Solar Photovoltaic Archives


March 27, 2015

Yingli Joins The $1 Club; China Solar Slows

Bottom line: A new second wave of consolidation is likely to occur in China’s solar panel sector later this year, with money-losing companies like Yingli and ReneSola as the most likely acquisition targets.

Looming signs of new trouble are brewing in the solar panel sector, with shares of Yingli Green Energy (NYSE: YGE) taking a bath after the company reported widening losses and slowing revenue growth. The 15 percent sell-off saw Yingli’s shares re-approach an all-time low from just 2 and a half years ago, as the company joined a small but growing club of US-listed solar panel makers whose shares now trade in the $1-2 range.

Yingli’s announcement makes it the last of China’s major solar panel makers to report their fourth-quarter results, painting a picture that hints of more consolidation on the way for a sector that has already undergone a painful restructuring over the last 2 years. Two camps are emerging: One that is profitable, including names like Canadian Solar (Nasdaq: CSIQ) and Trina (NYSE: TSL); and one that is losing money, which includes Yingli and ReneSola (NYSE: SOL), which became the charter member of the $1 club when its shares sank below $2 last November.

The broader solar sector took a beating in the latest trading day on Wall Street, with Yingli and ReneSola leading the downward charge with the 15 percent and 7.5 percent declines, respectively. Shares of both companies are now near all-time lows. The profitable Canadian Solar and Trina were both also down, but by smaller amounts in the 3-4 percent range. Both of those companies’ stocks still trade well above their all-time lows, and don’t appear to be in danger of joining the $1 club anytime soon.

Investors were clearly spooked by the bottom line in Yingli’s latest results, as it reported a net loss of 609 million yuan ($100 million) for the quarter. (company announcement; English article) That figure was actually an improvement over the company’s 806 million yuan loss for the fourth quarter of 2013, but it also marked a 4-fold increase from its loss of 138 million yuan in the third quarter of last year.

All of China’s solar panel makers, and most of the global industry in general, fell sharply into the red at the height of a sector downturn that began in 2011 and didn’t really start to ease until 2013. Companies like Canadian Solar and Trina were some of the first to return to profitability, and the pair have just reported relatively solid profits in their latest quarterly results.

In terms of top line, all of the companies are reporting that revenue growth is slowing sharply as prices start to decline after a relatively long period of steady gains during the recent recovery. Yingli predicted its shipments in terms of production capacity would only grow 7-16 percent this year. But if prices fall, that means actual revenue could grow by much less or even start to fall. ReneSola has forecast similar anemic growth this year, while Trina and Canadian Solar have forecast much stronger gains.

All of this brings us back to the question of whether a new shake-out is looming for the industry, and whether money-losing companies like ReneSola and Yingli might become attractive takeover targets. The recent sell-off of both companies’ shares has made each a relative bargain for any interested buyers. ReneSola’s current market value stands at just $150 million, while Yingli’s is about twice that amount at $360 million.

The bigger question is whether anyone would want to buy these companies, since such money losers aren’t exactly that attractive. I suspect the answer to that question is “yes”, as Beijing and local governments could provide some incentives to spur more consolidation that is still needed to put the sector on a longer-term sustainable footing. Accordingly, I would expect to see at least 1 or 2 mid-sized players to disappear later this year, most likely through acquisitions, before the sector returns to more solid footing in 2016.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 26, 2015

Who’s on First, What’s on Second and Why It Does and Does Not Matter

by Paula Mints

Sizing the supply side of the global PV industry has never been easy. As annual shipments grew to gigawatt heights outsourcing increased in tandem making it almost impossible to settle on a reliable number for the size of the industry in any given year.

Outsourcing, a common practice in all industries, takes place when one manufacturer buys a product or component from another manufacturer.  In the PV industry, manufacturer A buys cells from manufacturer B, assembles the cells into modules and includes these modules in its in-house production.  When both manufacturers report the resulting megawatts as their shipped product, the industry is instantly oversized. Since most manufacturers engage in outsourcing, the practice compounds and obscures the real capacity of the industry.

Figure 1 (below) provides an example of how easily the PV industry can be made instantly bigger by double counting.  In Figure 1, Trina, Canadian Solar, Jinko, Renesola and Yingli have a combined 9.1 GWp of c-Si cell manufacturing capacity and a combined 15.3 GWp of module assembly capacity for an excess of 6.2 GWp of module assembly capability.  These manufacturers will buy cells from other sources and include them in their production.

In contrast, NeoSolar, Gintech, TopCell, E-Ton and Inventec have a combined c-Si cell manufacturing capacity of 6.3 GWp and a combined module assembly capacity of 2.1 GWp for excess cell manufacturing capability of 4.2 GWp.

The manufacturers with excess cell capacity ship cells to the manufacturers with excess module assembly capacity and everyone reports everything. And thus the PV industry has been oversized on an annual basis for decades.

Figure 1: Select Manufacturer 2014 Crystalline Cell and Module Assembly Capacity

One misunderstanding that contributes to the annual oversizing concerns what should be counted.  A cell without a module is not going to be mounted on a rooftop, but a module without a cell can’t generate electricity.  This is not a chicken and the egg conundrum. The size of PV industry shipments (or sales) annually is limited by its semiconductor — that is, crystalline cell or thin film panel capacity. 

Unfortunately, there is still a misunderstanding about the difference between module assembly capacity and cell manufacturing capacity.  Twenty years ago almost 100 percent of the crystalline manufacturers assembled their internally manufactured cells into modules.  Currently, manufacturers, particularly in China, are adding significantly more module assembly capacity than cell manufacturing capacity.  In the case of China, given the tariff constraints its manufacturers face globally, it makes sense to include production that allows for the acquisition of cells from other regions such as South Korea and Malaysia.  Figure 2 presents module assembly capacity shares by region for 2014.

Figure 2: Global Module Assembly Capacity Shares 2014

Figure 3 presents 2014 module assembly capacity (100 percent dedicated to c-Si), crystalline cell manufacturing capacity, thin film manufacturing capacity, announced shipments, cell/thin film shipments from 2014 production, shipments plus 2013 inventory and 2014 inventory. 

Figure 3: PV Industry 2014 Supply Statistics

In Figure 2, there are 51.3 GWp of announced shipments and 40.2-GWp of shipments from in-house c-Si cell and thin film production plus the previous year’s inventory. The reason for the 11.1-GWp difference is this: manufacturers bought cells and/or modules from other sources and included the acquired product in their shipment announcement, while the original manufacturer also reported the product in its shipment numbers. 

Does It Matter Who’s on First?

The annual lists of the top ten PV manufacturers becomes irrelevant if the origin of the product being reported becomes so convoluted that no one knows the genesis of anything.  The lists are typically comprised of the same manufacturer names, but, as these lists are based on different methodologies, the names are almost never in the same order. Some specificity concerning what is being ranked is necessary in order to give these lists meaning. Without specificity the lists just do not matter.

As the module without cells is an empty frame, it is important to know who manufactured the cell in the first place. One reason that this is important is quality. A photovoltaic module is an electricity producing product that is expected to reliably generate electricity for at least 25 years.  Products that carry this responsibility for reliability and longevity need to be clear about their pedigree.  This should be a matter of pride, but if quality issues arise it may be a matter of necessity.

The fact is that once the module is assembled it is very hard to know who the original cell manufacturer was unless, of course, the module assembler reports these statistics. 

Who’s on first does not matter as much, frankly, as who’s cells are inside of whose modules. 

Why We Like Big Numbers

Constant growth has been the PV industry mantra for years even though, slower stable and profitable growth is a better path. The desire for ballooning growth is one reason that double counting of shipments is tacitly accepted by everyone. After all, referring to the previous example, 51.3 GWp is more impressive than 40.2 GWp (shipments from annual production plus previous year inventory) despite the fact that it was arrived at by counting the same cell once, twice, maybe three times.  Considered through the lens of bigger-is-better, the 38.9 GWp of shipments from 2014 production (not counting inventory) is downright penurious. 

That the annual celebration of ever bigger numbers has come hand in hand many years with low to negative margins is typically ignored until blatant — and never mind that it is almost impossible to figure out the real cost of producing anything in the PV industry.

We like big numbers because they symbolize success. Unfortunately, big numbers are often a façade obscuring failure.  The real success is the ability to point to PV modules that have been in the field for over 30 years reliably generating electricity.  This sort of success offers proof that photovoltaic technologies are not the future, this technology is the electricity generating technology of now.

The real danger of big numbers is that they are both addictive and self-fulfilling.  Addictive because the attention they garner feels good, self-fulfilling because of the tendency of people to look for data to support their beliefs.

So, who’s on first, what’s on second matters less these days primarily because the numbers have been combined and recombined often enough to render them meaningless.  The same confusion exists on the demand side of the industry, where multi-megawatt projects are sold and resold and therefore counted and recounted, while the difference between a grid connection and an installation is sometimes misunderstood.  The point is — and should be — quality up and down the value chain. 

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.

This article was originally published on, and is republished with permission.

March 23, 2015

SunRun: The Next Big Solar IPO

By Jeff Siegel

Good news for solar investors …

Another solar financing/installation company is about to go public. And if history serves as any indicator, this could be yet another opportunity to land some pretty solid gains.

As reported in the Wall Street Journal, Sunrun, Inc. is set work with banks including Credit Suisse Group AG and Goldman Sachs Group Inc. on an IPO.

No final price has be set at this time, but currently the company is valued at more than $1.3 billion, which puts it roughly in the same box with Vivint Solar (NYSE: VSLR). The fastest horse in this race right now is SolarCity (NASDAQ: SCTY), which is valued at just under $5 billion.

SolarCity was certainly a great opportunity for investors back in 2012, when the company first went public. At it's highest, the stock had climbed more than 700% since debuting. Check it out …


SolarCity is currently taking on a very aggressive growth strategy, and with this growth has come growing pains which have resulted in a sizable sell-off since last September. Still, overall I like SolarCity and believe it's a force that will continue to eat up market share. But for investors, 2015 is going to be a bumpy ride.

Now Vivint Solar has only been public for about six months. After the initial enthusiasm of its debut, the stock fell a bit and found support around the $8.00 level. However, since the start of the year, the stock is up about 40%.


Vivint Solar is also a force and should not be taken lightly.

Of course, Sunrun is no slouch either. Solar installation and financing companies aren't typically valued at more than $1 billion. The company has been in the game since 2007, has more than 60,000 customers, and is in the right business, as residential solar installation is expected to grow by 50% this year.

I will be curious to see how they price this thing, though. With so many investors so incredibly giddy over solar again, I won't be surprised if Sunrun gets a rather large price tag attached to it. In which case, I'll happily wait for the sell-off and scoop up a few shares after the smoke has cleared.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

March 18, 2015

Trade Wars Send Chinese Solar Companies Offshore

Doug Young

Bottom line: A new wave of overseas investment by Chinese solar panel makers should ease western complaints of unfair state-support and provide a more solid foundation for the sector’s longer-term development.

Solar panel makers migrate overseas

As a settlement to avoid anti-dumping tariffs for Chinese solar panels exported to Europe showed signs of unraveling last week, a new report emerged that showed a more positive trend for a sector that has become the subject of nonstop trade wars over the last 4 years. That newer trend has seen a growing number of embattled Chinese solar panel makers set up overseas factories, helping them to avoid punitive anti-dumping tariffs imposed by the US on their domestically produced goods.

Both Beijing and the west should welcome and encourage this kind of development, which not only can help diffuse trade tensions but also benefits everyone, including governments inside and out of China and the solar panel makers themselves. Most fundamentally, such a development greatly reduces the complaints of unfair state-support lodged by western governments, since such new factories lack access to many of the beneficiary policies that manufacturers receive in China.

At the same time, such overseas investment boosts jobs in economies of recipient countries, while also helping China by raising its outbound investment and extending its global influence. Despite experiencing some short-term pain, the panel makers themselves also benefit by becoming more diversified and efficient through competition with western rivals on a more level playing field.

The solar panel trade wars date back nearly 4 years, starting with a string of bankruptcies by western players that couldn’t compete with their Chinese rivals. The failed foreign companies complained that their Chinese peers enjoyed a wide range of unfair government support, from policies such as export tax rebates, low-interest loans from state-run banks and subsidized land supplied by local governments for factory construction.

The US responded by imposing anti-dumping tariffs. The EU threatened to follow with a similar move, but the dispute was resolved after the Chinese manufacturers agreed to raise their prices to levels similar to western rivals. That deal was showing signs of unraveling last week, as the European Commission investigated complaints that the Chinese manufacturers were using loopholes to avoid charging the higher prices stipulated in the settlement. (previous post)

But amid the latest wave in heightening tensions, a new report showed that the Chinese manufacturers have quietly started building more factories overseas to make panels that won’t be subject to the US tariffs, and possible new tariffs from the EU. (Chinese article)

Mid-sized player JA Solar (Nasdaq: JASO) has become the latest to join the trend, contemplating construction of a factory in Southeast Asia capable of producing panels with up to 400 megawatts in annual power capacity. The company has said it might try to find a local partner to co-invest in the project, bringing multiple potential benefits to the recipient country of such a factory.

That move would come after JinkoSolar (NYSE: JKS), another mid-sized player, began construction last year of a plant in South Africa with up to 120 megawatts in annual capacity. Rival ReneSola is one of the most advanced, with overseas plants planned or already producing in Poland, Turkey, South Korea, Malaysia and Indonesia, the report said. Top-tier player Trina Solar (NYSE: TSL) also said earlier this month it is planning to build manufacturing facilities by itself or with partners outside China.

Analysts have pointed out that many of these countries offer similar advantages to China, including low-cost labor and some preferential tax policies, allowing the Chinese companies to keep prices low. But because they are outside China, such plants’ panels wouldn’t be subject to the punitive tariffs imposed by the US. They would also likely be exempt from future punitive tariffs implicitly threatened by the European Union if last year’s landmark settlement ultimately unravels.

This kind of market-driven movement is a far more constructive response to the western complaints than the angry war of words that has evolved between Beijing and its major trading partners over the last few years. A systemic change in Chinese policies is difficult to achieve quickly, since such policies occur at a wide range of governmental levels that have become pervasive throughout the nation over the last few years as the sector developed.

While the US tariffs and similar moves in other major markets initially looked confrontational and counterproductive to the sector’s development, they could ultimately benefit everyone if they force the Chinese firms to diversify with new manufacturing bases outside their home market. That kind of development should be welcome and even encouraged by Beijing, which should be careful to avoid providing the kind of direct assistance in this new go-abroad movement that led to the original complaints from the west.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 14, 2015

EU Likely To Impose Further Sanctions On Chinese Solar Firms

Doug Young

Bottom line: A widening investigation into violations of an anti-dumping solar panel settlement between China and the EU is likely to result in punitive sanctions, dealing a blow to the Chinese panel makers.

