UPDATED: What can you do when profits are hard to come by? Find someone who can pony up money to keep you in business. That’s what struggling solar thin film maker Ascent Solar Technologies did as the company announced Monday that it’s selling a stake in the company and licensing its technology to a Chinese conglomerate.
Besides buying a 20 percent stake in Ascent, TFG Radiant Group also promises to spend roughly $165 million to build a factory in China to make solar panels using Ascent’s technology. Ascent will not only own a piece of the Chinese factory, it also will get royalties for the solar panels made and sold from that manufacturing plant, the company said. In all, the deal is valued at $450 million, excluding royalties.
TFG is a joint venture of China-based Radiant Group, a construction and real estate company, and Sinagpore-based investment firm Tertius Financial Group. TFG says it’s involved in all sorts of businesses, from metal roofing materials to real estate investment to gold mining.
Help is on the way
The agreement is a big deal for a solar company that hasn’t been able to make a profit and seen its stock’s value plummeted in the last 10 months. Colorado-based Ascent makes solar panels using copper, indium, gallium and selenium (CIGS), a compound that is hard to deposit evenly. Many CIGS solar companies have struggled to nail down their technologies and in the process ate up hundreds of millions of dollars in venture capital. These private companies have only entered mass production of their panels in recent years, and even then the volumes are tiny compared with the mainstream solar technology that uses silicon as the semiconductor to convert sunlight into electricity.
Ascent announces the good news hours before it’s to discuss its second-quarter earnings. The company generated $1.18 million in sales for the first quarter of this year but widened its losses to $9.7 million; a year ago, it reported $216,000 in sales and $6.6 million in losses.
UPDATE: Ascent posted $85.2 million in losses, or $2.63 per share, on $1 million in revenues for the second quarter of this year, compared with losses of $7.7 million, or $0.29 per share, on $446,000 in revenues for the year-ago period.
In March this year, the company announced a strategy change that will move away from making solar panels aimed for draping over buildings or embedding in roofing materials. The market for these types of products hasn’t taken off as quickly as some solar manufacturers – not just Ascent – have anticipated. Ascent said in March that it would focus on selling to the military and makers of portable electronics. Ascent also wanted to target off-grid uses in developing countries and produce panels for putting them on top of buses, trucks and trains. But on Monday, the company said it will be able to target the building sector again through its attachment to TFG.
What will TFG get?
TFG has bought a 20 percent stake in Ascent by paying $1.15 per share to buy 6.4 million Ascent shares. TFG has an option to buy an additional 9.5 million shares for $1.55 per share; the additional shares would increase its ownership in Ascent to about 35 percent, Ascent said. Ascent’s stock fell from $5.66 per share last October to $0.73 per share last Friday. The news of the TFG deal sent the stock up nearly 61 percent to $1.18 per share in recent trading Monday.
The deal with TFG will give the company an exclusive license to use Ascent’s technology to make and distribute solar panels in China, Taiwan, Malaysia, Indonesia, Thailand, Korea and Singapore. TFG plans to spend about $165 million to build the first, 100MW factory in China. As part of the broad deal announced Monday, Ascent will get $250 million if it achieves certain milestones, which the company didn’t disclose.
UPDATE: Construction for the factory in China should start next year and will take 12-18 months to bring online, said Ron Eller, Acent’s CEO, during a conference call with analysts Monday afternoon. He declined to disclose the amount of equity stake Ascent will have in the new factory in China.
Whether the deal can truly save Ascent from a slow decline into oblivion remains to be seen, of course. Given the still soft economy and changes in government incentives in key markets such as Germany and Italy, many solar panel manufacturers have seen fallen profits and a need to line up investors who can provide financial and marketing help. SunPower, which reported big losses for the second quarter, recently sold a 60 percent stake of the company to French oil giant Total.
Photos courtesy of Ascent Solar Technologies