Updated: SolarCity the largest US residential solar installer is to acquire one of the largest commercial and industrial solar developers in Mexico, ILIOSSON, S.A. de C.V.
The deal would be SolarCity’s first steps to expand its business operations outside the US, something management at the company had not ruled out before but has provided little insight into plans or that a deal was imminent during its recent second quarter earnings call. It also signals SolarCity’s renewed focus on the commercial sector, something that has proven difficult to expand in the US in recent years.
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SolarCity said that the ILIOSS acquisition would enable the company to provide commercial and industrial customers in the country with lower electricity process than currently available.
The company did not disclose any financial details regarding the transaction, though the deal is expected to be completed in August 2015.
However, Reuters reported later that ILIOSS had said the deal was worth US$10 million upfront. Other reports said a further US$5 million in payments based on milestones.
Upon completion of the acquisition, ILIOSS would operate as an independent business unit of SolarCity. The co-founder and Chairman of ILLIOS, David Arelle and co-founder and Chief Operating Officer Manuel Vegara were said to lead the new business unit as president and general manager, respectively.
ILLIOS had previously signed supply contracts with Hanwha Q CELLS and Schneider Electric for planned projects totalling around 250MW in 2014.
According to recent analysis by GTM Research, Mexico's annual PV market is expected to reach 2.6GW in 2020, while cumulative installations are expected t have reached 7.6GW.
In the commercial and industrial segment, GTM is guiding 2.2GW of installations in the same period and would account for around 15% of the total.
Adam James, GTM Research Senior Solar Analyst said, “SolarCity's entry into Mexico could be a market-moving event for the country's PV sector. The C&I segment is the most scalable near-term opportunity in the country, and the introduction of a strong financing product into the market would accelerate PV growth considerably.”
James also noted that the C&I segment experienced high electricity tariffs that were between US$0.09/kWh and US$0.17/kWh, but benefited from having stronger credit markets than in the residential space.
“If SolarCity can offer standardized financing products, the C&I segment could see even higher growth in coming years than the aggressive scenario we outline in our Base Case. This segment also offers a much more scalable growth strategy for SolarCity than the residential market, given the tariff structure and off-taker credit profiles,” added James.
Update 2:
In an SEC filing, SolarCity said the initial purchase price was US$9.5 million and included a payment of a further US$5.0 million, subject to certain conditions.
Key conditions were meeting an unspecified ‘battery storage deployment milestone,’ as well as unspecified ‘megawatt deployments in Mexico from the closing date through December 31, 2019.’