Solar-Panel Firms' Outlook Dims, May Remain Darker
October 03 2011 - 10:19PM
Dow Jones News
Solar-panel company stocks have plunged to multiyear lows as
slowing demand and a glut of panels from Asia have squeezed
margins, creating a cloud that could hang over the industry for
some time.
Shares of U.S. solar-panel giant First Solar Inc. (FSLR) have
been trading at four-year lows, while shares of Chinese rival
Suntech Power Holdings Co. Ltd. (STP) have reached all-time lows
since the company went public in 2005. The Standard & Poor's
Global Clean Energy Index, which includes First Solar, Iberdrola
S.A. (IBE.MC) and other renewable energy companies, was down 41%
year-to-date as of Monday. That compares to the broader S&P 500
index, which was down 11.3% during the same period.
Demand for solar panels in Europe, which accounted for more than
80% of demand in 2010, has slowed as governments in Italy, Germany
and other countries have cut solar-power incentives and as
financial turmoil has prompted lenders to scale back financing for
renewable energy projects, industry executives say. While
solar-power demand in the U.S., China and other countries has been
growing, those markets haven't grown fast enough to absorb a
massive buildout of solar-panel manufacturing capacity in China and
other Asian countries. The September bankruptcy of California
solar-panel maker Solyndra Inc. hasn't helped the solar sector,
even though that company was privately held and didn't have a
significant position in the market.
"This is a real mess, I don't know how else to put it," said
Jack Robinson, managing director at Winslow Management Co.'s
Winslow Green Growth Fund (WGGFX). He cited the lack of a broad
U.S. clean-energy policy, compared to billions of dollars in
Chinese government support for Chinese solar companies, as having
led to a sort of arrested development of the U.S. clean-energy
sector, with no bottom to falling stocks in sight.
"There are too many companies, too many technologies and I can't
believe there isn't going to be more consolidation," Robinson
said.
Manufacturers are likely to ship at least 18 gigawatts of solar
panels this year, up from 17.4 gigawatts in 2010, although 3
gigawatts of this year's panels are likely to remain in inventory,
said Paula Mints, an analyst at Navigant Consulting.
"You'll see reselling of products at ridiculously low prices at
the beginning of the year," Mints predicted. She added that while
top-tier manufacturers are now selling their panels at between
$1.20 and $1.50 a watt -- down from more than $2 last year -- the
same product can be bought from a reseller on the "gray market" for
as little as $1.10 a watt. Lower-tier solar-panel makers are now
selling their wares for less than $1 a watt, Mints said.
Slumping prices have hit solar-companies and their share prices
hard. SunPower Corp. (SPWRA, SPWRB) said Monday that "challenging
market conditions" have prompted the company to revise its 2011
revenue and earnings forecast when it reports third-quarter results
in November. SunPower's class A shares closed 12% lower Monday at
$7.14, an all-time low since the company went public in 2005.
"The real problem with solar is a lack of demand due to the
macroeconomic concerns, especially in Europe," said Jesse Pichel,
an analyst at Jefferies Group Inc. (JEF). ""We think [solar] stocks
are going lower."
To be sure, the lower stock prices of solar and other renewable
energy companies provide buying opportunities for investors who
previously stayed away from such names because they thought the
prices were too high.
Robinson cited French oil major Total S.A.'s (TOT, FP.FR) recent
acquisition of a controlling stake in SunPower, and Chevron Corp.'s
(CVX) involvement in solar power as evidence that large energy
companies are increasingly identifying solar power as a viable,
long-term form of energy.
Even so, the turmoil in the global solar-power market is likely
to continue testing companies to determine which ones are the
strongest and which ones will follow Solyndra into bankruptcy.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com
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