What started as some quiet rumblings earlier this week is quickly brewing into a major storm, with word that a landmark settlement between the EU and China a year ago to resolve an anti-dumping dispute over solar panels is quickly unraveling. In this case it’s probably more accurate to say the settlement was between the EU and actual Chinese solar panel makers, rather than an agreement between governments. That’s an important distinction, since Chinese companies are often far more likely to try to undermine such agreements by exploiting loopholes, unlike central governments that are usually a bit more trustworthy.

According to the latest headlines, the European Commission is expanding its probe to include a number of other firms from the 3 originally targeted, as it looks into complaints that Chinese solar panel makers are violating the year-old agreement that was supposed to resolve a dispute over unfair state support. Under the agreement, the Chinese companies agreed to voluntarily raise their prices to levels comparable with their western rivals to offset any advantage they might get from state support via policies like cheap government loans and subsidized land use.

The matter first poked into the headlines earlier this week when media reported that ReneSola (NYSE: SOL), Canadian Solar (Nasdaq: CSIQ) and ET Solar were being probed for potential violations of the agreement.  The reports weren’t more specific, but both ReneSola and Canadian Solar issued statements confirming they were being queried.

Now media are reporting that the European Commission’s widening investigation has seen goods seized in the European warehouses where imported panels are stored. (Chinese article) The reports say the EU has also sent lawyers to the companies’ headquarters in China to conduct inspections. All of this hints that things are developing quickly, and the Chinese panel makers could soon fine themselves formally accused of violating the agreement and subject to punitive tariffs.

The report I read didn’t name any sources for the news, but it appears to be based on interviews with officials from the Chinese solar panel makers who are probably worried about losing access to one of their biggest markets. The report specifically mentions that ReneSola, which sold more than a third of its panels to Europe last year, was saying it would pull out of the settlement agreement.

ReneSola’s intention is a bit strange if it’s true, since such a move would immediately subject the company to threatened punitive tariffs it was trying to avoid. Thus its intention would look a bit like an admission of guilt. I previously said that such violations wouldn’t surprise me at all, since Chinese firms are famous for signing agreements and then immediately looking for loopholes that allow them to undermine their partners.

Rumors that such violations were occurring have been common in industry circles, and a contact explained one scenario that companies are using to circumvent the agreement. Under that scheme, the companies sell their panels to buyers at the prices stated under the agreement. But then they tell the buyers to set up fake service and consulting companies, and rebate money to those customers by paying for bogus services.

Surprisingly, Chinese solar shares weren’t moving very much in the latest trading session in New York, with most up or down by less than 2 percent. But I suspect that’s because this is a breaking story and the latest news has yet to get priced in. At the end of the day I expect the Chinese companies will lose any credibility they had left in the European Commission’s eyes, and the EU will go through with its original plan and impose punitive tariffs similar to what the US has already done.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 12, 2015

Invest Where Solar Beats $10 Oil

By Jeff Siegel

In Dubai, solar is now cheaper than oil at $10 a barrel.

Yes, you read that correctly.

As reported by the National Bank of Abu Dhabi:

Dubai set a new global benchmark in December 2014: at 5.84 US cents per kW hour, the bid for Dubai Electricity and Water Authority’s 200 MW solar PV plant was cheaper than oil at US$10/barrel and gas at US$5/MMBtu.

You see, while oil in the U.S. is used primarily as a transportation fuel, in the oil-rich Middle East, the shiny black stuff is used to generate electricity. In fact, in Saudi Arabia, oil accounts for more than 65% of all electricity production. In Kuwait, it's as high as 71%, and in Yemen, it's nearly 100%.

Oh, to be a fly on the mud-brick wall when the proverbial poop hits the fan.

Meanwhile, consider this...

In the absence of Saudi Arabia's own domestic oil consumption, the desert kingdom could have generated an extra $43.8 billion in 2013.

With that kind of scratch in play, it's not surprising that the smart money is piling into a burgeoning solar industry in the Middle East.

Grid Parity for All!

In a new report written for the National Bank of Abu Dhabi, researchers have found that renewable energy technologies are fast approaching grid parity in most parts of the world.

And this was no Greenpeace report, either. This thing was actually produced primarily for the finance community in the Gulf region.

Here are some of its findings...

  • More than 50% of investment in new generation capacity worldwide is now in renewables.
  • $260 billion a year has been invested in renewable energy technologies worldwide for the past five years.
  • Green bond issues to pay for low-carbon energy projects reached $36.6 billion in 2014, more than triple the previous year.
  • Prices for solar PV modules have fallen over 80% since 2008.
  • Solar PV will be at grid parity in 80% of countries in the next two years.
  • Solar PV is already cheaper than grid electricity in 42 of the 50 largest U.S. cities.
  • Industrial applications of energy efficiency can deliver 100% payback in five years.
  • Modern wind turbines produce 15 times more electricity than the typical wind turbine in 1990.
  • The cost of energy storage is expected to drop to $100 per kWh in the next five years. Today it's about $250.

These data points are music to the ears of Middle East kings, presidents, and prime ministers. After all, in the Gulf region, oil is the lifeblood of many economies. And make no mistake — the cheap oil party going on right now won't last forever.

Truth is, in the Middle East, there is no greater choice for new electricity generation than solar. You know, because it's a freaking desert!

Quiet Integration

While I remain bullish on solar in the U.S., I'm becoming more and more attracted to the opportunities that could soon be spawned throughout the Middle East. In fact, I'm planning a research junket to the region sometime this year to get a firsthand look at what could soon be one of the most lucrative solar markets on the planet.

In the meantime, keep a close eye on the solar and solar-related companies that are actively investing in the region right now. These include, but are not limited to:

  • SunPower (NASDAQ: SPWR)
  • First Solar (NASDAQ: FSLR)
  • Schneider Electric (OTC: SBGSY)
  • SunEdison (NYSE: SUNE)
  • Trina Solar (NYSE: TSL)

This list will continue to grow, too.

Because while the Saudis and the U.S. play their game of chicken, behind the backdrop of all this nonsense and rhetoric, a strong and vibrant solar market is quietly integrating itself into a fossil fuel-addicted world. And it's doing so profitably.

Invest accordingly.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

March 11, 2015

EU Probes Chinese Solar Firms

Doug Young

Bottom line: The EU is likely to resolve its latest dispute with Chinese solar firms over implementation of a year-old pricing agreement, but the clash will undermine trust and hints at future conflict over the issue.

After several months of relative quiet, Chinese solar panel makers are back in the headlines this week with another looming trade dispute in Europe. This particular story, and much of the industry’s woes over the last 2 years, stems from broader western allegations of unfair government support for Chinese panel makers. In this case China and the EU signed a deal a year ago to resolve their dispute, but now the EU is accusing several Chinese firms of violating the deal.

The EU had previously threatened to levy punitive tariffs on Chinese panel makers, saying they received unfair support through policies like cheap loans from state-run banks and low-cost land from local governments. Washington made similar claims and ultimately did impose punitive tariffs, but the EU took a more conciliatory approach and reached a settlement after the intervention of several top government leaders.

The China-EU agreement reached last year didn’t really address the issue of unfair government support. Instead it attempted to level the playing field by calling on Chinese companies to voluntarily raise the prices of their panels to levels comparable to those of European firms. (previous post) Now we’re getting word that the European Commission has told at least 3 Chinese panel makers it believes they may be violating the agreement. (Chinese article)

It’s unclear if the action is limited to the 3 firms, which are named as Canadian Solar (Nasdaq: CSIQ), ReneSola (NYSE: SOL) and ET Solar, or if more names may also be involved. At least one of the trio, Canadian Solar, has issued a statement saying the European Commission has notified it of “potential issues” associated with its compliance with the agreement. (company announcement) It added it believes it has complied with the deal, and that no decision has been made yet by the EU.

The news sparked a sell-off for Chinese solar panel stocks, with ReneSola and Canadian Solar down by 6 percent and 2 percent, respectively, in the latest session. ReneSola is particularly vulnerable in this instance, since it relies completely on exports for its sales. Following the sell-off the shares have lost more than half of their value over the last 6 months, and are coming close to the $1 mark. Shares of other major solar panel makers also sagged, with Yingli (NYSE: YGE) and Trina (NYSE: TSL) also down by about 3 percent.

It’s slightly surprising that Canadian Solar investors were relatively less worried about the news, even though the company was named in the reports and confirmed the situation. But the fact of the matter is that investors have probably worried about this particular agreement ever since it was signed a year ago, and companies are being punished based on their exposure to the EU market.

The reason for investor concerns is relatively straightforward. Put simply, Chinese firms are famous for reaching this kind of deal, and then doing everything they can to undermine such agreements if doing so will benefit themselves. Thus, for example, a Chinese firm may sign an agreement agreeing to raise its prices, and then immediately start looking for loopholes in that same agreement that allow it to continue charging its previous lower prices.

It’s hard to comment in any detail on this particular development without knowing more about the European Commission’s queries. Those queries are almost certainly being prompted by complaints from local solar panel makers, who are hugely distrustful of their Chinese rivals. At the end of the day, the 2 sides will probably resolve this issue and the EU may implement a stronger system to ensure compliance. But this development will undermine the credibility of the Chinese companies, and could also hurt their sales as they are forced to raise prices to fully comply with the settlement.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 10, 2015

India Hates Coal

By Jeff Siegel

indiasolarIf you think the war on coal in the U.S. is bad, you ain't seen nothing yet!

We recently got word that India is set to double the tax on coal production, while promoting electric vehicles and renewable energy projects.

I'm pretty sure there's some Luddite reporter in Mumbai right now who's head's about to explode.

But that's neither here nor there.

While I'm no fan of regulatory regimes of any kind, I'd be lying if I said I wasn't happy to know that a crap-ton of money is getting funneled into renewable energy and electric cars in India, and not coal. This is for two reasons …

1.) India is one of the most polluted countries in the world. And while fuel wood, biomass, and traffic congestion are bigger culprits when it comes to air pollution, certainly reducing coal-fired power isn't going to hurt.

2.) Thanks to India's latest hard-on for renewable energy, we're now presented with even more opportunity to profit from from the inevitable transition of the global energy economy.

This is Huge

As it stands now, India plans to add 175 gigawatts of renewable energy generation capacity by 2022. 100 gigawatts of that will come from solar.

To put this in perspective, the U.S. currently has less than 18 gigawatts of solar capacity installed.

This is huge!

Analysts over Deutsche bank issued a report about a week ago which indicated that by 2022, 25 percent of India's power will come from solar. Analysts also suggested that solar will ultimately become the dominant source of electricity around the globe, generating $5 trillion in revenue over the next 15 years.

Deutsche bank notes that over the next 5 to 10 years, new business models will generate a significant amount of economic and shareholder value, and that “within three years, the economics of solar will take over from policy drivers (subsidies).”

I love it!

Here's more …

As we look out over the next 5 years, we believe the industry is set to experience the final piece of cost reduction – customer acquisition costs for distributed generation are set to decline by more than half as customer awareness increases, soft costs come down and more supportive policies are announced.

While the outlook for small scale distributed solar generation looks promising, we remain equally optimistic over the prospects of commercial and utility scale solar markets.

We believe utility-scale solar demand is set to accelerate in both the US and emerging markets due to a combination of supportive policies and ongoing solar electricity cost reduction. We remain particularly optimistic over growth prospects in China, India, Middle East, South Africa and South America.

The biggest solar player in India is Tata Solar Power, which is a subsidiary of Tata Power.

Other solar companies with a solid foothold in India include SunEdison (NYSE: SUNE) and First Solar (NASDAQ: FSLR).

Definitely keep a close eye on India throughout the rest of this year as new laws, regulations and incentives kick the Indian solar market into overdrive.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

March 06, 2015

Solar Storage Dream Becomes Reality

By Jeff Siegel

sune4While the solar industry continues to heat up, I maintain that one of the best plays in the space is SunEdison (NYSE: SUNE).

This is an aggressive operation, run by incredibly smart people. The company is well-capitalized, fairly liquid, and well-diversified in the energy space, boasting both a top-notch, vertically-integrated solar operation, and a basket of healthy wind assets, too.

The company is also now advancing on energy storage – the final obstacle to the creative destruction necessary to alleviate the world's reliance on fossil fuels.

In a press release this morning, SunEdison made the following announcement …

SunEdison, Inc., the world's largest renewable energy development company, and Solar Grid Storage LLC, a leader in deploying combined energy storage and solar PV systems, today announced that SunEdison has acquired the energy storage project origination team, project pipeline, and subject to customary consents and assignments, four operating storage projects from Solar Grid Storage. SunEdison now offers battery storage solutions to complement solar and wind projects worldwide, providing solutions that can benefit utilities, municipalities, businesses, and consumers alike.

"Storage is a perfect complement to our business model and to our wind and solar expertise," said Tim Derrick, General Manager of SunEdison Advanced Solutions. "Our strategy is to increase the value of the solar and wind projects that we finance, develop, own, and operate by improving their availability and ability to interact with the grid. With this acquisition we have added the capability to pair energy storage with solar and wind projects, thereby creating more valuable projects and positioning ourselves as a leader in the rapidly growing energy storage market."

The growth in the energy storage market is being driven by commercial and municipal customers who are interested in both immediate energy savings from solar and emergency back-up power from storage, and by electricity grid operators, who place a high value on storage for its ability to make the grid more resilient and less susceptible to failure. Renewable generation-plus-storage has proven to be a cost-effective way of integrating renewable energy such as solar and wind into the grid.

"Solar Grid Storage is unique in the storage industry in that we approach storage from a solar perspective. Understanding the core solar customer value proposition, as well as the ways that energy storage can add customer benefits and economic value to solar projects, enables us to deliver renewable energy projects that are more valuable for both customers and grid operators," said Tom Leyden, Chief Executive Officer of Solar Grid Storage. "Becoming a part of SunEdison, a renewable energy market leader with a strong pipeline of customers and development projects, positions us incredibly well to accelerate our growth and integrate energy storage with renewables to help create the electricity grid of the future."

Interestingly, this news comes less than one month after Tesla (NASDAQ: TSLA) genius Elon Musk announced that his company is about six months away from unveiling a new kind of battery that'll be able to power your home.

