aBalados: Finding Opportunities in a Crumbling Spanish PV Market
Last week, I had a meeting with the CEO of aBalados, Javier Valladares Ruiz. From the ashes for the Spanish market, aBalados has emerge as one of the few thriving solar company in the domestic market. Its success is due to following a few key principles: be lean and nimble, anticipate the needs of the customer, and seek opportunities outside of the mainstream. Through these principles, aBalados has turned the great challenges facing the Spanish PV industry into its own opportunity.
Due to the caps on the hours of FIT by the Spanish government, many power plants are now reaching their yearly cap in FIT hours around October, after which point they must sell their electricity on the wholesale market. The price on the wholesale market is around €50/MWh, whereas the FIT for early installations can range from €300-400/MWh. This means there is little incentive for operators to pay high costs to fix problems in a rapid manner. Since the cap on the FIT is reached so early in the year, a few hours or days of lost production will not dramatically affect the return on the plant. Investors and banks restructuring their solar power plants are thus looking to reduce costs, seeking out low cost operators for their power plants.
A cap on the total return for power plants of 7.5% will soon be finalized by the government. This has made investors and banks even more eager to find low cost, one stop shop operators. This is where aBalados' value proposition is particularly attractive. aBalados offers of take care of all services from operation and maintenance to legal and accounting. Javier explained to me that during the boom years, investors we willing to pay for specialized legal and accounting services from different firms. Having a high quality, high performance operation was key to maximizing the return on the investment because every kWh counted. Now, with FIT hours capped and soon a cap on the total return of the project, investors are focused on reducing costs.
Another aspect of aBalados that stood out to me was their approach to new opportunities. aBalados has done work internationally in France, Italy, and Germany, but when asked if Javier has plans to expand into Chile, he simply shakes his head. Chile has seen rapid growth in 2013 and has become the go-to market for struggling Spanish firms. This fact, explained Javier, is exactly the reason why he will not work in the Chilean market. He prefers to anticipate and get ahead of trends, and if he cannot, he looks elsewhere for opportunities. It is best not to try what everyone else is doing. aBalados is instead laying the foundation to work in hydropower in Peru and Mexico.
There were two major lessons I took away from meeting Javier. First, all challenges are opportunities if you can anticipate the needs of the customer and the changes in the market. Second, think for yourself and seek opportunities outside of the mainstream.
I thoroughly enjoyed my time talking with Javier and hope that he continues to find opportunities in Spain and in the other countries of the world.
Due to the caps on the hours of FIT by the Spanish government, many power plants are now reaching their yearly cap in FIT hours around October, after which point they must sell their electricity on the wholesale market. The price on the wholesale market is around €50/MWh, whereas the FIT for early installations can range from €300-400/MWh. This means there is little incentive for operators to pay high costs to fix problems in a rapid manner. Since the cap on the FIT is reached so early in the year, a few hours or days of lost production will not dramatically affect the return on the plant. Investors and banks restructuring their solar power plants are thus looking to reduce costs, seeking out low cost operators for their power plants.
A cap on the total return for power plants of 7.5% will soon be finalized by the government. This has made investors and banks even more eager to find low cost, one stop shop operators. This is where aBalados' value proposition is particularly attractive. aBalados offers of take care of all services from operation and maintenance to legal and accounting. Javier explained to me that during the boom years, investors we willing to pay for specialized legal and accounting services from different firms. Having a high quality, high performance operation was key to maximizing the return on the investment because every kWh counted. Now, with FIT hours capped and soon a cap on the total return of the project, investors are focused on reducing costs.
In the years after the solar market busted, Javier noticed investors were interested in having someone with knowledge of all areas of their project including operations, accounting, and taxes. At the time these areas were divided between different firms, but Javier could see the potential in bundling these services. Anticipating the needs of his customers, he began learning about tax law. As the situation worsened for the Spanish PV industry, investors began looking for ways to cut their costs. By packaging his services as a one stop shop for O&M, accounting, taxes, and due diligence, Javier was able to meet the needs of cost-conscious investors. Taken individually each service is not particularly profitable, but together they make for an attractive package for both aBalados and investors. His firm is not the best in any particular area, but by meeting the changing needs in the market, he was able to create opportunities in a crumbling industry.
Javier started aBalados by himself in 2008 and has slowly grown the company where so many other companies have failed or had to look to other markets for growth. aBalados has always been a small firm which makes it nimble and low cost. It is located in Sevilla where labor costs are lower than Madrid - the economic heart of Spain. During our discussion, Javier emphasized several times the importance of not having commitments restricting his life; his business reflects this outlook. It has no debt and has never raised money from outside investors. Instead it has grown slowly and steadily on its own profits. When the crisis hit, he didn't not have to worry about making payments on any loans and could be equally ambivalent to the spike in interests rates.
Javier started aBalados by himself in 2008 and has slowly grown the company where so many other companies have failed or had to look to other markets for growth. aBalados has always been a small firm which makes it nimble and low cost. It is located in Sevilla where labor costs are lower than Madrid - the economic heart of Spain. During our discussion, Javier emphasized several times the importance of not having commitments restricting his life; his business reflects this outlook. It has no debt and has never raised money from outside investors. Instead it has grown slowly and steadily on its own profits. When the crisis hit, he didn't not have to worry about making payments on any loans and could be equally ambivalent to the spike in interests rates.
Another aspect of aBalados that stood out to me was their approach to new opportunities. aBalados has done work internationally in France, Italy, and Germany, but when asked if Javier has plans to expand into Chile, he simply shakes his head. Chile has seen rapid growth in 2013 and has become the go-to market for struggling Spanish firms. This fact, explained Javier, is exactly the reason why he will not work in the Chilean market. He prefers to anticipate and get ahead of trends, and if he cannot, he looks elsewhere for opportunities. It is best not to try what everyone else is doing. aBalados is instead laying the foundation to work in hydropower in Peru and Mexico.
There were two major lessons I took away from meeting Javier. First, all challenges are opportunities if you can anticipate the needs of the customer and the changes in the market. Second, think for yourself and seek opportunities outside of the mainstream.
I thoroughly enjoyed my time talking with Javier and hope that he continues to find opportunities in Spain and in the other countries of the world.
