Carmanah Technologies Corp. of Victoria, B.C., the company that combines solar, LED and battery technology in self-contained lighting systems, is paying $10 million in cash and stock to acquire Soltek Powersource Ltd. (or SPS Energy), a supplier of solar power systems that's also based in Victoria.

SPS is expected to boost Carmanah's product development. "We anticipate a new range of co-developed solar/LED general illumination products -- including security lighting, street lighting and sign lighting -- for applications in all of the markets we currently serve," said Carmanah chief executive Art Aylesworth in a statement released today.

"We also foresee an entirely new product line of standardized 'plug-and-play' solar power sources that would take advantage of SPS's existing range of 'solar engines' and Carmanah's world-leading energy management technology."

Not sure exactly what those products will be, but it has certainly caught my interest. For those who don't know much about Carmanah, its solar LED technology is used in transit, marine, aviation and roadway scenarios to provide lighting (e.g. in a bus shelter) without the need for a grid-tied power source. In other words, no ripping up concrete and laying power lines.

Carmanah will pay for SPS with $6 million in cash and by issuing $4 million in common shares. SPS, a private company, has apparently been profitable since it was founded in 1988 and last year had $17.5 million in revenues. It has 65 employees and offices in Alberta, Ontario and California.

This is in many ways a merger of equals, as Carmanah is also profitable and had about $16 million in revenues last year, though its annual growth rate is running at more than 50 per cent. After the acquisition Carmanah will be a company likely to pull in more than $40 million in 2005. Not bad, not bad at all.

The press release states, "With approximately 60 per cent of market share, SPS is the largest Canadian supplier of solar systems and solar-related equipment."

I'm not sure how to take that statement, as I've honestly never heard of Soltek/SPS before. That said, I can't think of any other solar PV supplier in Canada pulling in more revenues. There's ICP Solar Technologies in Montreal, but it's private so financials are unavailable. Spheral Solar Power of Cambridge, Ont., is just getting started, and while its order pipeline is surely building up strong I doubt they can claim to be the largest in Canada yet -- world class manufacturing facility aside.

It's no secret that the solar PV market is busting at the seams, thanks to huge demand in California, Japan, Germany and Spain. The market is expected to grow 300 per cent between now and 2010, so Carmanah obviously wants to stay on top of the trend. Through the acquisition, Carmanah assures itself a steady supply of solar PV cells at a time when worldwide supply continues to tighten. At the same time, it believes it can squeeze more margins out of SPS's business as demand for solar PV technology rises.

Aylesworth is no dummy -- this is a no-lose deal. "With the expansion of renewable energy and sustainability mandates worldwide, as well as the obligations associated with international pollution reduction agreements such as the Kyoto Accord, the timing of our acquisition couldn't be better," he said.

I first became aware of Carmanah last summer at a Cleantech Venture Forum in Toronto. In January I got the opportunity to chat with Aylesworth, who said at the time that acquisitions were on the radar.

"We'll end up consolidating," he confidently predicted. "We're on the acquisition path. Our belief is that the next two or three years are to define your position in this global market."

It's funny, Carmanah is a solid, profitable company showing steady growth in a booming market, yet it remains on the TSX Venture Exchange. I asked Aylesworth why he wouldn't go to the TSX proper and he said the issue is routinely raised and ultimately management decides against it.

Why? Well, usually companies graduate to senior exchanges to gain more exposure and attract institutional investors. Aylesworth said the company doesn't have those problems.

"We have a huge audience of shareholders and institutions around the world wanting more stock that we can't provide them," he said. "We're in a really good position, we're not looking for money."

Don't find many companies on junior exchanges saying that. That said, Carmanah will eventually have to make the jump, but for now it's a big fish in a broad and shallow venture pond. Bigger after today's aquisition announcement.