I'm telling you right now, the elusive storage dream is about to become reality. And it's companies like SunEdison and Tesla that are going to make fat wads of cash by getting this stuff out of the labs and into the marketplace first.

Invest accordingly.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

SunEdison Adds Batteries to Its Arsenal with Acquisition of Solar Grid Storage

Meg Cichon

The renewable energy market has been slowly strengthening ties with energy storage, and it now seems to be tying a secure knot. Wind and solar developer SunEdison (SUNE) announced today that it bought the energy storage team, projects and 100-MW pipeline of Pennsylvania-based Solar Grid Storage (SGS).

SunEdison is now able to offer integrated battery storage solutions for its renewable energy project portfolio, and delve into an energy storage market that is set to grow 250 percent in 2015, according to a new report from the Energy Storage Association and GTM Research. The solar plus battery storage market alone is set to reach $1 billion by 2018.

“Storage is a perfect complement to our business model and to our wind and solar expertise,” said General Manager of SunEdison Advanced Solutions Tim Derrick in a statement. “Our strategy is to increase the value of the solar and wind projects that we finance, develop, own, and operate by improving their availability and ability to interact with the grid. With this acquisition we have added the capability to pair energy storage with solar and wind projects, thereby creating more valuable projects and positioning ourselves as a leader in the rapidly growing energy storage market.”

Solar Grid Storage saw market opportunity a few years ago when electric vehicle interest started improving battery technology and driving prices down, according to CEO Tom Leyden. It was also a time when significant weather events like Hurricane Sandy caused power outages, sparking greater interest in renewables and emergency power.

“A lot of things have moved in our direction, and because of the success in solar and wind, utilities are raising concerns about grid stability,” explained Leyden. “So there is a lot of interest in storage on a regulatory basis to create grid resiliency, an many companies and individuals want emergency backup.”

Solar Grid Storage offers an integrated inverter plus lithium-ion battery storage system that works best for commercial projects ranging from 150 kilowatts to 10 megawatts, along with valuable grid ancillary services. They are focused on the east coast, where they have a contract with grid operator PJM to establish and operate battery storage to help balance the grid. This contract creates a revenue stream, and allows SGS to go into solar and storage projects, according to Leyden. It currently has four completed projects in its portfolio, with several more in the pipeline.

While their focus has mostly been in the PJM territory, SunEdison’s wide U.S. and global reach will open new doors for the storage technology. “To grow we needed additional capital, so SunEdison decided to acquire us — they have a strong balance sheet and attractive financing, which are all good things for us,” said Leyden.

SunEdison has been in expansion mode for the past year or so. In February 2014, it established a yieldco called TerraForm Power (TERP). This yieldco model allows SunEdison to raise capital by selling its projects to TerraForm and then using the proceeds to purchase additional projects and pay investors. Since yieldcos have very strict criteria, SGS won’t be able to qualify just yet due to a lack of contracted revenue, but it hopes to rectify that by the end of the year, said Leyden.

Back in November, SunEdison and TerraForm announced the $2.4 billion acquisition of wind developer First Wind and its 1.3-GW portfolio, making SunEdison the largest renewable energy developer in the world. It also announced plans for a possible $2 billion polysilicon plant in China, a $30 million module plant in Brazil, and a $4 billion module plant in India to help along its more than 5 GW of potential projects in the region.

For now, Leyden said that SGS will focus on ramping up in the PJM market and moving into California, where there is storage procurement in place. Said Leyden, “Those are our two initial focuses, but we do want to expand beyond that — and we intend to — but it will take some time.”

Meg Cichon is an Associate Editor at, where she coordinates and edits feature stories, contributed articles, news stories, opinion pieces and blogs. She also researches and writes content for and REW magazine, and manages social media.  Formerly, she was an Associate Editor of ideaLaunch in Boston, MA. She holds a BA in English from the University of Massachusetts and a certificate in Professional Communications: Writing from Emerson College.

This article was first published on, and is republished with permission.

February 22, 2015

SolarEdge looks to Raise $125 Million in IPO

By Tim Conneally

From a huge crop of Israeli cleantech companies, solar power optimization and management startup SolarEdge has filed for a $125 million initial public offering on the NASDAQ exchange.

SolarEdge has been talking about IPO since 2011, but opted instead to work with venture capital through three separate funding rounds. By the time it completed its Series D, SolarEdge had raised a total of $37 million from more than ten venture capital groups.

The company's CFO recently told Bloomberg that it was difficult to grow such a large company with only private money. An IPO was a given, it was just a question of when it would happen.

Yesterday, the Securities and Exchange Commission published SolarEdge's S-1 filing that revealed the nuts and bolts of this offering.

What SolarEdge offers

A major problem for solar panels is how easily their output can be lessened. When even a portion of a solar panel loses its direct sunlight, the energy output is compromised. SolarEdge claimed to maximize efficiency of panels to mitigate the effects of things like partial solar shading.

By correcting inefficiencies in DC to AC conversion, SolarEdge claimed to be able to boost energy output by as much as 30 percent.

The value of the company is in its patented power inversion technique. It's an upgrade to the dominant method of harvesting solar power. In short, the system uses a distributed architecture of power optimizers. The SolarEdge system hooks up each photovoltaic (PV) module in the array with its own low-cost optimizer. The whole network of optimizers is monitored and managed by a cloud-based interface.

In the company's SEC filing, it describes itself in the following way:

“Our system enables each PV module to operate at its own maximum power point ("MPP"), rather than a system-wide average, enabling dynamic response to real-world conditions, such as atmospheric conditions, PV module aging, soiling and shading and offering improved energy yield relative to traditional inverter systems...Our architecture allows for complex rooftop system designs and enhanced safety and reliability.”

SolarEdge is a B2B company. It sells this solution to solar providers of various sizes in 45 different countries so far. It works with big installers like SolarCity (NASDAQ: SCTY) Vivint Solar (NASDAQ: VSLR) and SunRun and claims to have shipped more than 4.5 million power optimization units and 201,000 inverters since its founding in 2006. Approximately 95,000 installations are hooked up to its cloud monitoring platform.

In 2013, the company's revenue was $79 million. In 2014, revenue grew to $133.2 million. The comany's revenue for the first six months of fiscal 2015 have been double that of the previous year. After a history of losses and negative cash flow from operating expenses, the company is posting a net gain for the first six months of this fiscal year. The first six months of fiscal 2014 resulted in a $13.1 million net loss. So far this year, it's tracked a $5.9 million gain.

But that's an extremely limited run. The company's ability to generate a profit seems to be the biggest question, and it's marked as the number one risk factor in the SEC prospectus. Sure, they market their ability to optimize solar panels for output, but can they optimize their operating costs so they can turn a consistent profit?

SolarEdge will trade under the symbol (NASDAQ: SEDG), and it will not yield cash dividends at any point in the forseeable future.

Tim Conneally is an analyst at Energy and Capital, where this article was first published.

February 16, 2015

The Top Ten PV Manufacturers: What The List Doesn't Mean

by Paula Mints

Every year at this time lists of lessons learned during the previous year give way to lists of top ten PV manufacturers. It’s time to ask what these lists mean, and whether they have a purpose to the ongoing growth and health of the photovoltaic industry.

So Many Numbers, So Little Time

There is more than one way to size the photovoltaic industry and unfortunately, much of the time are the metrics are considered to be synonymous.  The PV industry is sized by capacity, shipments, production, module assembly capacity, installations and grid connections.  Since all of these metric describe something different, a host of misunderstandings can, and often do, arise.  Many times a one-to-one relationship is assumed between installations and shipments.  The difference between c-Si cell and thin film capacity and module assembly capacity is often misunderstood.  The role of inventory is overlooked. 

Many times the goal of sizing the PV industry is to announce continue growth, whether this growth is profitable or not.  All industries suffer a similar fate in this regard; growth is prized, whether or not it is healthy growth.

Figure 1 presents various metrics used to size the PV industry.  The metrics presented in Figure 1 are 2014 supply and demand inventory, module assembly capacity, commercial c-Si cell and thin film capacity, production, shipments from annual production, shipments + inventory and defective modules. In 2014, quality issues primarily with crystalline cells were found in modules that had been installed for, in some cases, over ten years.  In some cases, replacement of these defective modules requires a system redesign. 

Figure 1: 2014 PV Industry Metrics

Module assembly capacity, though not trivial, ramps up more quickly than c-Si or thin film capacity. Traditionally, the PV industry has had more module assembly capacity then c-Si cell and thin film manufacturing capacity.  The size of the PV industry is limited by its semiconductor capacity.  In 2014, the PV industry had ~50-GWp of module assembly capacity and 45.9-GWp of c-Si cell and thin film capacity.  This means that in a perfect world at 100% utilization and without considering inventory, PV industry shipments could only amount to 45.9-GWp. 

Manufacturers announcing quarterly and annual shipment data often (meaning, close to 100 percent of the time) do not differentiate between cell capacity and module assembly capacity.  When these numbers are taken at face value the industry is oversized, often significantly.  This is important for several reasons — one business reason is that manufacturers establishing a strategic direction need to have an accurate understanding of the competitive landscape in which it operates.

Table 1 presents data for the top ten manufacturers (as of publication) for 2014.  A final assessment will not be available until all shipment data are tallied. At that time, inventory from the previous year will be factored into the analysis. 

The manufacturers in Table 1 had 2.7-GWp more module assembly capacity than c-Si cell and thin film manufacturing capacity.  A manufacturer can only ship to the limit of its cell/thin film capacity + inventory in any given year.  It is common practice for manufacturers to buy cells from other sources and assemble these cells in-house, including the resulting product in annual shipment numbers. 

Table 1: 2014 Top Ten Manufacturers Shipment Estimate, Capacity, Module Assembly

One reason the annual top ten manufacturer list has lost meaning is that the buying and selling of cells/modules obscures an accurate count and sizing of the industry.  Another reason the annual top ten manufacturer list has lost meaning is that for many years shipments were not profitable.  Recognition of an unprofitable achievement does not support the worthwhile goal of establishing a healthy, thriving industry. Celebrating data that obscures the facts does not help new and established entrants understand the industry landscape in which they compete.   

Top Ten PV Manufacturers Over Time

Today’s number one manufacturer may be out of business tomorrow or merge with another more nimble entity.  Table 2 presents the top ten c-Si cell and thin film manufacturers from 2001 through the 2014 estimate.  Sharp Solar was the number one manufacturer from 2001 through 2007.  Sharp Solar has reduced capacity significantly overtime.  Q-Cells was the number one manufacturer in 2008.  Q-Cells c-Si business was acquired by Hanwha and its CIGS business was acquired by Hanergy.  Other Q-Cells’ businesses are no longer operating.  Suntech was the number one manufacturer in 2010 and 2011.  Suntech declared bankruptcy. 

Several manufacturers on the annual top ten list, such as Schott, AstroPower and BP Solar exited during trying (unprofitable) times.

Historically, and taken in context with what was happening at the time, the annual top ten list has much to teach and perhaps becomes more relevant over time.  Beginning in 2004, the PV industry began to experience accelerated growth. This growth was driven by the EU Feed in Tariff. In 2005, high prices for polysilicon began to pressure crystalline manufacturers.  During these days, investment in thin film technologies increased, the turnkey equipment concept was announced as the future of the industry and longtime participants without polysilicon contracts in place began to struggle. 

In 2009, aggressive pricing from manufacturers in China began to pressure crystalline manufacturers in other regions and First Solar, a manufacture of CdTe panels was the first and only thin film manufacturer to lead the list.  During 2011, 2012 and 2013, survival was the most important PV metric as low margins became impossible to hide. Many manufacturers ramped up during the early days of the EU FiTs, assuming that growth would continue unabated.  Still, even during unprofitable times, those on the top ten list were recognized. 

Table 2: Top Ten PV Manufacturers 2001 – 2014 Estimate 

The top ten list is primarily useful in hindsight, offering lessons about what pitfalls to avoid and where caution might have forestalled failure. It is used most often as a marketing tool, and, when the data are obscured or are confusing, is of little use in that regard. 

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.

This article was originally published on, and is republished with permission.

February 15, 2015

Chinese Bureaucracy Casts Cloud Over Shiny Solar Finance

Doug Young

Bottom line: Complaints of problems from a major solar plant builder reflect the difficulty of new construction in China, and could wreak havoc on the sales and finances of panel makers and their construction partners.

Solar entrepreneur Shi complains of bureaucracy

Two solar energy news items are showing both the attraction and also the frustration that developers are feeling as they try to build new clean-energy power plants to help China wean itself from its dependence on fossil fuels. On the attraction side of the story, the industry has just won a major new backer in the form of insurance giant Ping An (HKEx: 2318; Shanghai: 601318), which is teaming up with panel maker Trina Solar (NYSE: TSL) in a new plant-building initiative.

But the frustrations that many plant builders are feeling were on prominent display in a separate report that cited another major developer complaining of the difficulties of new construction. Those kinds of complaints aren’t really new, and are being caused by provincial government interference and other local issues in the many remote locations where new plants are being built.

While solar power proponents are quite happy to talk about all the money they’ve raised and their big plans for new plant construction, few like to talk about the many troubles they face when they actually try to build those plants. Everyone is being attracted by Beijing’s ambitious plans to build up solar power in the country, partly to support the nation’s big field of solar panel makers and partly to clean up the nation’s polluted air.

Beijing has repeatedly boosted its target for new solar plant construction, with a current aim of installing 35 gigwatts of capacity by the end of this year. And yet an industry official was cited last fall saying that only 10 gigawatts were likely to be added by the end of 2014, making the 35 gigawatt target look nearly impossible to reach. Despite that, the ambitious target has continued to draw in big investors who believe Beijing and local governments will provide them with financial and other assistance in the drive to realize China’s solar energy dreams.

Now Shanghai-based entrepreneur and multi-millionaire Shi Yuzhu is showing just how difficult the road to solar construction can be in China. Shi announced a major new solar construction fund last year, but his enthusiasm has quickly turned into frustration since then. A new media report cites Shi as complaining on his microblog that of the 3 major plants his fund was planning, 2 have run into difficulties that could delay them indefinitely. (Chinese article)

The article details the situation with one stalled project in Inner Mongolia, but the bottom line shows that local government officials are playing their usual tricks designed to benefit themselves rather than facilitate business. Such games are quite common in China, especially in less developed provinces like the ones where many solar plants are being built. Shi is probably being hurt by his own lack of experience as well, but it’s quite likely that his story is being repeated at many similar projects around the country. That certainly doesn’t bode well for solar panel makers or plant builders.

