By - Jim Vess

ABB is paying $470 million for Fimer to take its inverter business off its hands

Energize Weekly, July 24, 2019

Zurich-based ABB is paying $470 million to unload its solar inverter business to Italian solar inverter maker Fimer Spa, as price pressures dog the market.

ABB said it will take an after-tax nonoperational charge of $470 million with about 75 percent going to Fimer as a cash payment. ABB said it will pay Fimer from the deal closing date through 2025. There will another “carve-out” of $40 million in separation costs expected in the second half of 2019.

The deal is slated to close in the first quarter of 2020. ABB spokesman Daniel Smith told Reuters that the margin improvement in the future “outweighs” the cash impact of the transaction.

Fimer is the world’s eighth largest inverter manufacturer. Inverters are the hardware that links solar panels to the electric grid.

ABB, a Swedish-Swiss multinational company focused on robotics and powers systems, said its inverter business has approximately 800 employees in more than 30 countries, with manufacturing and R&D sites located in Italy, India and Finland. 

After the transaction is closed, ABB said it expects the operational earnings before interest taxes, depreciation and amortization margin (EBITDA) of its electrification business to be “impacted positively by slightly more than 50 basis points supporting the business’ progress towards its target margin corridor of 15-19 percent.”

The deal will be subject to certain conditions, including the completion of the carve-out and consultation with employee representative bodies, ABB said.

“The divestment is in line with our strategy of ongoing systematic portfolio management to strengthen competitiveness, focus on quality of revenue and higher growth segments,” Tarak Mehta, president of ABB’s electrification business, said in a statement. “ABB will continue to integrate solar power into a range of smart solutions including smart buildings, energy storage and electric vehicle charging.”

While the solar market is growing, the hardware costs of installations, under market competition, have dropped more than 70 percent in a decade. The cost of an average-size rooftop array in the U.S. has declined 55 percent to about $18,000, according to the Solar Energy Industries Association.

“Because of price pressure and such low margins in the solar inverter industry, we’re seeing companies looking to get margins in different ways,” Lindsay Cherry, an analyst for Wood Mackenzie Power & Renewables, told GTM news.

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