The sun set on Atlantic Richfield Co.'s venture into solar energy when it announced the sale Wednesday of its pioneering but money-losing Arco Solar Inc. unit to Siemens, the West Germany-based conglomerate.
Both companies announced a letter of intent for Siemens to acquire Arco Solar for an undisclosed amount, capping months of rumors and bringing to a close Arco's 12-year experiment with alternative energy that made Arco Solar a leader in photovoltaics--light-to-energy technology.
Analysts estimated the value of the sale at $30 million to $50 million. "That's a nice price for Arco in that (Arco Solar) didn't make money and was a long-term investment," said energy analyst Kenneth B. Funsten at Wedbush Morgan Securities in Los Angeles.
Siemens prevailed over bidders including Westinghouse Electric Corp. and an investors group led by former Arco Solar President James H. Caldwell Jr., analysts said.
The proposed sale, expected to close in the fall, brought protests from congressmen and others fearful that Arco Solar's technology--developed in part with federal and state funds--would ultimately find its way offshore.
"A concern I feel I have to get resolved . . . is on the possibility of a technology transfer that might not be in the best interests of the country's economy or national defense," said Rep. Elton Gallegly (R-Calif.), whose district includes Arco Solar's headquarters city of Camarillo.
Although Arco Solar is backlogged with orders and had sales of about $30 million in 1988, those sales are far below initial projections. The company has never made a profit because of the high cost of research and development, and Arco has dumped more than $200 million into the company since acquiring it in 1977.
Arco Solar's photovoltaic modules have been used to power call boxes along the San Diego Freeway, buoys for the Coast Guard and billboard lights around the country.
Arco has a pilot one-megawatt solar plant near Hesperia that sells electricity to Southern California Edison and a 6.5-megawatt plant near San Luis Obispo that sells power to Pacfic Gas & Electric. Neither would be included in the Siemens deal, and Arco is still seeking a buyer.
For Siemens, which already has a solar operation in West Germany, the sale offers a chance to get its hands on Arco Solar's highly touted thin-film silicon technology, under which cells are created by spraying chemicals on glass rather than by the more laborious and expensive process of growing silicon crystals, analysts said.
For Arco Solar, the sale would mean another corporate benefactor with deep pockets. Siemens' U.S. companies had sales of $3.1 billion last year.
Arco Solar also becomes part of a company with more knowledge of the quirky solar business than Arco has.
Siemens already markets Arco Solar products in West Germany, and the two companies have had a joint venture since 1987, PV Electric GmbH, under which thin-film solar products are manufactured at a prototype plant in Munich, West Germany. Those include transparent sunroofs for autos that convert sunlight into electricity to operate small ventilation fans, said Charles F. Gay, Arco Solar's president.
Siemens, which employs 30,000 people at its U.S. subsidiaries, said it remained committed to maintaining Arco Solar's plant, most of its 400 employees and its management in their current Camarillo headquarters, said spokesman Kevin E. Kimball.
Question of Access
But that doesn't reassure critics. Gallegly has asked Commerce Secretary Robert A. Mosbacher and Treasury Secretary Nicholas F. Brady to seek a review of the proposed sale by the sub-Cabinet-level Committee on Foreign Investment in the United States. Rep. Vic Fazio (D-Calif.) also opposes the sale, a spokeswoman said.
Charles R. Imbrecht, chairman of the state energy commission, questioned whether the sale would reduce competition in areas where Arco Solar and Siemens vie for the same business. He also wondered whether the sale would limit American access to solar technology--despite public funding for it.
Arco Solar has a $4.5-million contract with the federal Solar Energy Research Institute for cost sharing in the research and development of thin-film silicon technology. The company also has a $900,000 contract with the California Energy Commission for the same technology, said Arco spokesman Al Greenstein.
"Our contention is that this is worldwide technology," said Greenstein, pointing to Arco Solar's joint ventures with Siemens and a second, Japanese company. "We're a leader now, but it needs these constant infusions of research and development resources to stay on the leading edge, and Siemens will do that and do it in the U.S."
Arco confirmed in February that it was peddling Arco Solar as part of Arco's strategy to focus more on its core oil, gas, chemical and coal businesses. The sale also reflects the waning interest in solar in this country, particularly since crude oil prices have fallen since the late 1970s, analysts said.