One such panel maker that was counting on a local construction boom is Trina, which has just announced a new plant-building initiative with PingAn Trust and Jiuzhou Investment Group, an investment arm of the Jiangsu provincial government. (company announcement) The trio plan to build new solar plants with total capacity of up to 1 gigawatt over the next 3 years. The arrangement looks quite risky for Trina, as it appears Trina will borrow money from its partners for plant construction, and give them the option to convert the loans into equity ownership at a future date.

Trina and its peers like Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ) have announced a string of similar initiatives, which often see the companies join hands with financial backers for new plant construction. If a big portion of those plans runs into troubles like the ones we’re seeing from Shi Yuzhu, which seems almost inevitable, both panel makers and their plant-building partners could find themselves in a big mess that could wreak havoc on their finances and even threaten their survival.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

February 13, 2015

Enphase Acquires O&M Provider Next Phase Solar

Meg Cichon

Enphase (ENPH) has been slowly inching its way into the solar service business on both a residential and commercial scale, and may even tap utility-scale projects in the near future, according to Marty Rogers, Enphase’s vice president of worldwide customer service and support. Last year Enphase announced a partnership with solar crowdfunding platform Mosaic to offer O&M services to residential solar loan customers. More recently, it announced a commercial O&M offering that combines its C250 commercial microinverter technology with services that assist the design, installation and maintenance of solar projects, including cloud-based monitoring and a dedicated service team.  

Next Phase Solar adds both residential and commercial projects to Enphase’s portfolio — about 70 percent of those are commercial installations, and the remaining 30 percent residential with a small amount of utility-scale.

“This is a repeatable business and it will be interesting moving forward since the market is really based on both the increase and age of installations,” said Rogers. “We don't see anyone else grabbing this market sector, so we decided it was a great move for us to go after it.”

With services that encompass project needs from start to finish, Enphase claims that its system will reduce financial uncertainty and capital costs while enhancing system performance and ultimately the return on investment (ROI). It’s sort of like commercial office space, explained Rogers. If an owner maintains office space with the highest levels of efficiency, the asset will stay strong and valuable. However, if the owner leaves the asset alone, it will decrease in value over time. “What we’re saying is: Let’s create asset value over a longer period of time, and include documentation to prove that it has been maintained — this will prolong the life and value of the system.”

Enphase also revealed a new Energy Management System at the 2014 Solar Power International (SPI) conference, which is set to hit the market in the third quarter of 2015. The system combines its microinverters, storage and monitoring technology and aims to satisfy the growing commercial and residential storage-plus-solar market that is set to reach 318 MW by 2018.

“The energy storage business requires service, and it will be important to have the right teams in the right places to maintain systems,” said Rogers. “This will be huge for those trying to dive into residential storage, and I can’t think of one company that has a residential fleet for service — but you have got to have this.”

Meg Cichon is an Associate Editor at, where she coordinates and edits feature stories, contributed articles, news stories, opinion pieces and blogs. She also researches and writes content for and REW magazine, and manages social media.  Formerly, she was an Associate Editor of ideaLaunch in Boston, MA. She holds a BA in English from the University of Massachusetts and a certificate in Professional Communications: Writing from Emerson College.

This article was first published on, and is republished with permission.

January 09, 2015

Sol-Wind: New Yieldco With A Tax Twist

By Tim Conneally

The pool of public solar yieldcos keeps growing.

Just before the Christmas holiday, Sol-Wind Renewable Power LP filed for a $100 million initial public offering with the Securities and Exchange Commission. This will be the eighth Yieldco to debut since 2013, and the stock will trade on the NYSE under the symbol SLWD.

But there's something different about this one.

Sol-Wind is a yieldco that utilizes a Master Limited Partnership (MLP) structure, so it will be taxed differently from the other Yieldcos.

Generally speaking, a Yieldco is similar to MLPs by nature, but the taxation rules are very different.

The offering from Sol-Wind merits a closer look.

What it is, Why it's different

Sol-Wind is a New York-based company that has only existed for a year. It has already booked $15 million in PPAs across the U.S., Puerto Rico, and Canada. It has a portfolio of 184.6 MW of generating capacity which is made up of 131 discrete solar assets and 16 wind assets.

According to the IPO prospectus, Sol-Wind intends to put the proceeds of the IPO toward acquiring more assets. The document states:

“We are focused on acquiring assets from middle-market developers, which is an area where we see particularly compelling opportunities. We define "middle-market developers" as those developers who typically, in the case of solar assets, develop projects of between 100 kW and 5 MW in nameplate capacity and, in the case of wind assets, between 1 MW and 10 MW in nameplate capacity.”

It seems pretty straightforward, but Sol-Wind is attempting to structure itself in such a way so that it can receive the tax benefit of an MLP instead of a typical yieldco.

A regulation known as I.R.C. § 7704 allows certain publicly-traded master limited partnerships to be taxed as partnerships instead of corporations, and Sol-Wind has the ability to meet that exemption.

It's a tricky arrangement that's often used by private equity and hedge funds to avoid taxation. A blocker corporation is set up to absorb the 35% corporate tax that would otherwise be applied to the partnership's assets. However, the corporation makes nothing, and any income made by the MLP is taxed only at shareholder level.

Why is this structure necessary?

“By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects. These projects get access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment,” Senator Chris Coons (D-DE) says on his website. “Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, starving a growing portion of America's domestic energy sector of the capital it needs to build and grow.”

Currently under federal law, qualified sources of income for tax-free partnerships include: interest, dividends, rents, capital asset sales, real estate, and natural resources (including oil/gas/petroleum, coal, timber, etc).

Several bills known as the MLP Parity Act (MLPPA) were submitted to congress in 2012 and 2013, seeking to amend the tax code for publicly traded partnerships to treat all income from renewable and alternative fuels as “qualifying income”.

Unfortunately, senate bills and house resolutions known as the MLP Parity act all died in committee.

Tim Conneally is an analyst at Energy and Capital, where this article was first published.

December 20, 2014

Commerce Department Finalizes Tariffs on Chinese and Taiwanese Solar Panels

Jennifer Runyon

Yesterday the U.S. Department of Commerce announced its final findings in the 3-year long trade war between the U.S. and China. Additional tariffs will be imposed on modules from China and Taiwan. Although this is good news for SolarWorld and other American solar PV manufacturers, many in the U.S. solar industry are not celebrating and the decision is expected to further divide an already shaken solar industry.

Specifically, Commerce determined that imports of certain crystalline silicon PV products from China have been sold in the U.S. at dumping margins ranging from 26.71 percent to 165.04 percent and that imports of certain crystalline silicon PV products from Taiwan have been sold in the U.S. at dumping margins ranging from 11.45 percent to 27.55 percent.  Finally, Commerce determined that imports of certain crystalline silicon PV products from China have received countervailable subsidies ranging from 27.64 percent to 49.79 percent.  Named in the suit, Trina Solar (TSL) and Renesola (SOL)/Jinko (JKS) received final dumping margins of 26.71 percent and 78.42 percent, respectively. Commerce also found that 43 other exporters qualified for a separate rate of 52.13 percent (PDF of fact sheet here lists all 43 exporters beginning on page 7.)

The China-wide entity received a whopping final dumping margin of 165.04 percent — this is for companies that did not cooperate with the investigation.

In the Taiwan AD (anti-dumping) investigation, mandatory respondents Gintech and Motech received final dumping margins of 27.55 percent and 11.45 percent, respectively. All other producers/exporters in Taiwan received a final dumping margin of 19.50 percent.

In the CVD (countervailing duty) investigation, Commerce calculated a final subsidy rate of 49.79 percent for mandatory respondent Trina Solar. Mandatory respondent Suntech and five of its affiliates (see final subsidy rates chart at the bottom of this article) received a final subsidy rate of 27.64 percent. All other producers/exporters in China have been assigned a final subsidy rate of 38.72 percent.

Next, U.S. Department of Commerce will investigate if the dumping injured U.S. manufacturing. If injury is found to have occurred, the tariffs will stay.  If no injury is determined, the investigation will be terminated. That decision will be made on or about January 29, 2015. However, U.S. Customs and Border Protection will immediately begin to collect cash deposits equal to the applicable weighted-average dumping margins. If injury is not found, the money collected will be refunded.

Industry Divided

The solar petitioner in the case, SolarWorld (SRWRF), applauded the decision. The company said that by comprehensively addressing the unfair trade practices of China and Taiwan, Commerce has paved the way for expansion of solar manufacturing in U.S. market.  Makesh Dulani, U.S. President of SolarWorld Americas believes the tariffs set the stage for companies to create new jobs and build or expand factories in the U.S. Last month, SolarWorld announced that it was expanding its Oregon factory and adding about 200 jobs.

Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA), said the ruling is “ill-advised” and feels that it will harm many and benefit few. “We remain steadfast in our opposition because of the adverse impact punitive tariffs will have on the future progress of America’s solar energy industry.  It’s time to end this costly dispute, and we’ll continue to do our part to help find a win-win solution,” he said.

SEIA held a webinar for its members on December 18 at noon EST to discuss the ruling.

SEIA’s non-neutral stance has raised some eyebrows in the industry.  Yesterday, PetersenDean, a privately-held roofing and solar company, called for Resch’s resignation as well as that of the full SEIA board because of its position in the case. According to PetersenDean Roofing & Solar President Erin Clark, the trade association’s support for China and Taiwan in these matters is a clear conflict with its own stated purpose to keep America competitive.

“SEIA has become nothing more than a tool used by Chinese companies to try and bankrupt and destroy American solar manufacturing. Thanks to some of these actions, thousands of American workers have lost their jobs in the past three years due to the closure of solar manufacturing plants in America. All of this at a time when our domestic economy and employment are struggling to recover from the devastating recession,” said Clark.

The Coalition for Affordable Solar Energy (CASE) thinks the decision will raise prices and kill jobs and believes the decision is in direct opposition to the pledges recently made by the U.S. and China to work together to curb global warming. “Hundreds of megawatts of solar projects remain unrealized due to deleterious solar trade barriers in the U.S., China, Europe and globally. Eliminating taxes in cleantech trade represents the lowest-hanging fruit in the global fight against climate change,” said Jigar Shah, President of CASM.

All of this contention comes at the heels of a recent announcement that the U.S. solar industry is on track to install 41 percent more solar in Q4 2014 than it did in 2013.  In total, the U.S. is expected to install 6.5 gigawatts of solar in 2014, a 36 percent increase over last year.

Jennifer Runyon is chief editor of and Renewable Energy World magazine, coordinating, writing and/or editing columns, features, news stories and blogs for the publications. She also serves as conference chair of Renewable Energy World Conference and Expo, North America. She holds a Master's Degree in English Education from Boston University and a BA in English from the University of Virginia.

This article was originally published on, and is republished with permission. 

December 19, 2014

Casting Off The Electric Company Cord

By Jeff Siegel

Billy Adams doesn't get an electric bill.

Perched along a hillside in the mountains of Western Maryland, Billy's home gets all its electricity from the sun.

He has a small battery pack that stores about five hours worth of electricity, and he heats his home with a very powerful 100,000 BTU wood stove.

Of course, Billy isn't your typical American.

He's never been a fan of living in the suburbs. He enjoys the peace and quiet of mountain living, rarely eats anything he hasn't hunted or grown himself, and doesn't have a single penny of debt.

For the most part, Billy's head is on straight. He doesn't seem to want for much and doesn't really seem to need much of anything. That being said, he can be a bit delusional at times when it comes to how he sees himself.

For instance, the last time I saw Billy, he was building a walipini. If you don't know, a walipini is basically an underground greenhouse. Tired of eating little more than canned vegetables throughout the winter, he decided he was going to use a walipini so he could grow fresh vegetables year-round.

He told me that once it was finished, he'd never have to leave his house again.

Then I reminded him that no one's going to deliver his diesel for his truck, and until he learned how to make his own toothpaste, he would have to venture out into the world at some point.

Still, Billy's doing pretty well for himself. He told me the electric companies fear people like him because more and more folks are realizing they don't need to be connected to the grid to live comfortably.

Most People

Truth is, while he may be right about not having to be grid-connected to live comfortably, most people aren't going to follow in his footsteps.

Most people don't want to chop wood for heat. Most people don't want to be limited to only five hours of electricity per night. Most people don't want to use propane to cook their meals.

The bottom line is that Americans have it pretty easy when it comes to energy.

We flip a switch, and there's light.

We turn the knob, and the stove burner lights up.

We set a dial, and the heat or air conditioning fires up.

Given the very comfortable way of life we all enjoy, why would anyone give that up?

Most won't.

Energy Independence

As much as I love the idea of being energy independent, I don't think most people realize just how reliant they are upon the grid.

Sure, you can slap some solar up on your roof. But chances are, you're still going to be connected to the grid. And despite the fact that the nation's electric grid is severely flawed in terms of efficiency and safety, it still works well enough that you live a lot more comfortably than most folks on this planet. No amount of yearning for energy independence will change that.

Don't get me wrong — one day these huge towers and thousands and thousands of miles of copper and rubber won't be necessary. And the truth is, that day could come sooner than many would like to admit. But the fact is U.S. utilities are not these weak entities that are going to be brought down by dreams of energy independence and really cool software.

Although we have the technology right now to make the grid superfluous, there's a lot of money at stake for the utilities. And mark my words: They're not going to roll and over and die just because they are inferior to distributed generation.

Where the Profits Are

According to a new report published by Accenture, as solar power and energy conservation initiatives grow, U.S. energy utilities could lose as much as $48 billion a year.

That's a lot of scratch!

But the utilities have at least another three to five years before this really starts to become a thorn in their sides. And by then, I suspect they'll be doing major deals with solar finance companies and installers to make sure they can still get a piece of the action.

Sure, there are some, like the Salt River Project (SRP) in Arizona that's been doing the equivalent of CIA-styled enhanced interrogation techniques on the solar industry there. The utility for the Phoenix area has gone out of its way to penalize anyone wishing to use the state's amazing solar resource to generate homegrown electrons — including new fees and rate hikes for solar providers.

Interestingly, I've found that most of the folks who dictate energy policy in the Grand Canyon state are bitter, hostile shut-in types who still think solar is some kind of socialist plot designed to destroy America. It's the Luddites in Arizona responsible for solar struggles — not the economics.

But aside from the knuckle-draggers over at the SRP, most utilities are waking up to the reality that they will either be part of the transition to a new energy economy or wither away and die under a cloud of mediocrity and denial.

As an investor, I haven't touched a utility in three years. And I have no intention of chasing these shaky institutions in 2015, either.

