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As Solar Sales Plummet in Spain, Ríos Renovables Heads Overseas

By Manuel Baigorri
December 01, 2011 4:07 PM EST
Founded in 1990 as an electricity systems installer, Ríos Renovables shifted to
solar in 2004. Photograph courtesy of Rios Renovables
Founded in 1990 as an electricity systems installer, Ríos Renovables shifted to solar in 2004. Photograph courtesy of Rios Renovables

When Adalberto Ríos founded Ríos Renovables two decades ago in the town of Fustiñana in northern Spain, he didn’t expect an airline to become a key part of his strategy. But as the company expands into new markets, such as Italy, Romania, and the U.S., to offset flagging sales at home, Adalberto and his chief executive officer, Ramón Tejadas, have spent countless hours on airplanes. And Ireland’s Ryanair (RYAAY), with cheap flights from the airport in nearby Zaragoza, has come in handy as the company seeks to cut costs. “We joke that we only go to those countries where Ryanair flies,” says Ríos. “We now travel pretty much every single week.”

Founded in 1990 as an electricity systems installer, Ríos Renovables shifted to solar in 2004 when Spain introduced subsidies that promised a boom for renewable power. Ríos now develops, builds, maintains, and sells solar installations. The company, owned by Adalberto Ríos and his wife, Conchi Enrique, who is chief financial officer, enjoyed significant growth in Spain from 2004 to 2008.

Then the solar bubble went bust as Spanish lawmakers cut subsidies and the world financial crisis hobbled growth. Spain saw new installations of 2,500 megawatts of solar capacity in 2008 and just 17 megawatts the following year, according to ASIF, a trade group of Spanish photovoltaic panel producers and related companies. ASIF forecasts 300 to 400 megawatts of installations this year. “The Spanish market is now really dry,” Tejadas says. “Sales in Spain are completely empty, and access to credit is limited, which affects not only us but also the funds that buy our parks.”

The collapse at home spurred Ríos’s overseas push, which the company this year expects will help more than quadruple sales, to €200 million, from €46 million in 2010. Next year, Tejadas says, Ríos could see revenue of €350 million, with a profit margin of about 12 percent. “In this industry,” Tejadas says, “you have to be nimble. … At the end of the day, we spend more time abroad than at home.”

Ríos has developed 40 megawatts of photovoltaic energy in Italy, or almost a third of the 125 megawatts it has built since its first solar installation seven years ago. Today, about two-thirds of the company’s 200 employees are in Italy. Ríos plans a similar push in Romania, where the company aims to develop 170 megawatts of solar by 2014. In the U.S., the company is in talks with investors for an $108 million, 16-megawatt solar park in Sacramento, Calif. “In each country you find new ways of working,” Ríos says. “The legal system, working hours, salaries, different ways of negotiating, the reliability. You need to adjust all the time.”

Tricky Choices

Ríos isn’t the only Spanish solar company that has looked abroad as the Iberian market has imploded. Madrid’s Solaria Energía & Medio Ambiente says it will make 80 percent of its sales this year in Italy, Germany, and Latin America, up from 15 percent two years ago. That’s smart, but it poses challenges for companies with little overseas experience, says Sean McLoughlin, vice president of Clean Technology Research at HSBC Bank (HBC) in London. “International expansion takes time, and dealing with local authorities in different countries involves finding the right people with local expertise,” McLoughlin says. “Given the rapidly falling tariffs in many countries, understanding which is the next market to get into can be tricky.”

And it may be some time before the Spanish market bounces back, says Iván San Félix, an analyst at Madrid brokerage Renta 4. “The outlook for the solar industry in Spain isn’t pretty,” San Félix says. “It’s very expensive energy and relies heavily on government subsidies, which have been cut and may be reduced even further as part of austerity measures.”

Ríos understands that geographic diversification alone isn’t enough, so the company plans to build 150 megawatts of wind projects in its home market over three or four years. In Italy, Ríos is in talks with partners to develop 100 megawatts of wind energy, Ríos says. In Romania, he is aiming to complete a project for 120 megawatts of wind energy in the next couple of years, and he says he’s looking into a 100-megawatt wind project in Mexico.

The company is also planning a €2.5 million plant at its Spanish headquarters to produce light- emitting diode light fixtures for streets and public buildings as regional and local governments slash spending to meet deficit targets. Within two years, Ríos says, he expects that venture to provide nearly a third of total revenue. “When you’re in the middle of a huge crisis, you can’t just cry,” Ríos says. “We need to look for alternatives because it’s a whole different world.”

To contact the reporter for this story: Manuel Baigorri at mbaiggori@bloomberg.net

To contact the editor responsible for this story: David Rocks at drocks1@bloomberg.net

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