Earnings Analysis: Clean Tech Companies Report Challenges, Opportunities
This earnings analysis covering a handful of solar and wind technology companies reveals some of the underlying challenges and opportunities in the market.
Clean energy technology companies have mostly rebounded from pandemic-related supply chain disruptions and are adding capacity to meet their production targets. Those in the solar market are reporting higher profits driven by strong demand. Meanwhile, wind turbine developers are still reeling from inflation and supply delays.
The following briefing looks into the latest business dealings of five leading solar and wind players by market cap. (Note: Holding companies are excluded, instead focusing on firms that design or manufacture renewable energy systems and provide related services in their respective domains.)
SolarEdge Technologies reported record revenues of $836.7 million in its third-quarter 2022 results last November, up 15% from the previous quarter and 59% year-over-year. Most of that revenue (about $788 million) was claimed by its solar segment, clocking a record increase of 15% from the last quarter and 65% since the third quarter of 2021.
The Israeli company markets solar PV inverters, power optimizers, energy management software, battery energy storage systems, and other renewable products. SolarEdge’s third-quarter revenue performance brings its market share to about 30%, according to CSIMarket.
SolarEdge CEO Zvi Lando attributes the third quarter’s growth to strong momentum in Europe, where sales grew 90% annually. In its earnings presentation, the company noted record quarterly revenues in Europe, particularly in Germany and Holland, as well as in the rest of the world, such as Taiwan and South Africa.
With demand outpacing supply, SolarEdge increased its production in the third quarter to ship more units, including 264,500 inverters totaling 2.7 GW, 6.1 million power optimizers, and 320.7 MWh of battery capacity. In May 2022, the company opened a 2 gigawatt-hour (GWh) battery cell facility in South Korea, enabling it to have its own supply of lithium-ion batteries and infrastructure.
SolarEdge’s 2 GWh battery cell production plant in South Korea. Image used courtesy of SolarEdge Technologies
The company believes it can capitalize on global demand by continuing to scale up production capacity across its existing lines and establishing a manufacturing footprint in the U.S.
Siemens Gamesa Renewable Energy, the wind turbine development arm of German conglomerate Siemens, released its 2022 annual results last fall with a 4% decline in revenue, totaling $10.6 billion. The company cited supply chain disruptions and other challenges arising through the launch of its Siemens Gamesa 5.X platform, a new line of high-performance onshore turbines.
As EE Power reported last October, its onshore division faced a slew of financial losses and project delays leading up to the 5.X launch, ultimately triggering layoffs and an executive shakeup.
Siemens Gamesa also cited cost inflation, supply bottlenecks in critical components, and delivery delays, all mainly affecting its core wind turbine generation business. Its service and onshore segments were further hit by higher costs associated with more failures and repairs in certain components on established platforms.
Still, Siemens Gamesa ended the year with a record backlog topping $37.9 billion, up 8% year-over-year and boosted by its offshore division. Also, its revenue was positively impacted by its fourth-quarter sale of wind development assets in southern Europe, totaling $663.2 million.
Vestas Wind Systems
Denmark-based Vestas Wind Systems, one of the world’s largest wind turbine developers with 161 GW of installed capacity across 88 countries, released its interim third-quarter financial report last fall with a 29% annual drop in revenue ($4.2 billion total) and a negative EBIT margin of -3.2% (down from +5.7% a year ago).
The company blamed its negative performance on high cost inflation, project delays, supply chain instability, decreased offshore installations, and overall geopolitical uncertainty. It closed the quarter with lower offshore deliveries in Northern Europe, lower onshore deliveries in the U.S., and a lack of deliveries in Russia and Ukraine. Transportation and project execution challenges also prompted further delays.
Vestas Wind Systems’ turbines off the coast of Germany. Image used courtesy of Vestas
Still, Vestas continued to increase the average selling price of its wind energy products to 1.07 million euros per MW, compared to 0.81 million euros in the third quarter of 2021. This allowed it to secure a high backlog of onshore orders totaling $19.5 billion despite its lower intake of 1.9 GW. Meanwhile, the company’s service revenue grew 32%, and it continued ramping up its offshore wind segment with 3.8 GW of additional preferred supplier agreements across the U.S., U.K., and Poland.
Henrik Andersen, president and CEO of Vestas, stated in a press release that energy market uncertainties and red tape remain barriers to project development and order intake, despite the higher overall demand for wind energy products.
EDP Renováveis (EDPR) released its latest earnings results last fall, covering the first nine months of 2022. The Spain-based renewable energy giant earned $1.8 billion in revenue, up 46% from the same period last year. It also reported a 10% increase in total installed capacity to 14.3 GW, attributing its growth to a strong recovery in the average selling price of energy, reaching $71 per megawatt-hour (MWh) and representing a 29% jump year-over-year. The company said this is mainly due to European markets and the positive contribution of three asset rotation deals in Spain, Poland, and Italy.
A slide from EDP Renováveis’ nine-month results presentation in November 2022 (page 31). Image used courtesy of EDPR
EDPR’s net profit swelled 181% year-over-year to about $450 million, and its installed renewable generation capacity grew by 15%. Further, its gross investments—primarily centered around renewables—more than doubled to $4.7 billion, up from $2.1 billion in the first nine months of 2021. The company said this reflects substantial renewables expansion, with 2.6 GW added over the last 12 months and 4.3 GW of additional renewable capacity under construction in 15 markets spanning Europe, North and South America, and the Asia-Pacific region—a significant portion of its existing presence in 28 markets worldwide.
The growth comes as EDPR aims to add 20 GW of renewables by 2025, focusing on Europe and North America with an even split of wind and solar capacity.
Adani Green Energy
India-based Adani Green Energy provides a window into South Asia’s renewable energy market as one of the region’s largest players. According to its latest quarterly results released last fall (covering the second quarter and first half of 2022), the company’s revenue grew 45% year-over-year while its sale of energy jumped by 67%. It attributes that revenue growth to the recent commissioning of 1.3 GW of hybrid solar/wind and wind plants. Adani also integrated 1.7 GW of additional capacity from SB Energy’s operating portfolio, which it acquired in 2021 through a $3.5 billion deal with Japan’s SoftBank.
Adani also attributed its positive results to lower operation costs via a real-time monitoring system spanning its entire renewable portfolio, helping the company maximize plant availability and add more electricity generation.
The company’s project portfolio currently stands at about 20 GW. It’s investing $20 billion into renewable development over the next decade, targeting 25 GW of renewable capacity by 2025 on its way to reaching 45 GW by 2030.