Instead, I remain focused on the disruptors — the companies that are bringing solar and other new energy technologies to the masses. SolarCity (NASDAQ: SCTY), Vivint Solar (NYSE: VSLR), SunPower (NASDAQ; SPWR), First Solar (NASDAQ: FSLR), SunEdison (NASDAQ: SUNE). These represent the new face of distributed energy.

No, distributed energy will not replace the grid anytime soon. The utilities and their massive control will not go gently into that good night. But they're also not going to experience the meteoric growth that you're going to see in new distributed energy developments.

And that's where the action is. That's where the opportunity is. That's where the profits are.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

December 05, 2014

Top 10 PV Module Suppliers for 2014

The 2014 rankings for solar module suppliers have been released from the newly combined Solarbuzz and IHS Technology solar research team. The team predicts that the global top 10 PV module suppliers will stay the same, although some reshuffling will occur. The rankings are based on full year shipment estimates.

The group is forecasting Trina Solar (TSL) to be the largest module supplier in 2014 in terms of global shipments. IHS said that Trina is expected to break industry records for both quarterly and annual PV module shipments in Q4’14. Yingli Green Energy (YGE), the holder of these previous records, is expected to be come in as the 2nd largest supplier having adopted a new strategy to prioritize profitability.

JA Solar (JASO) is forecast to gain most ranking places amongst the top 10 and should come in as the fifth largest supplier in 2014, said IHS. JA Solar’s module shipments are expected to double from 2013 level, outpacing all of the other top 10 suppliers. IHS attribute this growth to JA’s successful transformation from a major cell manufacturer into a leading module supplier.

China, Japan, and the U.S. have been the largest three PV markets in 2014, and unsurprisingly were the key markets for all of the leading PV module suppliers. Japanese suppliers, Sharp Solar and Kyocera leveraged high brand awareness and acceptance in their domestic market to retain positions in the top 10 rankings in 2014.

The 2014 top 10 PV module suppliers are almost the same group of companies as one year ago. SunPower (SPWR) entered the top 10 in 2014 and was ranked joint 10th largest suppliers alongside Kyocera (KYO) according to IHS estimates.

Many of the top 10 suppliers also accelerated the use of a large quantity of PV modules for internal solar projects in 2014, especially Trina Solar, Yingli, JinkoSolar (JKS), and JA Solar. Total unrecognized module shipments that will be used in internal projects will reach 1.4 GW in 2014 for these four companies combined, reflecting these companies efforts to shift towards PV project development, which was pioneered by Canadian Solar (CSIQ), First Solar (FSLR), and SunPower, said IHS.

This article is by the editors of, where it was first published. It is republished with permission.

December 01, 2014

Solar Stocks Slide On Oil Slick

Doug Young 

Bottom line: The recent plunge in solar stocks is the result of panic selling due to falling oil prices, meaning the shares could rebound sharply once the sell-off subsides.

US investors were showing signs of new energy indigestion in the shortened trading day after Thanksgiving, dumping stocks of all the major solar panel makers in a messy post-holiday sell-off. With no major news from any of the companies, the driving force behind the sell-off appears to be the recent plunge in oil prices, which hit new 4 years lows late last week after OPEC declined to cut its daily output quotas.

Investors appear to be worrying that falling oil prices will dampen enthusiasm for building new solar plants, since lower oil prices mean solar power will be less competitive with more traditional power sources derived from fossil fuels. The only problem with that logic is that solar power was never competitive with fossil fuels to begin with, meaning solar stocks could be getting punished for no good reason.

All that said, let’s look first at what’s been happening to oil prices, which were in the spotlight last week after Saudi Arabia vetoed a plan by other OPEC members to cut oil output in a bid to boost sagging global prices. That move fueled fears that oil prices will continue to fall from current lows not seen since 2010 when the world was still suffering from the effects of the global economic downturn.

Following the drop last week, oil prices are now down by about a third since June. The plunge has understandably hit major oil companies, which will get far less revenue even though their costs will remain fixed. But suppliers of equipment used to make alternate energy are also getting hammered and took an especially big beating last Friday.

Leading the post-Thanksgiving sell-off was high-flyer Canadian Solar (Nasdaq: CSIQ), whose shares plunged 11.6 percent on Friday and are now down 40 percent from a September peak. The picture looked similar for most other solar panel makers, with Yingli (NYSE: YGE), Trina (NYSE: TSL) and JA Solar (Nasdaq: JASO) all dropping 7-8 percent on Friday. Wind power also got caught in the selling frenzy, with wind turbine maker Ming Yang (NYSE: MY) down 7 percent on Friday and off 24 percent since September.

One of the worst hit was ReneSola (NYSE: SOL), which tumbled nearly 9 percent on Friday and whose shares have lost nearly half of their value since September. The company may have looked especially vulnerable since it is one of the few that relies completely on exports, unlike its peers which have positioned themselves to take advantage of a major solar power building program in China.

So the big question now becomes: Is all of this selling justified, and is the industry headed into a new downturn just as it starts to emerge from its previous slump? I’m not a major expert on solar energy policy, but my answer to both of these questions would be a fairly confident “no”. The reason is simple, namely that solar and wind were never economically competitive power sources using current technology, even when oil prices were still high. The only reason solar and wind energy plants are being built at all is due to government policies that subsidize their development. [Ed. note: There's also the much more relevant fact that solar and wind compete with other sources of electricty, such as coal, natural gas, and nuclear.  Even at current prices, oil (diesel) is too expensive to compete with solar and wind without subsidies.]

Those policies typically see governments set prices for solar and wind power at artificially high levels, and then force utilities to buy that power at those inflated prices. Thus even if a power company can make its own power at much cheaper costs, it still has to buy all the output from solar energy plants at the government-set prices. That reality means that solar plant construction shouldn’t see any major shifts despite the big drop in oil prices, and that solar stocks are likely to rebound strongly once the current round of panic selling subsides.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 30, 2014

Chinese Solar Cos Go Shopping To Avoid Troubles At Home

Doug Young 

Bottom line: Sputtering progress for China’s solar power build-up could erode domestic panel makers’ performance, prompting some to buy more overseas assets to avoid punitive trade barriers in the west.

The latest trouble signs in China’s ambitious solar power build-up are coming in newly released quarterly results from Trina (NYSE: TSL), which has reduced its annual sales targets after scrapping one of its planned new projects in the country. At the same time, China’s industry continues to look for ways to circumvent anti-dumping tariffs in the west by setting up off-shore production and purchasing foreign assets to avoid such penalties. In the latest move on that front, a unit of China National Chemical Corp, also known as ChemChina, has just announced its purchase of a major panel producer in Norway for about $640 million.

China’s major solar panel makers have relied on exports for much of their explosive growth over the last decade, with the big majority of sales going to buyers in Europe and North America. But both markets have taken punitive actions against Chinese panels over the last 2 years, complaining that Chinese manufacturers receive unfair state support in the form of policies like export credits and cheap loans from big state-run banks.

The Chinese firms were depending on a major build-up of China’s domestic solar power industry to help offset losses in western markets, though signals earlier this week indicated that program was running into some headwinds. (previous post) Now we’re starting to see some real results of those headwinds in the newly released quarterly results of Trina, one of China’s top panel makers.

The company reported fairly respectable results for the third quarter, with revenue up nearly 20 percent on a quarter-to-quarter basis and profits up a more modest 3 percent due to foreign exchange factors. (company announcement) But investors were spooked by the company’s downward revision of its full-year guidance for module shipments.

The main factor behind that revision appears to be a solar farm that Trina planned to develop in Inner Mongolia, but ultimately scrapped due to changes in government policy. Trina said those policy changes could also affect the company’s pipeline of other projects. That gloomy outlook sent Trina’s shares down 5.2 percent, and they now are trading 43 percent lower than a peak reached back in March.

Interestingly, shares of other major players like Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ) didn’t drop in the latest trading session, even though these companies will also be affected by the same trends that are hurting Trina’s outlook. Accordingly, I wouldn’t be surprised to see these shares also come under pressure soon, and for the entire sector to feel some pressure through the first half of next year until the China situation clarifies.

Meantime, the other major news bit from the solar sector has China National BlueStar Co, a unit of ChemChina, purchasing Norwegian solar panel maker REC Solar (Norway: RECSOL) for 4.34 billion kroner, or about $460 million. (English article) REC previously had manufacturing operations in Norway, but later closed all of those and now does all of its manufacturing in Singapore. Analysts are saying the deal could be followed by similar ones that see Chinese producers purchase offshore assets to circumvent barriers in Europe and North America.

The United States has levied punitive anti-dumping tariffs against Chinese-made panels, and the European Union (EU) has taken similar actions through an agreement negotiated last year requiring Chinese panel makers to voluntarily raise their prices. But solar panels made in the west and other markets like Singapore aren’t subject to those actions. Accordingly, we could see more similar purchases in the year ahead, and the trend could even accelerate if the solar build-up in China shows further signs of stalling.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 28, 2014

China Struggles To Meet Solar Targets

Doug Young

Bottom line: China is likely to fall well short of its plan for 35 gigawatts of solar power capacity by the end of next year due to profit-seeking speculation and lack of experience among plant builders and operators.

I’ve been quite skeptical for a while about China’s ambitious plans to rapidly build up its solar power capacity, arguing that many of the plants being built are more designed to please central planners in Beijing than of real practical use. Now it seems at least one researcher at a major government institute agrees with that view, prompting him to slash his forecasts for new construction this year. That certainly doesn’t look good for big domestic names like Yingli (NYSE: YGE) and Trina (NYSE: TSL), which are hoping to keep their recent positive momentum going with big new demand from plant developers in their home market.

The latest report contains interesting details on some of the major problems dogging China’s new solar building campaign, which has the country aiming to install 35 gigawatts of capacity by the end of 2015. The biggest problem is one that I previously discussed, namely that many of these projects would be built in remote locations that would have difficulty delivering power to China’s central grid.

But a second problem also emerged this fall as some developers started using the build-up program to make some quick money through a quirk in recent modifications to the power pricing system. None of this is too unexpected, since it was probably unrealistic that China could successfully execute such an ambitious build-up so quickly, especially when it had very little experience at such construction just 2 years ago.

But the growing reality could crimp ambitious sales targets for solar panel sellers that were depending on strong domestic demand to keep fueling their recent rebound. It could also turn into headaches for names like Trina and Yingli, which have recently set up funds for solar plant construction. Those funds could take a hit if many of their new projects get built but then fail to find long-term buyers due to poor planning.

China is now expected to build 10 gigawatts of new solar power capacity this year, well short of an earlier target for 14 gigawatts and a sharp slowdown from last year’s 13 gigawatts, according to the new report from Wang Sicheng, a researcher at the Energy Research Institute of the National Development and Reform Commission (NDRC). (English article) Only 3.8 gigawatts of new capacity were built through September this year, though the report notes that the fourth quarter is typically the strongest for new construction.

It seems that one of the biggest issues has come from lower-than-expected usage of power by local customers from these newly built plants using rooftop-mounted solar panels. Earlier plans that envisioned that such local consumers would use 80 percent of power generated at such plants, with the remaining 20 percent set for sale to more distant locations. But plant operators have only been able to sell about 60 percent of their power locally, because many such plants are located in remote locations with sparse population.

Adding to the problems was a wave of speculative new project announcements that look purely related to a recent preferential tariff announcement designed to promote growth in inland areas. The NDRC quickly moved to plug a loophole that was fueling the speculation, but the result is that many of the new plants announced during that window may never get built since many were conceived simply to earn some quick profits.

These kinds of shenanigans and logistical problems certainly aren’t unique to China. But in this case they’re quite acute due to Beijing’s desire to ramp up solar power output so quickly despite its lack of experience. I do expect we’ll see the rapid build-up continue, but at the end of the day we could see a significant number of planned projects get scrapped, and an equally significant number that do get built ultimately hit financial difficulties due to poor planning.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 24, 2014

Walmart Loves SolarCity

SolarCity (NASDAQ: SCTY) is up 5% on an unsurprising new solar deal with Walmart (NYSE: WMT)

By Jeff Siegel

slarwmtSolarCity (NASDAQ: SCTY) investors were a bit giddy Friday.

The company enjoyed a nice bump after it was announced that Walmart (NYSE: WMT) had hired the company to install new solar projects at Walmart facilities in up to 36 different states over the next four years.

SCTY has actually been working with Walmart since 2010, so it's not particularly surprising that Walmart's next round of solar installations is being carried out through SolarCity.

Now while I'm certainly pleased to see SCTY continue its healthy relationship with Walmart, it's not the actual solar installations I'm so excited about this morning. You see, this deal includes energy storage projects as well.

As I've mentioned in the past, it's the company's storage initiative that I believe will help keep it ahead of the curve. And for the past few years, SCTY has been testing storage projects at 13 Walmart locations. This new deal adds another ten storage projects to the list.

Of course, despite today's news and the nice push, SCTY is still trading below $60. Well below where I expected to see it this time of year. So it's still a pretty good bargain if you're looking for a long-term play in the solar space.

I currently have a one-year price target of $70.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

November 13, 2014

GCL-Poly Mops Up Chaori Solar Mess

Doug Young

Bottom line: Solar consolidators like GCL-Poly and Shunfeng will suffer short-term pressure due to difficult acquisitions, but could be longer-term beneficiaries as they earn government goodwill for their actions.

The latest deal involving an insolvent solar panel maker is seeing a group led by GCL-Poly Energy (HKEx: 3800) take control of bankrupt Chaori Solar, in a takeover that looks slightly ominous but also potentially interesting for investors. The ominous element comes from the fact that these bankruptcy proceedings are occurring Chinese courts, where local politics are often more important than forging deals that make commercial sense.

But the interesting element comes from the fact that many of these insolvent companies enjoy strong backing from their local governments. That means that once all the finances are cleaned up for these insolvent firms, they could actually become good longer-term assets for their new owners.

The short-term headaches for solar buyers are evident in the recent mixed fortunes for Shunfeng Photovoltaic (HKEx: 1165), which looked like a rising solar superstar when it purchased bankrupt former solar superstar Suntech. But Shenfeng’s fortunes have suffered a sharp setback in the last month, as the Suntech effect wears off and people realize the turnaround story could be long and difficult.

We’ll come back to the Shunfeng-Suntech story shortly, but first let’s look at the latest news that has the parent of GCL-Poly leading a group that will buy 66 percent of Chaori for 1.46 billion yuan ($240 million). (English article) The deal was part of a broader restructuring for Chaori, which made headlines this year when it became the first company in modern China to default on a corporate bond. (previous post)

The restructuring plan was approved by the Shanghai Municipal First Intermediate People’s Court late last month, and the buyer group has pledged to return Chaori to profitability this year and re-list it in 2015. That kind of pledge means that the buyer group has probably received key government support for the restructuring and will find a way to meet its targets, even if that means using aggressive accounting to return to profitability and calling on state-owned investors to make the new IPO a success.

