Solar Millennium AG, which is developing the world’s largest solar energy site with a capacity of up to 1000 MW in the Californian city of Blythe, USA, has decided to take a completely new approach by abandoning the planned CSP installation and switching to PV. Now, instead of the projected concentrated solar power technology in the form of parabolic trough collectors, the first two 250 MW phases are to be equipped with photovoltaics.
Solar Millenium and its US operating arm Solar Trust of America explain their change of direction as an adjustment of corporate strategy to changed market conditions, particularly in the USA, aimed at securing sales and earnings. In solar power plants that do not require storage, there are far more profitable prospects for the use of PV. As a result financial close for the project has been postponed into the next fiscal year, 2011/2012.
Dr Christoph Wolff, the CEO of Solar Millennium, explains this as follows. “At the moment, the US market is clearly focused on peak load supply. Due to the drastic drop in PV prices, we agreed with the Californian utility to convert the power purchase agreements to PV. The simultaneous sudden price increases for raw materials and construction would have reduced our return on equity and risk provisioning for our construction share in the Blythe CSP project to marginal values. Against this backdrop, we made the entrepreneurial decision ... to focus on PV in the US. In anticipation of this market development, our US subsidiary built up the respective expertise early on. This enables us to meet the specific needs of the U.S. market.”
The decision to revert to the significantly less costly PV variant also means that Solar Millennium will finance the power plants on the free capital market and forego the loan guarantee by the US Department of Energy for Blythe 1 and 2.
Wolff adds, “The decision to use photovoltaics in Blythe does not mean the Solar Millennium Group is turning away from its core technology of solar-thermal power plants. According to our understanding, the market differentiates between base load solar-thermal electricity generation or concentrated solar power on the one hand and photovoltaics for peak load demand on the other. Whereas the electricity from solar-thermal power plants was more economic [as recently as] two years ago, this relation has changed completely due to the sharp drop in PV module prices, particularly from Asia. Due to its suitability for base load supply, many regions still attach great value to CSP in their energy mix, thus supporting the Solar Millennium Group’s growth opportunities.”
With this decision, the Company is continuing along the lines of the strategic realignment first described by Christoph Wolff at the last shareholders’ meeting. This also includes the extension of solar tower technology and possibly even Fresnel as well as the ability to implement also photovoltaics and particularly hybrid PV/CSP projects as developer and service company. By expanding its portfolio of smaller and medium-sized PV/CSP projects and offering construction and operation services, Solar Millennium seeks to achieve more continuity in its business model.
• The change of direction will have some immediate financial implications. As expected, the result of Solar Millennium is negative in the first half of the fiscal year, because the financial close for Blythe (and Ibersol) were not scheduled to take place before the second half of the fiscal year. Given the shift of the Blythe financial close into the next fiscal year, the result for the full fiscal year of 2010/2011 is now also expected to be negative.
Solar Millennium AG closed the first half-year period from 1 November 2010 to 30 April 2011 with total operating performance in accordance with IFRS of € 34.6 million, compared to € 43.0 million in the previous year, and EBIT of € -32.6 million, down from € -25.1 million in the previous year. The most noticeable sales contribution to total operating performance was generated by the steady progress in the construction of Andasol 3 in Spain, which went according to plan.
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