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Sharp Acquires U.S. Solar Developer for $305 Million

Sharp Corp., Japan’s biggest solar- panel maker, agreed to buy California’s Recurrent Energy for as much as $305 million to expand into building power plants as it faces more competition from Chinese panel manufacturers.

The companies plan to complete the all-cash deal by year- end, they said in a statement during the Japanese morning today. Owning the San Francisco-based solar-power developer will bring Osaka-based Sharp further into the U.S. market for installing photovoltaic panels and building power plants to sell emissions- free electricity to utilities and large commercial consumers.

Japanese panel manufacturers and U.S. competitors are seeking expertise in building solar plants to diversify their revenue sources as they face intensifying competition from Chinese makers including Suntech Power Holdings Co. Sharp is focusing more on power plants and developers to win bigger contracts, Sharp President Mikio Katayama said last week.

“Sharp needs to move on to value-added businesses as the device market has become overly populated,” Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc. in Tokyo, said today in an interview. “It’s a new area for Sharp and won’t be easy.”

Panel makers from Sharp to First Solar Inc. of Tempe, Arizona, are scrambling to expand into installing the devices and making related electric components, a business with less international competition. First Solar, the largest U.S. solar panel maker, is considering “all aspects of the value chain” as it expands and aims to lower costs, Chief Executive Officer Rob Gillette said on July 29.

Boom Year

The rush is fed by forecasts that 2010 will be a boom year for photovoltaic panels. Global sales may more than double to as much as 18 gigawatts and then flatten next year as countries including Germany, Italy and France cut guaranteed above-market rates for solar energy, Bloomberg New Energy Finance estimated.

The industry is competing to build panels more cheaply as those government-mandated rates decline as well as to help the technology compete better with fossil fuels such as coal and natural gas.

Under Sharp’s deal, Recurrent isn’t obliged to use Sharp solar panels in its projects, and the transaction includes no preferential pricing terms for Recurrent to buy Sharp products, the U.S. company’s Chief Executive Officer Arno Harris said on a conference call.

Sharp gained 1.3 percent to close at 857 yen on the Tokyo Stock Exchange, narrowing its loss this year to 27 percent. Japan’s benchmark Nikkei 225 Stock Average slipped 0.4 percent today.

Recurrent’s Pipeline

Recurrent, which is active in the U.S., Canada, France, Spain, Germany and Israel, according to the company’s website, said it has contracts to develop more than 330 megawatts of projects. Including those in earlier stages of development, its project pipeline totals 2 gigawatts.

The developer focuses on projects ranging from 2 megawatts to 20 megawatts in capacity because smaller developments require can be approved and installed more quickly and don’t require new power lines, according to Recurrent’s website.

Teaneck, New Jersey-based Hudson Clean Energy Partners, a private equity firm focusing exclusively on renewable energy, invested $75 million in Recurrent in July 2008.

“With Recurrent Energy’s know-how as a developer, Sharp aims to become a total solutions company in the photovoltaic field, extending from developing and producing solar cells and modules to developing and marketing power generation plants,” Sharp Executive Vice President Toshishige Hamano said in the statement.

Sharp’s Forecasts

Sales of solar panels may gain 50 percent in the year ending March 2011, faster than Sharp earlier forecast, because of robust demand in Europe, Katayama said last week. The company said in April solar-device sales may grow 20 percent to 250 billion yen ($2.95 billion) during the year.

The Japanese manufacturer said July 1 it planned to increase its global solar-cell production to more than 1,500 megawatts by March 2013, about double the current capacity. It is also expanding production at its U.K. module factory to 500 megawatts by February after the British government brought in price guarantees for electricity generated by the sun.

Morgan Stanley advised Recurrent and investor Hudson on the deal, Harris said.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net.

To contact the editor responsible for this story: Anand Krishnamoorthy in Singapore at anandk@bloomberg.net.

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