It’s important to note that this GCL-Poly deal has several key differences from the earlier Shunfeng-Suntech one. In this case the buyer is actually GCL-Poly’s privately held parent, Golden Concord Holdings, meaning the risk associated with taking over Chaori isn’t being shouldered by the publicly listed company. In addition, the GCL-Poly parent is part of a larger group that includes 8 other members, and thus Golden Concord will only own 30 percent of Chaori after the deal, equating to an investment of about $72 million.

So, how have GCL-Poly’s shares reacted to the news? The stock has dropped steadily over the last 6 weeks, and is now down 17 percent from a peak at the end of September. That performance mirrors Shunfeng, whose shares have lost nearly half of their value over the last 2 months after media reports emerged saying a major solar plant it was helping to build had run into trouble. (previous post)

I suspect the magnitude of the Shunfeng sell-off was at least partly due to profit taking after a big run-up in the company’s shares on high hopes after the Suntech deal. And in fact, Shunfeng’s shares are now almost exactly at the same levels where they were at the start of this year before they embarked on a major rally.

So, the next bigger question becomes: What’s ahead for consolidators like GCL and Shunfeng, whose actions are motivated as much by local politics as by commercial factors? As I’ve said above, the political element of the equation means the stocks could come under short-term pressure as they deal with financial issues related to their purchases. But the goodwill they receive from local governments could be quite valuable over the longer term, meaning the stocks could see some strong upside potential once the current messes get sorted out.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 27, 2014

Will Investors Flock to SunEdison’s Emerging-Market YieldCo?

by Tom Konrad CFA

SunEdison is proposing something entirely new: a YieldCo with a focus on projects in Africa and Asia, but it's a long way between an S-1 filing with the SEC and and IPO.

The June launch of SunEdison's (SUNE) first YieldCo, TerraForm Power (NASD:TERP), transformed the parent company's prospects. Now it wants to repeat the performance with a first-of-its kind YieldCo that will focus on investment in Africa and Asia.

A YieldCo is a publicly traded company that is formed to own operating clean energy assets that produce a steady cash flow, most of which is returned to shareholders in the form of dividends. Like many other renewable energy developers, SunEdison formed TerraForm Power in order to appeal to a pool of income-oriented investors who would never consider owning the company's common stock. Such investors look for reliable income streams generated by existing businesses, and often won't even consider buying stock in a company that does not pay a regular dividend. 

The low interest rate climate over the past few years has made income-oriented investors, many of who rely on dividend payments to support current expenditures, increasingly desperate for yield and much more willing to enter new asset classes in order to find it. YieldCos and the renewable energy developers that formed them have been direct beneficiaries. 

Arguably, no energy developer has benefited more from forming a YieldCo than SunEdison. Unlike large utilities that have formed YieldCos, includng NRG Energy, NextEra, Abengoa SA and TransAlta Corp., SunEdison does not have a history of profits and dividendimg

These utilities' YieldCos, NRG Yield (NYSE:NYLD), NextEra Energy Partners (NYSE:NEP), Abengoa Yield (NASD:ABY), and TransAlta Renewables (TSX:RNW), appeal to investors who might have been interested in the parent companies' stock, but like the higher yield and relatively greener assets offered by the YieldCo subsidiaries.

YeildCo Sponsor earnings.png

In contrast, SunEdison has never paid a dividend, and has not been profitable under generally accepted accounting principals (GAAP) since before 2011. On an adjusted basis (in which items deemed to be one-off by management are eliminated), the small profits in 2011 and 2012 were more than wiped out in 2013, and analysts expect losses to continue at least through 2015 (see the chart above).

While the lack of earnings and dividends makes SunEdison's stock unattractive to income investors, they have rushed to buy the stock of TerraForm Power. According to one estimate, investors are effectively paying $5 per watt for TerraForm's projects when they buy the stock. When such projects are sold in private transactions, they typically fetch only $3 per watt, so TerraForm investors are willing to pay a 67 percent premium over the going market price.

SunEdison has a huge appetite for investor capital.  According to its cash flow statements, the company has raised an average of $1.2 billion in debt and equity in each of the last three years. So it's not surprising that after seeing the appetite of income investors for the mostly developed-market assets owned by TerraForm Power, SunEdison is hoping income investors will also be interested in projects in Asia and Africa.

To date, YieldCos hold a majority of their assets in the developed world, especially the U.S., Canada, and Europe. The reasons for this are simple: income investors consider the safety of a company's income stream to be extremely important, and developed electricity markets offer long-term contracted power-purchase agreements.

In contrast, electricity markets and grids in Asia and Africa range from the state-controlled to the unreliable and even the nonexistent. The lack of reliable grid infrastructure in some Asian and African countries means that renewable power is often competing with electricity from diesel generators on price. The following slide is from a 2012 presentation by Christian Breyer of the Reiner Lemoine Institut. The green and yellow areas on the map denote places where the economics of displacing some diesel power generation with solar during the daytime is highly economical, even without subsidies. These areas have expanded as solar prices have fallen over the last two years.

PV displacing diesel.png


Clearly, sub-Saharan Africa and Asia's interior are both excellent prospects for solar from a purely economic standpoint, without any subsidies whatsoever. Indeed, the slide above shows that diesel subsidies serve to limit the number of countries in which replacing diesel with solar generation makes economic sense.

One problem is that these parts of Asia and Africa are better known for outbreaks of disease and terrorism than for the stable political and economic conditions that usually give rise to businesses producing reliable long-term dividends.

Perhaps SunEdison intends to focus on more stable parts of Asia and Africa, but that will make its projects more dependent on local political support to produce the reliable returns that income investors expect. 

Either way, SunEdison is proposing something entirely new. From the perspective of using the power of markets to fight climate change, it's entirely welcome. What remains unclear is if income investors are ready for the idea. If the new YieldCo can pay a dividend high enough to attract such investors despite the risks, it will be a big win for the planet -- and for SunEdison's current shareholders.


Disclosure: Long RNW, Short NYLD.

This article was first published on GreenTech Media, and is republished with permission.

October 22, 2014

Five Solar Stocks For 2015

By Jeff Siegel

Times sure have changed!

In 2006, I attended my first Solar Power International (SPI) conference in D.C.

It was a no-frills event but loaded with valuable information I used to help Energy and Capital readers get a jump on the solar bull market that ran from 2006 to 2008.

Truth be told, we cleaned up. But nothing lasts forever. And when the market nosedived in 2008, solar stocks were not exempt from the ravenous bears that mauled everything in their path.

Of course, as the broader market began to inch back up in 2010, solar stocks didn’t miss a beat... at least the handful that were still viable.

Since 2010, solar stocks have enjoyed a fantastic ride. First Solar (NASDAQ: FSLR), SunPower (NASDAQ: SPWR), and JA Solar (NASDAQ: JASO), just to name a few, showed non-believers that the solar industry was no longer a niche market catering only to tree huggers and wealthy eccentrics. And when I arrived at this year’s solar conference, I expected to hear more cheering and chest pounding from the gatekeepers of this industry.

What I heard instead was something every energy investor should know about — because there’s a very real possibility that the solar industry could soon be heading face-first into another meltdown.

A Solar Nightmare

I should preface this section by telling you that despite some ominous news, the solar industry has still put up some pretty impressive numbers. Consider the following:

  • Annual solar installations in 2014 will be 70 times higher than they were in 2006.
  • By the end of 2014, there will be nearly 30 times more solar capacity online than in 2006.
  • Solar has gone from being an $800 million industry in 2006 to a $15 billion industry today.
  • The price to install a solar rooftop system has been cut in half, while utility systems have dropped by 70%.
  • It took the U.S. solar industry 40 years to install the first 20 gigawatts (GW) of solar. It’ll install the next 20 GW in the next two years.
  • During every week of 2014, the solar industry installed more capacity than it did in the entire year of 2006.

Now, the reason I focused on 2006 in this list is because this is when the solar Investment Tax Credit (ITC) kicked in.

The solar ITC is a 30% tax credit for solar systems on residential and commercial properties. And it is the ITC that, without a doubt, has been one of the most important federal policy mechanisms supporting the deployment of solar energy in the U.S.

It’s also scheduled to expire in 2016.

Now, if you’re a regular reader of these pages, you know I’m not a fan of energy subsidies. There is no greater threat to a free market than government intervention. And in the case of energy, it’s these subsidies that push lawmakers to pick and choose winners in the energy industry. This goes for everything from solar and wind to fossil fuels and nuclear.

That being said, I completely understand why Rhone Resch, president and CEO of the Solar Energy Industries Association, said the following at the opening session of SPI:

It’s absolutely imperative... job #1... that we extend the 30 percent solar Investment Tax Credit past 2016.

 2015: The Year of Solar

The truth is, no one actually knows whether or not the ITC will be extended beyond 2016.

If I had to put money on it, I’d say it’ll get extended for at least another four years, taking us into 2020. But when it comes to policy, nothing’s certain until all the votes are counted.

So as a result, many in the solar industry are now operating at a capacity that suggests 2015 will be the last year for that 30% tax credit. In other words, they’re kicking it up a notch in 2015 in an effort to take full advantage of the ITC before it expires.

I suppose it’s a bit of an uncomfortable indicator for solar supporters, but for energy investors, it is a call to action: Ride the wave of aggressive integration in 2015.

There’s no doubt that the big dogs in the solar sector are treating 2015 as if it’s the last year for the ITC. Although that may not be the case, it’s still a precautionary measure that’rsquo;ll help these companies hedge against uncertainty as 2016 approaches.

No solar company will take it slow in 2015, but there are five solar companies (or companies with skin in the solar game) in particular that I believe will intensify marketing, acquisition, and development efforts so much that they’re going to blow the doors off and deliver record revenues before 2016 arrives.

Not surprisingly, these are the companies that are currently well capitalized and already have competitive and first-mover advantages. And for the sake of full disclosure, the success of these companies does put money in my pocket:

  1. SunPower (NASDAQ: SPWR)
  2. First Solar (NASDAQ: FSLR)
  3. SolarCity (NASDAQ: SCTY)
  4. SunEdison (NYSE: SUNE)
  5. Hannon Armstrong Sustainable Infrastructure (NASDAQ: HASI)

Of course, if the solar ITC is extended, then 2015 will just be icing on the cake. And while I certainly won’t vocally support any subsidy for energy, as long as fossil fuels and nuclear continue benefitting from direct and indirect subsidies — just as they have been for decades — then it should not come as a surprise when the solar industry gets the go-ahead to wet its beak from the government trough, too.

So invest accordingly.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.  follow basic@JeffSiegel on Twitter

October 17, 2014

Solar Bonds For Small Investors

By Beate Sonerud

SolarCity (NASD:SCTY) is issuing US$200m of asset-linked retail bonds, with maturities ranging from 1-7 years and interest rates from 2-4%. Wells Fargo is the banking partner. While the bonds are registered,SolarCity expects the bonds to be buy and hold, and not traded in the secondary markets.

The bond is issued for small-scale investors, with investment starting at US$1000, giving this bond issuance a crowdfunding aspect. Choosing such a different structure allows SolarCity to diversify their investor base – the company stresses that small-scale investors are a complement, not substitute, for large-scale institutional investors. While this is the first public offering of solar bonds in the US, in the UK, such small-scale retail and mini-bonds in the solar and wind sectors have been popular for some time.

SolarCity is the largest installer of residential solar in the US, and this is not the first time they are pioneering in the green bond space. In November last year, SolarCity was the first US company to issue asset-backed securities for solar. Since then, it has issued another two rounds of ABS backed by power-purchase agreements from their customers. All of these issuances have been private placement offerings.

SolarCity’s securitisation offerings have shown a steady decline in coupon, providing the company with cheaper funding. The company’s first issuance was rated BBB+ with coupon at 4.80% - right off the bat achieving investment grade rating with no credit enhancement. In April this year, the second issuance, US$70.2m, was also rated BBB+, but achieved a better coupon at 4.60%. In July 2014, the third issuance, for US$201.5m, achieved a lower coupon still. The upper tranche of this issuance achieved rating of BBB+, and a coupon of 4.026%, with the lower BB tranche getting 5.45%, providing an overall coupon of 4.32%.

In September, SolarCity also issued US$500m of 5-year convertible bonds, with a 1.625% coupon. We like the wide range of different structures of green bonds they are using.

In terms of the green credentials, we consider SolarCity a pure-play company aligned with a climate economy, although it’s worth noting that their bonds are not labelled green bonds. We do think there is room for labelling also for solar companies like SolarCity, mostly because it would make it easier for investors to identify the company’s bond issuances as green. Although easy investor identification is less relevant for this specific retail bond, it is something to consider for future issuances. It is also a much simpler process to label solar than non-pure play companies - check out our solar standards for details of what we’d expect from a labelled solar bond.

We look forward to see what SolarCity will do next as a green bonds pioneer. The company seems to just be getting started, as SolarCity states that: “(…) this is the first of fairly continuous offerings”. Great stuff!

———  Beate Sonerud is a policy analyst at the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

October 14, 2014

China Plans Aggressive Renewables Deployment But Falling Incentives

Doug Young

Lofty targets contained in a new report show that China intends to push ahead with ambitious plans to build up its renewable energy sector. But perhaps the most interesting thing about this new report is word that Beijing finally intends to sharply reduce the inflated state-set fees now paid for solar and wind-produced power, in one of the sharpest indicators that it expects the industry to stop depending on government support and become commercially viable on its own. Such state support through a wide array of measures, which also include export credits and low-interest loans, have become a huge sticking point that has led to a series of trade wars between China and the west.

All that said, let’s jump right in and look at the latest aggressive targets now being finalized by Beijing under its upcoming 5 year plan for the sector between 2016 and 2020. China makes such 5 year plans for all major sectors, a relic of a Soviet-era practice for centrally planned economies. Under revised figures for its current 5-year plan, Beijing announced late last year it was aiming for national solar power-generating capacity of 35 gigawatts by the end of 2015, a very ambitious target for a country that had virtually no such capacity just 3 years earlier. (previous post)

Anyone who thought that figure looked ambitious will probably think the newest plan looks even more aggressive, aiming to build up solar generating capacity to 100 gigawatts by 2020. (English article) The country has even more ambitious plans for the wind power industry, with a target of 200 gigawatts of capacity by 2020.

