of plants under construction, with more than 27MW being built outside of Spain in the Czech Republic, Greece, mainland Italy and Sardinia.
The foreign operations are part of a strategy by Solaria Energia to diversify from a stagnating solar market in Spain, which the firm believes is a consequence of the RD 1578/2008 legislation in the country; the previous feed-in tariff legislation had been particularly favourable to the installation of large scale PV power plants. The company has set up a permanent commercial structure in France, Italy, Greece and Germany, as well as strategic deals in Brazil and Morocco, in order to increase export sales. In the first half of this year, 70% of Solaria Energia’s revenues came from foreign markets.
Generation accounted for 10% of the firm’s revenues during the first half of 2010. Overall turnover for H1 2010 was €63.1 million, an increase of 243% over the first half of 2009. This reflected a significant ramping up of production of PV modules since early last year (H1 2010 PV module sales were €43.1 million compared with €23.4 million for the whole of 2009).
Operating profit, in terms of EBITDA (earnings before interest, taxation, depreciation and amortisation) came in at €6.8 million (H1 2009: €10.1 million) while net profit was €438,000 (H1 2009: €3.1 million). The reduced profit on higher sales in part reflects an 80% increase in Solaria Energia’s workforce to support strong manufacturing demand.
The firm’s debt increased by €6.9 million during the first half to €71.2 million. Its management said that this gearing of approximately 28% is at a level that it considers moderate and highlights a “robust balance sheet”.
For the whole of 2010, Solaria Energia’s management estimates total revenues of €200 million with an EBITDA margin of 15.5%.
So far during the second half, Solaria Energia has announced two funding agreements made to finance the construction of solar plants in Italy and the Czech Republic. The first agreement – signed with Italy’s largest retail bank, Intesa San Paolo – provides €23 million for a 5.8MW rooftop plant in the southern Italian town of Uta. This plant is owned by the investment fund Solaria-Aleph Generación – a joint venture fund 50% owned by Solaria Energia.
In the Czech Republic’s Bohemia region, Solaria Energia will fund two solar plants with a total generation output of 7MW by means of a €23.5 million from Czech bank Ceskoslovenska Obchodni Banka.
The firm began paying investors a dividend in September of this year: the first payment amounted to €0.02 per share.
In spite of increased sales and a more diversified business model in terms of both services and geography, Solaria Energia’s share price is down some 40% on the start of the year. In part this reflects a general downturn in the prices of solar shares, but it is also reflective of both reduced profits at the firm and diminished expectations for solar energy vendors in Spain.
Investors in the firm will be looking for evidence that international diversification will lead to profitable growth.
