Solar industry in chaos as pioneer Solar Shop placed into receivership
Monday, September 12, 2011/
The downturn in the solar industry has now reached one of the country’s most recognisable brands, with Adelaide-based Solar Shop being put into the hands of receivers as the industry continues to suffer under volatile changes to subsidies and benefits.
The shock announcement comes as the solar industry continues to suffer, especially in New South Wales and Victoria where new Liberal Governments have reduced feed-in tariff rates for consumers who operate solar panels and feed power back into the grid.
Solar Shop, which has been operating for 12 years, has about 200 staff and turns over approximately $70 million, has suffered under the pressure facing the industry as a whole, receivers appointed by Ferrier Hodgson have said.
“People who have been watching the renewable energy sector would be aware that there have been a number of regulatory changes that have eroded the value of the certificates attached to renewable energy installations,” partner John Lindholm said in a statement.
“This has had a significant impact on Solar Shop as the business structure could not cope with the collapse in the price of STCs (small-scale technology certificates). This business has been hit by the turbulence you’d expect in an emerging sector.”
Receivers have said management attempted to reduce losses last month by closing stores and reducing staff numbers, but it wasn’t enough. A buyer is now being sought, with Lindholm saying there is sufficient interest.
Ferrier Hodgson has advised that customers who have provided deposits for solar panels will rank as unsecured creditors, with any scheduled installation set to continue. However, it has advised that if a buyer isn’t found, then there is a chance those deposits may be lost.
Solar Shop chief executive Tony Thornton was contacted by SmartCompany this morning, but no reply was available prior to publication.
Thornton told SmartCompany back in 2009 that when Government assistance disappeared, the company would be prepared to stand on its own two feet.
In a letter to employees, Lindholme has written that while the company has continued to trade, it cannot guarantee future employment. It has also warned employees not to place any orders for goods and services unless they have been authorised by receivers and managers.
“At this stage, I am seeking to sell the Group’s business and assets as a going concern. If I can achieve a sale, your employment may continue with the purchaser.”
Solar Shop founder and former managing director Adrian Ferraretto invested in the business in 2001, after it had started two years earlier by an electrician. He purchased the majority of the business in 2003, and then started expanding.
Over the next seven years it enjoyed considerable success, owning a 20% market share and winning such large projects as installing panels on the Adelaide Showgrounds roof.
Part of this success was due to Ferraretto’s innovative management of cashflow, convincing suppliers to let him pay later than usual.
In 2009, Ferraretto sold 18% of the company to Harbert Australian Private Equity, and started a new business in manufacturing. Harbert last year increased its stake to 50.2%. Revenue in the company has also reached over $70 million.
But the solar industry has been hit hard over the past two years, with changes to subsidies resulting in multiple transition periods, which put pressure on small businesses trying to plan long-term.
In June, the New South Wales Government announced it would be reducing its feed-in tariff from 60 cents to 40 cents, although it abandoned an original plan to have that apply retrospectively. Last month, the Victorian Government also said it would be transitioning its feed-in tariff to a lower rate.
Multiple solar businesses in New South Wales have collapsed, with research from the Solar Energy Society of Australia showing that many others are considering laying off staff. Many SMEs in the solar market have informed SmartCompany they are suffering due to multiple changes in subsidies.
This article first appeared on SmartCompany.