At the same time, officials who are leaking details of the upcoming plan are also making it clear that state support will be phased out over the next 6 years for makers of solar panels and wind generation equipment. One of the biggest forms of support comes via artificially high state-set prices for renewable energy, which force big power companies to buy such clean energy at rates that are well above the cost of power from more conventional fossil fuels. The use of such high, state-set fees is also common in the west, used as a policy tool to promote the clean energy sector’s development.

Under the new 5 year plan, China’s tariffs for solar generated power will be reduced by a hefty 50 percent by 2020, falling from the current 0.9 yuan per kilowatt-hour to 0.6 yuan, according to an unnamed government energy official. Wind power tariffs will also be cut sharply, falling to 0.4 yuan per kilowatt-hour from the current 0.6 yuan. Equally interesting is a more general quote from the official saying the solar panel and wind equipment makers should improve the efficiency of their products “instead of depending on government subsidies.”

This is one of the first times I’ve seen a government official openly acknowledge what western governments have been saying all along, namely that Chinese solar panel makers like Trina (NYSE: TSL), Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ) get a big advantage over their western rivals due to extremely strong state support through a wide range of favorable policies from Beijing. Such support led Washington to slap anti-dumping tariffs on Chinese solar panels last year, and the European Union has also considered taking similar action.

So what does this flood of new information mean for the Chinese panel industry? The ambitious construction target means that Beijing will continue to push for construction of new solar power plants, even if such plants aren’t economically viable. That problem could become worse as solar power prices are lowered, leading to a bumper crop of unusable solar and wind power plants by 2020. That means that the big Chinese solar panel makers could see strong business over the next 5 years from a domestic building boom, but could then see a sharp slowdown if many new projects prove to be economically unviable.

Bottom line: China’s aggressive new energy power goals and determination to reduce state support could result in a building boom of economically unviable solar and wind power generation plants.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 11, 2014

Politics and Debt Rain On Chinese Solar

Doug Young

The solar power sector has become a highly volatile place these days, with company stocks rallying one week on upbeat news, only to tumble days later on more downbeat signals. Much of the volatility owes to 2 factors that have created big uncertainty: protectionism and doubts about funding for many new power plants now being announced. Both of those factors are at play in a new string of downbeat news on industry lead Canadian Solar (Nasdaq: CSIQ), as well as struggling Chaori Solar (Shenzhen: 002506) and the now defunct former superstar Suntech.

Of these 3 companies, only Canadian Solar is currently a serious player, though it is seeing early trouble signs in the important Japan market. Suntech has been mostly liquidated after being forced into bankruptcy last year. But ghosts from its past continue to haunt the company, with word that Suntech is being sued by a former customer. Chaori is also undergoing its own painful reorganization after defaulting on a domestic bond earlier this year, and the latest reports say that debt holders will end up losing most of their money.

Let’s begin with Canadian Solar, which has just announced that some of its projects in Japan are now running into problems after the government stopped approving connection of new solar power plants to the national grid. (company announcement) Japan has become a major bright spot for many Chinese solar panel makers over the last year, as that country tries to wean itself from reliance on nuclear power following a major disaster in 2011.

Canadian Solar now has 500 megawatts in late-stage projects in Japan, and aims to increase that by up to 20 percent by the end of this year. The Japanese government’s suspension of new approvals has affected Canadian Solar’s projects with about 135 megawatts of combined capacity, though the company said it expects to win eventual approval of the projects and sees no near-term impact on its sales.

I’m no expert on Japanese politics, but I do expect that these affected projects should eventually win approval since the country is under a lot of pressure to develop safer power sources. Still, I’ve also heard that protectionist forces may be growing, as Tokyo tries to promote domestic panel manufacturers. If that’s the case, politics could place a damper on future sales to Japan by Canadian Solar and other Chinese solar panel makers.

Next let’s look at the other 2 cases, starting with word that Suntech is being sued by a former customer named ZKenergy for failing to deliver 206 million yuan ($33.5 million) worth of solar panels. (company announcement) In this case the amount isn’t huge, but it could cause problems for Hong Kong-listed Shunfeng Photovoltaic (HKEx: 1165), which acquired Suntech’s manufacturing assets during the bankruptcy liquidation.

Shunfeng is already reeling from bad news 2 weeks ago, when media reported a 500 million yuan, 130 megawatt solar farm being built with the company’s panels had run into trouble. (previous post) Shuntech shares have fallen sharply since that report, and the stock could see more turmoil if other former Suntech customers start stepping forward with similar lawsuits.

Lastly there’s Chaori, which made headlines early this year when it became the first company in modern history to default on a Chinese domestic bond offering. Other struggling solar panel makers like Suntech had previously defaulted on bonds, but all of those were dollar-denominated and sold to more sophisticated international investors.

According to the latest report, Chaori is working on an agreement with its bond holders that could see them ultimately recoup as little as 20 percent of their original investment. (English article) Such payouts aren’t that unusual for this kind of default, and Suntech bondholders probably received similar rates. But the figures do underscore the ongoing risk for solar investors, as the industry continues to clean up after its prolonged downturn that saw many mid-sized and smaller firms go out of business.

Bottom line: A new report from Canadian Solar indicates politics could dampen Chinese panel maker sales in Japan, while separate reports indicate heavy debt continues to plague the sector.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 10, 2014

Two New Reasons to Buy SolarCity

By Jeff Siegel


SolarCity truck Well, SolarCity's (NASDAQ:SCTY) latest news probably won't be enough to silence the bears and scare off shorty, but it has stopped the bleeding a bit.

After falling more than 25% over the past month, SCTY has stabilized after announcing a new loan program that will allow customers to buy a solar energy system outright instead of leasing a system.

Thanks to the company's massive scale and low cost of capital, SCTY will now lend directly to customers. This is a huge advantage over having customers seek out loans provided by third-party banks. And as far as I know, no other installer offers such an option.

Users of the company's new loan program, called MyPower, will also still benefit from SolarCity's 30-year warranties, production guarantees and monitoring services.

Bank of America analyst Krish Sankar chimed in on the news today, reiterating his buy rating and $95 price target on the stock. Of course Sankar also noted that the loan product was expected.

In any event, SCTY is still going to be a roller coaster ride throughout the rest of the year. Many of those who bought at the top are likely going to sell in an effort to offset capital gains liabilities for 2014. But folks like me, who bought in on the dip and see the long-term potential of SCTY will hold tight, and maybe even pick up more while the stock is still relatively cheap.

Also worth noting today is the recently renewed partnership between SolarCity and Honda (NYSE:HMC) to finance $50 million in new solar projects for Honda and Acura customers and dealerships in the U.S.

This is actually a pretty big deal, but the news is getting overshadowed by SCTY's new loan announcement.

Nevertheless, I remain bullish on SCTY and see any major dips below $70 as a buying opportunity.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

October 02, 2014

Trina Solar's Second Convertible Bond

By Beate Sonerud and Sean Kidney

China’s Trina Solar (TSL)is issuing US$100m of convertible bonds with 5-year tenor and 4% annual coupon, with semi-annual payments. An extra US$15m could be raised, as Trina has given the underwriters a 1-month window to buy additional bonds. Guess they are waiting to gauge demand. Underwriters are Deutsche Bank, Barclays, and Credit Suisse, with Roth Capital Partners as co-manager.

The bonds can be converted to shares (American Depositary Shares, meaning they are listed in the US) at an initial price of US$14.69 per share. Currently, Trina’s shares are trading at US$11.40, after falling sharply due to concerns that Japan, the world’s second largest solar market, will reduce subsidies to solar – which would mean reduced business demand for Chinese solar companies, including Trina. So shares will have to rise substantially before it’s attractive for bondholders to convert the bond.

Trina Solar is a leading manufacturer and service provider in PV solar – therefore we consider it a pure-play company aligned with a climate economy. However, this bond, as their previous offerings, are not labelled green bonds and consequently there is no second party review on the green credentials of the use of proceeds (Trina reports that the proceeds will be used for general corporate purposes, which may include development of solar power projects, expansion of manufacturing capacity and working capital). We do think there is room for labelling also for solar companies like Trina, as it would make it easier for investors to identify the investments. It is also a much simpler process to label solar than non-pure play companies - check out our solar standards for details of what we’d expect from a labelled solar bond.

This is Trina’s second convertible bond offering so far in 2014, following a previous issuance of US$150mn in June. Convertible bond issuances have been a popular financing choice for solar companies this year. We are including them in our climate bond universe because, although they are more complicated than vanilla bonds, they are still bonds until converted.

———  Beate Sonerud is Policy Researcher and Sean Kidney is Chair of the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

September 28, 2014

SolarCity or Vivint Solar?

By Jeff Siegel

In as soon as five years, you could be living right next door to a power plant.

Actually, even closer. The power plant could be operating from right inside your home.

I'm serious. Take a look...


This is a backup battery system installed in a home that's powered by domestically generated electrons, courtesy of the biggest nuclear reactor known to humans: the sun.

And according to super genius Elon Musk, within five to 10 years, every set of solar panels installed by SolarCity (NASDAQ: SCTY) will come with a battery pack.

Nighttime Solar

Musk's cousin and SolarCity CEO Lyndon Rive recently spoke at a private meeting in New York, where he announced that due to the economies of scale that will soon come from Tesla's (NASDAQ: TSLA) new battery manufacturing complex, SolarCity's solar power systems, with the new battery system installed, will be able to produce energy cheaper than the local utility company.

This means powering your home with solar day and night, and at a price lower than what your utility charges.

That's a pretty bold claim, but it's one I wouldn't sleep on. Musk and his ilk are not the type to fall short, nor are they the type of folks you should bet against.

The truth is, beyond the battery system, SolarCity is taking the appropriate steps to drastically slash the cost of solar altogether.

A few months ago, I told you about the company's acquisition of solar manufacturer Silevo. This deal will allow the company to lock in a steady supply of low-cost, high-efficiency panels that'll enable it to stay competitive against a rise in new U.S. start-ups as well as low-cost producers from China.

Then, just last week, the company unveiled a new solar mounting product called ZS Peak. It basically allows installers to install systems on flat roofs in half the time it takes today. And according to company reps, this new product can increase generation capacity on flat-roof buildings by 20% to 50% per building.

This technology now makes it possible for far more businesses, schools, and other organizations to install solar power on their buildings and immediately pay less for solar electricity than they pay for utility power. It will also help the company expand its reach into the commercial solar market.

The Best Part

Now here's the best part...

SolarCity has been getting knocked down a few pegs over the past week or so. Some believe the new Vivint Solar IPO, which is a competitor to SCTY, is luring SCTY investors away with a cheaper share price.

But while I'm also looking forward to picking up a few shares of Vivint, this isn't a reliable comparison. If anything, I would caution investors against picking one over the other and instead recommend maintaining positions in both — especially now that SolarCity fell below the $60 mark. That's a bargain compared to Deutsche Bank's $90 price target and Credit Suisse' $97 price target.

Point is, there's plenty of room for more than one company to grow and profit. And there's no reason you can't ride both.

Full Disclosure: I currently own shares of SCTY.

To a new way of life and a new generation of wealth...

Jeff Siegel Signature

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

September 24, 2014

Signs Of Trouble For Chinese Solar Stocks

Doug Young

Regular readers will know I’m a bit bearish lately on the solar panel manufacturing sector, largely because I believe its recent rebound is being fueled as much by hype as real business after a prolonged downturn. A new report on some of the sector’s so called “growth engines”, coupled with a separate report on a dispute at one of the top surviving players, are adding fuel to my skepticism that the sector’s recent sharp rebound isn’t really happening. At the very least, the recent reports indicate the rebound isn’t nearly as strong as many are claiming, and solar panel makers and their shares could soon be set for far slower growth than many were hoping for.

A number of factors are behind this looming slowdown, most notably financial bottlenecks and related issues in China and other emerging markets that the Chinese panel makers hope will fuel their rebound. They’re being forced to rely on such markets after the US and EU imposed tariffs and took other punitive measures against the Chinese manufacturers for receiving unfair state support from Beijing.

Let’s start off our solar round-up with the worrisome report on Shunfeng Photovoltaic (HKEx: 1165), which emerged as a player to watch last year when it won the bidding to buy most of the assets of bankrupt former solar pioneer Suntech. The new media report is saying that a 500 million yuan ($81 million), 130 megawatt solar farm being built with panels from Shunfeng in China’s interior Ningxia province has run into trouble. (Chinese article)

The report is quite detailed about the issue, but apparently the dispute is purely financial and involves Shunfeng’s failure to pay funds that it promised to help to build the plant. I wrote about this kind of self-financing issue just last week, which has seen most of China’s major solar panel makers partner with other companies to build new power plants, and then provide some or all of the money for such construction. The solar panel makers win new business by selling their panels to such projects, but then end up with big risk if they can’t sell the plants to long-term owners on completion. (previous post)

Shareholders got a bit spooked by the report, with Shunfeng’s shares droping 8 percent after the news came out. The stock was on a steady upward trajectory after the Suntech deal was announced last year, but have now lost about a third of their value since peaking in late May. The decline follows a roughly similar trend for many other solar panel stocks, which have seen bumpy trading this year after a surge in 2013 over optimism for their rebound.

Meantime, another new report on the wider industry trends also hints that the current rebound may be overly optimistic. That report begins with upbeat numbers showing that shipments from China’s major solar panel makers jumped 26 percent in the second quarter of this year, reaching 5.2 gigwatts of capacity, according to data tracking firm NPD Solarbuzz. (English article) But then the same report goes on to cite a range of factors for the rise, many of which don’t look too encouraging.

One of those is the rise in demand from China, which I’ve already explained looks troublesome due to the self-financed nature of many new projects. The report also cites a surge in shipments to the US, as many panel makers raced to beat a new round of punitive tariffs set to take effect. Lastly the report also credits the jump to growing shipments to emerging markets, many of which include financing and protectionist obstacles similar to the ones I’ve already discussed. On the whole, I can’t find any causes for optimism in either of these 2 new reports, and suspect we’ll see the panel makers’ sales and share prices start to come under growing pressure over the next 1-2 years.

Bottom line: A new financing squabble involving Shunfeng and a report on factors fueling a solar panel rebound point to slowing growth for the sector, which will put pressure on both sales and stock prices.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

September 20, 2014

Chinese Solar Development Funds: Recipe For Disaster?

