An agreement to buy 75% of Korean battery manufacturer Kokam gives SolarEdge a level of vertical integration that could make the PV company a ‘one-stop-shop’ for customers, while SolarEdge could diversify into areas outside solar energy.
Lior Handelsman, VP of product strategy and marketing, spoke with Energy-Storage.news this morning about the acquisition, which was confirmed late last week. Handelsman said SolarEdge intends to acquire the remaining shares through the South Korean stock exchange, where they are currently listed.
SolarEdge bought its initial 75% majority stake for US$88 million, which Handelsman said was a “good and fair price”. Kokam, which produces lithium-ion cells and battery systems for applications which range from the aerospace and marine sectors to stationary storage systems for front-of-meter applications including frequency regulation, claims to have installed 700MWh of systems worldwide to date.
“It’s very exciting and I think transformational. Kokam is going to remain a separate company, they will be a SolarEdge division but we are keeping the name and the brand,” Handelsman said, adding that it was the Korean company’s track record in batteries – the company began working with lithium in the late 1980s – that was of primary interest.
“Even before participating in frequency regulation and FTM ESS, they are first and foremost a lithium cell manufacturer, very good cells. As we see storage becoming such a major part of solar in the future, of the grid and smart energy in general, we feel that we need to have a little bit more of an ‘insider track’ into the understanding of lithium cells and also access to lithium cells.”
According to Handelsman, Kokam’s activities in diverse areas unrelated to SolarEdge’s immediate interests are expected to continue to grow, while the battery company is active in Korea, Australia, the US, Japan and other markets, all of which the SolarEdge representative said were of interest, while SolarEdge’s spread across regional markets including the US, Japan and Europe could boost Kokam’s activities in those regions in turn.
Strategic and tactical motives for acquisition
A while ago, I blogged on the phenomenon, seen perhaps most prominently in the US, whereby the likes of Tesla and Vivint Solar are doing their best to offer a complete suite of solutions to their residential customers. Offering solar-plus-storage, electric vehicle chargers and other clean energy equipment to customers from one single provider is a tactic that could grow market share and retain customers over long relationships. SolarEdge, too, wants to offer a complete package.
“To look on the strategic value here: the acquisition positions us in a strategic way as a one-stop-shop smart energy solution provider, so not merely a power electronics inverter company but we will be able to deliver the whole system to our customers,” Handelsman said, adding that another side of the coin is that the other markets Kokam is active in could be the foundations of diversification for SolarEdge.
“We can and will, through Kokam, be able to sell lithium-ion cells and batteries for various markets, not just solar and not just energy. The strategy allows us to offer a one-stop-solution in our expanding markets – with the recent addition of VPP (virtual power plants) our market is even wider – and in diversifying activity out of solar, into the lithium-ion market which is an excellent market, fast-growing, successful market. That’s the strategic value.”
Along with that ‘strategic value’, the so-called ‘tactical value’ of the acquisition, Handelsman said, is that it gives the NASDAQ-listed company access to the lithium supply chain.
“What is going on in the energy storage market currently is driven by access to lithium cells. It gives SolarEdge a good position because we now have access to lithium-ion cells for some applications and markets. That’s one of the advantages and SolarEdge is [also] able to leverage its financial strength to invest in manufacturing and capacity – that’s one of the big advantages for Kokam. They are really an excellent company with excellent technologies, with access to the EV market, to the aerospace market and to stationary storage front-of-meter market access. I think it’s a very good acquisition.”