A-Power enters the solar market with $50M acquisition

Shenyang, China-based A-Power Energy Generation Systems (Nasdaq:APWR) said today it is planning to acquire Kyoto, Japan-based Evatech in an all-cash transaction valued at $50 million.

A-Power spokesman Valentine Ding told the Cleantech Group that the purchase marks his company’s foray into the solar space.

“This will help us jump start our solar business,” he said. “It’s really a fortuitous opportunity.”

A-Power stock was up 1.88 percent at $10.29 in today's morning trading.

Through its China-based operating subsidiaries, A-Power is the largest provider of distributed power generation systems in China. It recently started a wind turbine manufacturing business, opening China’s largest wind turbine manufacturing facility (see A-Power completes first phase of wind turbine facility and A-Power opens 1GW wind turbine plant in China). Its wind technologies have been licensed from Germany’s Fuhrlander and Denmark-based Norwin.

Ding said the company is also working with utilities in China to build power plants that use biomass, with three current projects in Eastern China (see A-Power lands $44M for energy alliance as stock plummets).

“Our mission is to become an all around alternative energy company,” Ding said. “Our customers are municipalities, utilities and industrial companies in China. There’s a big movement in China to create clean, low-cost energy nationwide in all forms. We want to be in all these areas to leverage our abilities. Eventually, we want to be a one-stop shop for all our customers so they can have different forms of clean energy.”

Privately-held Evatech, which designs and manufactures industrial equipment for liquid crystal displays and plasma display panels, is also known for its experience developing thin-film products.

Evatech's photovoltaic technologies include an atmospheric-pressure chemical vapor deposition manufacturing technique and transparent conducting oxide (TCO) glass, which has the potential to reduce thin-film battery production costs and enhance its photoelectric conversion rate.

With Evatech’s current technology, the conversion rate is 8 percent, but Ding said his company is hoping to get it higher than 10 percent in the next couple years.

Through the memorandum of understanding signed today, Evatech’s production lines for amorphous, thin-film PV batteries and TCO glass coating will be moving from Kyoto to Shenyang, an industrial hub in Northeast China, where A-Power currently operates.

Ding said the move should help reduce production costs and bring the products closer to the existing and prospective customers. Evatech sells to customers in about 10 countries outside Japan and has 46 customers in China, which is its largest overseas market.

A-Power is not disclosing details yet of where the facility is to be located because the contract is still being finalized. Ding also didn’t know what the facility’s potential production capacity would be.

Evatech’s thin-film photovoltaic research and development operations are expected to remain in Japan, where the company has partnerships with Japan-based Osaka University and the University of Tokyo. Founded in 1987, Evatech has branch offices in Tokyo, Shanghai and Taiwan.

Ding said Evatech is currently going through a corporate and debt restructuring process because of the economic conditions. During the process with the courts of Japan, Evatech said it was seeking a strategic buyer with complementary product offerings and A-Power fit the bill.

He said A-Power plans to retain the whole Evatech team, which has 85 employees, for the time being. Its management is also expected to stay in place.

The $50 million deal is expected to be primarily funded through a combination of government subsidies and loans from the governments of Shenyang and its Liaoning province, which have policies to support the development of alternative energy, Ding said.

Last month, the central government announced the “Golden Sun” project to subsidize up to 70 percent of the costs of building solar farms with a total capacity of at least 500 megawatts by 2012, versus the country’s current capacity of 80 MW.

In March, the Chinese Ministry of Finance also offered a subsidy for installed solar to help the industry recover from price drops along the value chain (see New solar subsidies in China set to reduce installed cost by half).

Government subsidies are expected to make up 40 percent to 45 percent of the total purchase price of Evatech, with the remainder coming from loans and internal sources, Ding said.

A-Power said it expects to sign a definitive purchase agreement with Evatech by September, closing the transaction by the end of November.