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ABB to buy solar inverter maker Power-One for $1bn

Solar panels
Image caption Inverters convert the direct current generated by solar cells into the alternating current needed by electricity grids

Swiss engineering firm ABB has said that it will buy Californian solar energy firm Power-One for $1bn (£656m)

The firm makes "inverters", which convert the direct current generated by solar cells into the alternating current needed by electricity grids.

ABB claimed demand for inverters would rise by 10% a year until 2021, due to rising energy demand, electricity prices and falling production costs.

The deal, set to be completed after the summer, requires shareholder approval.

The $6.35 price per share agreed by ABB represents a 57% premium over the Nasdaq-listed Power-One's closing share price on Friday, although it is still well below the $13 level its shares traded at back in 2010.

The $1bn total price tag is more than eight times the $120m in profit earned by the Californian company in 2012.

The global solar industry has suffered in recent years from a glut of government-subsidised supply from China, the US and Europe, as well as weak demand in Europe and other core markets due to the economic downturn.

However, the cost of solar energy has fallen rapidly since the 1970s, and is on course to become cheaper than other sources of energy on national grids by the end of this decade.

"Solar [photovoltaic] is becoming a major force reshaping the future energy mix, because it is rapidly closing in on grid parity," said ABB chief executive Joe Hogan.

Power One will add $1bn in annual inverter sales to ABB's current $100m, as well as valuable research and development expertise and $266m in cash on its balance sheet.

The US firm has 3,300 employees, spread across China, Italy, the US and Slovakia.

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