Leeward Renewable Energy announced Monday it will acquire multiple utility-scale solar projects representing approximately 10 GW of generation capacity from developer First Solar, during the first quarter of 2021.
Acquiring multiple assets in various stages of construction will help Leeward reach its growth targets two to three years ahead of schedule, enabling the company to compete in an increasingly crowded marketplace, according to company CEO Jason Allen.
The deal is likely "an indication of where the industry is starting to go," as the maturation of the solar industry leads more companies to specialize and focus on their strengths, according to Elizabeth Crouse, a partner at global law firm K&L Gates.
The 10 GW deal between Leeward and First Solar is not just a win-win for the two companies, according to company officials, but may also be a marker of current trends in the solar industry.
Leeward, according to Allen, was looking to expand its development operations aggressively after it was acquired by OMERS Infrastructure. They had a plan in place, Allen said, but the rollout would require several years' time. First Solar, meanwhile, was looking to sell its solar development business to focus on technology and manufacturing.
When the deal closes, pending regulatory approval, Leeward will acquire five projects which are expected to begin construction in the next two years, as well as one project which is already operational. Leeward will also receive 650 MW in First Solar PV modules for additional development.
The deal is worth an estimated $261 million, according to an SEC filing by First Solar.
Although First Solar first approached OMERS with a proposal for the deal, Allen said Leeward saw the opportunity to accelerate its own plans for growth.
"This allows us to accelerate our solar growth, and fits in very well with where we hope to be three to four years down the road," Allen said. "We will be there essentially when this deal closes."
That rate of growth is necessary, Allen said, to maintain the economies of scale that are now necessary to compete as a developer in the renewable energy space. "A lot of people are developing in this space," he said, "so when you're talking to offtakers, they are very interested in partnering with large players. ... Leeward was on the lower end of [company size], prior to this transaction, and now we're in the sweet spot of being able to offer that."
The deal will also enable Leeward to gain interconnections in critical markets that serve the California market, Allen added.
To Crouse, who co-leads the power practice at K&L Gates, Monday's announcement was not entirely surprising. The solar industry, she said, is engaged in a "reshuffling of business priorities" as the industry matures and becomes more competitive.
"The market has changed a lot, for solar and wind particularly, over the last 10-15 years," she said. "For a lot of companies with sizeable development shops, it doesn't make sense for them to have that business anymore."
Solar isn't going away and isn't experiencing industry consolidation per se, Crouse said. Rather, she said that price pressures and decreased profitability are causing some companies to reconsider their strengths, letting go of divisions where they have been less successful to double down and maximize efficiencies in those where they have found success.
"There are still ways to succeed," she said. "Leeward and the bigger developers, they know what they are doing. They have cost efficiencies. They have contacts, and they can get the deals done faster and more profitably."
Crouse said she anticipates that the industry will continue to see more sales and mergers of this nature, and potentially some acquisitions of small developers by larger companies. Manufacturers like First Solar, she said, may branch out into new, solar-adjacent technologies such as energy storage.
"I hope we're going to see folks like First Solar take the proceeds of this and reinvest in technology," she said, "which I'm hoping will accelerate the rate of change."