Reliance Industries (RIL) is close to acquiring REC Group, the largest solar panel manufacturer in Europe, for $1-1.2 billion from China National Chemical Corp (ChemChina), said people aware of the matter.
The purchase will help RIL access cutting-edge technology and global manufacturing capabilities as it continues with its recently-announced march into green energy, they said.
Reliance is in talks with global banks to raise $500-600 million in acquisition financing for the transaction, while the rest will be funded via equity.
Singapore-registered and Norway-headquartered REC Group is an international “member” of state-owned chemicals giant ChemChina, which is the largest shareholder in Pirelli Tyres and Syngenta. REC produces silicon material for photovoltaic (PV) applications and multi-crystalline wafers, as well as solar cells and modules for rooftop installations, industrial and solar parks.
The solar industry’s growing dependence on China has become a bone of contention globally and leading consumers such as India and the US are now incentivising local manufacturing or diversifying supply sources.
Move to Boost Capabilities
In 2019, when solar ranked as the world’s top source of new power-generating capacity, about one-third of the polysilicon the industry used to make solar panels came from Xinjiang province, according to Bernreuter Research. Indian companies such as Renew Power and conglomerates Adani and Reliance have all announced major manufacturing projects now.
India’s current solar cell-making capacity is at around 3 GW a year — the module production capacity is around five times that – but is not enough to meet the solar target of 280 GW. Due diligence is almost complete and bilateral negotiations are on to close the transaction. A formal announcement is expected in a few weeks, said the people mentioned above. “Earlier, Reliance has been scoping several independent power producer assets, including SB Energy, but valuations made them baulk at most of those transactions,” said one of the persons.
“Unlike the past, they now have a clear idea of the path and so are far more focused. It’s unlikely they want to be a developer feeding to the grid or distribution companies in India. It’s more a manufacturing play to complement the Prime Minister’s energy self-reliance narrative.” The company is working with a global adviser on the transaction. Reliance declined to comment. REC Group didn’t respond to queries. “Manufacturing is super competitive. Next year, there will be oversupply from China. Only players like Reliance can make these assets sweat,” said the chief executive of a power producer. Mint had earlier reported that RIL is evaluating REC.
With an annual volume of 1.5 GW, REC has made over 40 million solar panels, which generated 11 GW of power globally for customers — from Ikea and Audi to Tiger Beer and homeowners in Arizona — to become one of the largest vendors globally, with manufacturing in Scandinavia and Singapore. Formed in 1996, the history of REC Group is one of ups and downs and multiple corporate reorganisations and amalgamations. After a successful IPO in early 2000, its plants and operations had to shut in 2011-12 due to weak market conditions and negative cash flows.
In 2013, REC was split and offshoot Renewable Energy Corporation ASA (REC Silicon) was formed, consisting of the silicon manufacturing facilities in the US.
In 2014, China National Bluestar agreed to acquire REC Solar for $640 million to combine it with a Norwegian asset – solar grade silicon maker Elkem – it picked up in 2011. Bluestar in 2011 had bought Elkem for $2 billion in one of the biggest industrial takeovers by a Chinese group in Europe.
In India, the company has been present for a little over a decade. After starting out as a supplier — to power utilities such as Greenko or scaled projects for the Department of Atomic Energy and Eenadu Group, among others — it pivoted to the rooftop segment for industrial users such as Capgemini, Infosys, BMW and Wonder Cements, among others.
According to industry estimates, before the pandemic, REC reached almost 10% market share in the rooftop commercial and industrial segment.
Over the past few quarters, REC has been marketing its HJT technology panels in India to potential customers. The company says these have an efficiency of 25% against 15-18% offered by utility scale manufacturers, albeit at a cheaper price. “REC doesn’t compete with utility scale players such as Longi, Jinko, or Trina in the Indian market,” said an executive at a rival.
Energy for Future
Reliance chairman and managing director Mukesh Ambani announced ambitious green energy plans with the setting up of the Dhirubhai Ambani Green Energy Giga Complex on 5,000 acres in Jamnagar, at the company’s 44th annual general meeting in June. With a $10-billion investment, the company plans four giga factories — an integrated solar PV plant, advanced energy storage battery manufacturing unit, green hydrogen, and fuel cell facility.
Reliance has already begun making moonshot bets on new energy and materials. Wholly-owned subsidiary Reliance New Energy Solar Ltd, along with strategic investors Paulson & Co Inc and Bill Gates, announced an investment of $144 million in Ambri Inc, an energy storage company based in Massachusetts. Last year, Reliance had partnered with Gates to back Breakthrough Ventures to support innovation in clean energy solutions.
https://m.economictimes.com/industry/renewables/ril-eyes-billion-dollar-rec-buy-for-solar-push/amp_articleshow/85783319.cms
