Delta Electronics of Taiwan Considers Acquisitions, to Boost Solar Output
Delta Electronics Inc. (2308), which has half of the global market for notebook computer power-supply packs, is considering acquisitions of renewable energy companies as it doubles solar-cell production capacity this year.
Its DelSolar Co. unit plans to spend NT$7 billion ($236 million) in 2011 to boost its annual solar cell manufacturing capacity to 800 megawatts, said Yancey Hai, chief executive officer of Delta Electronics. The Taipei-based company is seeking to buy companies with “reasonable valuation,” he said.
“It may be as little as a 3 percent stake, or 5 percent, or as much as 100 percent,” he said in an interview in Taipei yesterday. “We’re looking for deals.”
Delta Electronics, whose products run electricity in Apple Inc. (AAPL) and Hewlett-Packard Co. (HPQ) computers, generates NT$20 billion to NT$30 billion in free cash flow, or operating cash minus capital expenditures, a year. Increasing spending in investments and acquisitions “isn’t a problem,” Hai said. Delta Electronics is targeting industries that can help protect the environment and earn profits, he said.
Delta Electronics, founded in 1971, has expanded into manufacturing of light-emitting-diode lights, photovoltaic inverters, and wind turbines.
“Green energy is an inevitable trend over the long term because of dwindling global resources,” said Ellen Shen, a Taipei-based fund manager at Union Securities Investment Trust Co., which oversees NT$40 billion of assets, including Delta Electronics stock. “Delta Electronics is at an advantage because of its resources and its early start.”
LED-related industries such as packaging will be the focus for possible acquisitions, Hai said. Last month, the company’s board approved a plan to invest as much as $35.25 million setting up a joint venture with Epistar Corp. (2448) of Hsinchu, Taiwan to make LED chips, according to a stock exchange statement.
DelSolar, about 60 percent owned by Delta Electronics, has an annual capacity to produce 400 megawatts of solar cells currently and also makes solar modules and systems, Hai said.
By engaging in solar system manufacturing, DelSolar can reduce the impact from falling cell prices, he said. The cost to install a 1-megawatt solar system has declined by about half over the past three years to $4 million, Hai said.
Solar panel prices may drop 15 percent to 20 percent a year as supply increases, he said.
DelSolar aims to sell 20 million shares in an initial public offering in the first half before starting trading on the Taiwan Stock Exchange, he said.
Delta Electronics rose 2 percent to close at NT$129.50 in Taipei trading as of 1:30 p.m. local time, compared with the 1.4 percent gain in the benchmark Taiex index.
The parent company, which posted net income of NT$12.4 billion for the nine months to September, doesn’t have any other fund-raising plan, he said.
Delta Group, including DelSolar, plans capital spending of NT$15 billion this year, compared with NT$8 billion in 2010. Most of the sum will be in automation, which will enable the company to cut jobs by 10 percent, Hai said.
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