With the German antitrust authorities examining Siemens’ proposed acquisition of inverter brand Kaco, an analyst at IHS Markit says the move would be unlikely to affect jobs at Siemens’ central inverter factory in India.
The German giant resumed inverter production in India in December 2017 at its Kalwa plant, near Mumbai. Although IHS Markit’s Cormac Gilligan said the proposed takeover is likely to result in some overlap, he said he expected little impact on Siemens’ Mumbai operation, even as the German giant eyes more business across Asia.
“If Siemens was to serve more central inverters to the rest of the Asian market, [it] would likely produce directly in China,” said Gilligan, adding the Indian production facilities will continue to serve mostly the Indian market. It may be that Siemens will establish more production capacity in Asia in the years to come, due to transportation costs and its presence in those markets, but it is unclear whether that would be in India.
The German electro-industrial conglomerate has certainly made headlines after powering back into the PV market. Having charged into the residential storage sector with its Junelight system, the company last week announced its bid to acquire domestic peer Kaco.
What’s in it for Kaco?
The German manufacturer until recently had a large portfolio of inverter products but over the last year, Gilligan said, it has worked to become leaner and more efficient. In that vein, the company sold off its central inverter business to South Korea’s OCI and focused on three-phase, high power string inverters for the utility-scale market. That move also removed any potential overlap between Kaco’s operations and Siemens’ Kalwa plant.
Kaco boasts a considerable production pipeline. Streamlining it and, potentially, beefing it up with additional resources from Siemens could help the company follow through on orders more quickly.
In the storage space, especially, Kaco recently offered a 50 kW storage inverter for the commercial and industrial segment and a 10 kW residential product. The latter development came after Kaco acquired Energy Depot, a company which had the 10 kW inverter readily available.
In the storage field, bankability is tremendously important, according to Gilligan. Project developers consider how bankable a provider of storage systems is before procuring a project. For Kaco, the arrival of Siemens as owner brings a substantial increase in bankability, helping the procurement of future projects.
Additionally, by attaching itself to Siemens’ sales and project development network, Kaco will have easier access to key high growth markets such as India, Southeast Asia and the U.S. Penetration of the hugely promising Indian market, in particular, has been a complicated issue for Kaco until now.
Essentially, acquisition by a big player like Siemens will bring stability. For Kaco, the market it can address will increase if the acquisition is waved through. By joining their production and development capacities, Siemens and Kaco are in a good position to deliver high throughput and continue to develop new products. Their relative proximity, with both companies having headquarters and large production and research capacities in Germany, will help with that strategy.
Re-powering and replacing in Europe
Siemens has multiple motivations for buying Kaco. When it announced its acquisition plans, the conglomerate said it would launch a smart infrastructure business on April 1. To that end, acquiring a distributed generation-focused company will help, as it removes the need for Siemens to develop a large portfolio of its own inverters. Even better, Kaco has already installed around 12 GW of inverter capacity in the key EMEA region.
Acquisition of Kaco will offer Siemens a large volume of already installed products through which it can launch its smart infrastructure business. The other reason the target company’s huge installed product base plays in Siemens’ favor is that Kaco has been very active in early adopter markets such as Germany and Italy. In those nations, a large market for re-powering and replacing projects will soon present itself and that is an opportunity many manufacturers are looking closely into. In the hard-fought inverter sector, a market that size would be significant, said IHS Markit’s Gilligan.
The move also offers Siemens a great opportunity to quickly move into all segments. It already has a central inverter, although it is possible the company has experienced pushback from EPC – engineering, procurement and construction – contractors around the world seeking high power, three-phase inverters for utility scale installations.
There will inevitably be some overlap after any acquisition, said Gilligan, with Siemens having launched the Junelight and Kaco having stated it intended to continue its central inverter cooperation with OCI, but not enough to scupper the proposed takeover. “Kaco’s acquisition of Energy Depot was necessary at a point where Kaco really needed a 10 kW storage inverter on the market very fast,” said Gilligan. “This was important for the company at the time.”
Big players on their marks
For a more holistic internet of things offering, Siemens could acquire or bring to the market virtual power plant or aggregator products or could make a move into EV charging, an option Gilligan considers the most likely.
In the scramble for a slice of the energy transition, power firms are working to position themselves to serve potentially large markets throughout the industry. “Currently, we see a huge acceleration in terms of the big players, including oil majors like Shell and BP, moving quickly,” Gilligan said. “Siemens is indicating that it wants to be a major player in this segment, and certainly also through acquisition. With Kaco [it] now [has] a good portfolio in the C&I [commercial and industrial] and residential energy storage segments.”
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: firstname.lastname@example.org.