Doug Young

Canadian Solar Logo

Canadian Solar (Nasdaq: CSIQ) has joined a growing field of Chinese solar panel makers entering the risky business of speculative development in China, with its launch of a new locally-based fund for solar power construction. The move follows the establishment of self-financed vehicles for similar speculative construction by rivals Trina (NYSE: TSL), Yingli (NYSE: YGE) and wind power equipment maker Ming Yang (NYSE: MY), as they try to create more demand for their products.
Under such a strategy, solar panel makers typically provide some or all of the money for new plant construction, and then sell their panels to the project. They later recoup their money by selling off the plants upon completion to long-term institutional buyers.

Such a model often works well in the west, where power station developers are very familiar with their industries and know they can easily sell completed projects to a sophisticated long-term institutional buyers that understand the business. But such speculative development could be much riskier in China, where most solar panel makers have limited experience with plant construction, and few experienced institutional buyers can step in to own and operate such facilities over the long term.

That mix could become a recipe for disaster over the longer term, potentially leaving solar panel makers with huge debt if they can’t find buyers for projects that may have design flaws and other logistical problems. Accordingly, Beijing should take steps to cool such speculative construction, or at least offer guarantees and guidelines that could lower the risk.

Canadian Solar made headlines last week when it announced it would launch a new solar power investment fund with Sichuan Development Investment Management. (company announcement) The fund would have 5 billion yuan ($810 million) in investment, making it one of the largest to date to focus on solar power development in China under Beijing’s ambitious plans to clean up the nation’s air.

Canadian Solar and Sichuan Development would each contribute equal, unspecified amounts to the new fund, with the remainder coming from other investors. That means Canadian Solar could probably expect to provide at least $200 million and possibly more, equaling more than a quarter of its current cash reserves.

Canadian Solar’s plan follows a similar move by rival Yingli, which in April announced its own new fund in partnership with local partner Shanghai Sailing Capital. (previous post) That fund had an initial target of 1 billion yuan, a more modest figure than the Canadian Solar plan but still sizable for a company like Yingli that had just $150 million in cash reserves at the end of June.

Trina also embarked on a similar plan earlier this month when it announced a partnership with 3 local partners to build the largest solar power plant in southwestern Yunnan province, with a massive capacity of 300 megawatts. (previous post) Under that deal, Trina is providing 90 percent of the project’s financing, again stretching its own limited cash resources. Wind power equipment maker Ming Yang also joined the speculative development team in June, when it announced its own plans to build and co-finance a massive 300 megawatt wind farm project in eastern Jiangsu province. (previous post)

This kind of short-term self-financing for new projects works well under healthy economic conditions in mature markets. It has served Canadian Solar well in Canada, where the company frequently finances and builds new plants using its own solar panels, and then sells the projects after completion to local institutional buyers who understand the business and the returns they will get.

But such speculative development proved ruinous 2 years ago for former industry pioneer Suntech, which launched its own such fund for speculative development in Europe. Conflicts involving that fund set off a downward spiral that ultimately led to Suntech’s bankruptcy last year.

Beijing is eager to foster more clean power generation under its plans for building 35 gigawatts of capacity by the end of next year, in its bid to clean up the country’s air and support the development of companies like Trina, Yingli and Canadian Solar. Thus it’s likely to support the establishment of these new funds, and perhaps even provide them with some money.

But central policymakers also need to take steps to ensure these speculative new projects are economically viable and can find long-term buyers once they are complete. Failure to do so could spark a new crisis for the sector if these projects turn out to be lemons and can’t find long-term buyers, creating new financial woes for manufacturers just as they start to recover from the recent downturn.

Bottom line: Beijing should step in to offer guidelines or guarantees to ensure a new generation of solar farms being built by panel makers are economically viable and can find long term buyers upon completion.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

September 19, 2014

One Solar Installation, Five Stocks

Tom Konrad CFA
2014-09-08 08.56.59.jpg

Invest In What You Know

"Invest in what you know" is an old stock market adage.  The idea is that, if you have some personal knowledge of the real economy, you can use that to make better investments. 

How useful this adage is depends on how you apply it.  If you know more about a stock market sector than other investors because of "what you know," it's possible to make better investments because you may be better at spotting future trends.  If, on the other hand, you feel you know a sector because you buy its products, you may get caught up in a herd mentality and end up buying a company (along with a bunch of its other customers) just when the popularity of its products peaks along with its stock price.

I'm a recent customer of the solar industry.  Last week, my solar installer flipped the switch on my new solar PV system, and my meter started spinning backwards.  Like many new solar owners, I'm a bit obsessed the system.  Here, I'm channeling that obsession into an article about the companies that supplied parts of the system, and what we can learn about their prospects.

The System

Solar systems are far from uniform, and vary significantly depending on energy usage, location, available space, and local incentives.  My system is a little larger than average, at 6.6kW. I have a fairly high load because last year I installed air source heat pumps to supplement my oil-fired boiler.  My 2 person, 2000 square foot house in New York's Hudson River Valley uses an average of 13 kWh a day outside the heating season, but and another 10-20 kWh a day during the four month heating season, for an average annual usage of 21 kWh/day.

According to my calculations using PVWatts, my 6.6kW system should produce just about that much in an average year, but my solar installer used more conservative numbers, and expects it to produce about 20kWh a day.  Below is a monthly production and usage chart based on my calculations.

Solar Production and Usage.png

Because my usage is highest in the winter, and my production is highest in the summer, I will be relying on net metering rules to "bank" kWh produced from April to October to be used for heating from November to March.  My utility requires that this kWh bank be trued up once a year, which I will set in March or April.  I've shown the true-up here in March, where I'm "billed for" negative kWh (i.e. paid by the utility.) 

This "banking" is actually to the utility's advantage because, not only do they effectively get an interest-free loan of electricity for an average of 6 months, but New York electricity prices tend to be a little higher in the summer than in winter.  Since 2005, only 2014 had a higher peak winter price than the previous summer peak.  Last year's exceptionally high winter prices were caused by locally high natural gas prices, in turn fueled by the polar vortex.  The utility also benefits from daily production swings: solar production is highest when hourly prices are highest in New York.

Although the utility receives significant benefits from my solar system, it is also a good deal for me, mostly due to Federal and State incentives. If I assume electricity price increases completely offset system maintenance costs (I expect them to more than pay for any maintenance), my expected internal rate of return over 30 years will be 9.7% (or 8.3% over 20 years.)  The payback of my initial investment will take about 9 years. Without subsidies, the 30 year return would have been a paltry 1.9%, with a 22 year payback.

I expect that many New York solar systems have even better returns than mine, because I made a number of decisions which raised cost without increasing electric production.  First, I wanted to reserve part of my roof for a future solar hot water system, so I chose somewhat more expensive monocrystalline panels in order to make the most of the roof space I was willing to use.  Second, I decided to go with SMA TL-US strong inverters rather than microinverters because TL-US inverters can provide some back-up power when the grid goes down.  Third, I had to do some upgrades to the frame of my garage and attic of my old (1930) house to support the extra weight of the panels.  Finally, I wanted an awning to protect a third floor balcony from rain, and so I had my installer project the edge of the panels past the edge of the roof to serve this function, making the installation more difficult.

The Stocks

I don't follow any of these stocks closely, so I decided to ask my panel of professional green money managers. 

SMA SB 3800TL-US-22 and SB 3000TL-US-22 Inverters

SMA Solar Technology (S92.DE, SMTGF)

My inverters were from SMA Solar Technology AG (S92.DE, SMTGF), a Sunny Boy 3000TL-US-22 and a Sunny Boy 3800TL-US-22. These cost about $0.50/W and account for about 13% of the total system cost.

There was some real disagreement about SMA.  Shawn Kravetz manages a solar focused hedge fund at Esplanade Capital LLC in Boston, so I pay attention to his thoughts on solar related stocks.  He notes that SMA Solar Technology's string inverters have been losing market share to suppliers of micro-inverters and optimizers. 

These competing technologies make better use of the power produced when power production from panels is not uniform, such as when the panels are partially shaded.  Fortunately for me, I have very little shading, and living in a rural area, I wanted to be prepared for long-term power outages.  To the right, you will see an image of me testing the inverter's ability to power my furnace on a cloudy day (it was raining at the time.)  The furnace draws 340W, which is about 8% of the rated capacity of the larger of my two solar arrays. I expect that I should have enough power to run the furnace for an hour or two even on cloudy winter days, as long as I keep them clear of snow.SMA TL-US Power backup

Frank Morris, the former portfolio manager of the Global Ecological mutual fund (EPENX) describes the technology as a dramatic innovation:
With the flip of the switch, SMA's TL-US inverter will send up to 15A of 110V power to your home outlet even during a power outage.  This feature is unique to the SMA TL-US line of inverters.

When there is a power outage, a solar roof with SMA TL-US line of inverters can provide electricity to your home, independent of the grid.  During hurricane Sandy, millions lost electricity-and the thousands of solar roofs in Sandy's wake were useless: most inverters lose function when the grid is down.  The SMA TL-US line of inverters represent a dramatic innovation for the world solar market.  The convergence of resilient distributed affordable solar electricity generation, affordable electricity storage, and breakthroughs like the SMA TL-US line of inverters, should have a dramatic effect on the global utility industry.

Thomas Moser, CFP® of High Impact Investments® in Tucson, Arizona likes SMA most of the companies listed from a buying viewpoint, also because of its applications to backup power.  He says, "Energy storage will be needed as individuals and companies look to disconnect from utilities.  The level of concern regarding energy backup systems in case of total utility shutdown will rise, especially with worldwide threats capable of shutting down the grid.  SMA's R&D is well ahead of the curve on energy storage."  That said, he sees many more attractive clean energy buying opportunities right now, and says SMA's stock price would need to decline from the current €22 and change to around €15 before he'd buy it.

2014-09-05 13.12.11.jpgLG Electronics (066570.KS) 

My panels are 22 LG 300W Mono X® NeON Modules.  These are fairly high-end modules using 60 monocrystalline silicon cells with a total module efficiency of 18.3%.  The panels can be bought retail for approximately $1.50/W, and account for approximately 40% of the total system cost.  LG Electronics is a listed Korean conglomerate with symbol 066570 on the Korea SE. 

LG is a large conglomerate.  My experts did not feel that its solar segment was a large enough part of its overall business to make an investment case.  That's not to say they don't know anything about the company: Kravetz knew mine were from LG's MonoX® line just from of the power rating. 

DSC05294.JPG Schneider Electric SE (SU.F, SBGSF)

Schneider Electric SE (SU.F,SBGSF.) supplied five Square D brand Solar DC disconnects and a circuit breaker box for combining the current from the two inverters.   I'm guessing these amount to between 10¢ and 30¢ per Watt, or about 5% of the total system cost.

Schneider makes a number of clean energy related products, but the experts I consulted were not familiar with the company or did not think clean energy is a significant enough part of its business to make an investment case.

ABB Group Ltd. (ABB)

ABB meter

My installer included an analogue "dumb" meter from ABB Group (ABB) to keep track of total system output (the SMA inverters each keep track of their own energy production.) The system also required 200 to 300 feet of conduit and electrical boxes from Carlon, a brand owned by ABB. These components likely cost between 10¢ and 15¢ per Watt, or about 3% of the total system cost.

Although ABB is another conglomerate, it has enough cleantech to get the attention of my panel. Jan Schalkwijk, CFA® of JPS Global Investments in Portland, OR says,

ABB touches on renewables and energy efficiency in various ways, with offerings such as solar inverters, HVDC [high voltage direct current] links that connect renewables power sources to the grid (ABB has installed 13 of the 14 HVDC projects commissioned worldwide to date), offshore wind power projects, and high efficiency motors, among other power products. In the most recent quarter, orders were up 13% year-over-year, half of which came from a HVDC ink project in Canada to connect renewable power sources to the North American grid. Another large project in progress is the 900MW DolWin2 offshore wind converter platform that will be installed in the German North Sea. Recently the company has faced industry headwinds related to offshore wind in Europe, unprofitable EPC projects [engineering, procurement, & construction, i.e. projects for which ABB was primarily responsible for construction] for solar (which it is discontinuing), and contracts that did not have equitable risk sharing with partners. The company is aware of these issues and is changing its strategy to de-risk and improve profitability of the Power Systems business. With a dividend yield of 3.6% vs 3% for the peer group, a strong competitive position, and a relative valuation 5-10% below peers (averaging relative P/E, EV/EBITDA, P/B, EV/Sales, P/CF) ABB looks like a decent bet. Risks include unfavorable currency movements (Swiss Franc), further trouble in offshore wind, and failure to deliver on strategic refocus of the Power Systems business.

Jim Hansen at Ravenna Capital Management in Seattle, Washington also owns ABB, and "will be buying again if the price drops." Moser is more skeptical, and comments that its recently announced $4 billion stock buyback looks like "putting a fresh coat of paint on an old truck."

Itron reversing smartmeter Itron, Inc. (ITRI)

Although not directly involved in the project, my utility replaced my meter with a new I-210+c SmartMeter from Itron, Inc. (ITRI) to support net metering.  I don't know what this cost the utility, but it was probably not significant as a percentage of system cost, likely only a few pennies per watt.

Itron makes a full range of electric meters, and was more popular with clean energy investors when residential smart grid was a greater focus of attention than it is today.  Hansen has owned it in the past, but does not currently.  Moser says the stock does not interest him because its stock performance is "as lumpy as its sales."

Installer, Balance of System

The remaining approximately 40% or $1.60/W of the system cost was overhead, labor, equipment rental, permitting, and components such as racking (Unirac). wiring, and flashings (QuickMount) which are made by privately held companies.  My installer is a local privately held company, Solar Generation.


If you have a strong opinion about the advantages of microinverters vs. string inverters, or think that the growing interest in grid resilience may allow SMA to reverse some of its recent losses, there will likely be stock market profits to be made by betting on one of these trends, but I don't have the confidence to put my own money on one or the other.  While my own strong preference is the added resilience, companies selling solar leases or power purchase agreements are only paid for producing energy, not for the resilience SMA's products bring.  But the recent trend away from leases and towards other forms of solar financing may allow more homeowners to opt for resilience over maximizing production, as I did.

Of the others, only ABB is in my own portfolio, as it has been for years.  Like Schalkwijk, I like the valuation, dividend stream and solid position in many aspects of the electric grid.

Even ABB's dividend stream does not come close to matching the income stream (in the form of lower electricity bills) of my solar system itself.  Sometimes an industry's products are far better investments than the industry itself. For me, the lesson of this whole exercise is that companies which invest in solar installations are likely to be better investments than the companies that provide the parts.

Disclosure: Long ABB.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

September 16, 2014

SolarCity Product Can Increase Generation On Flat Roofs Up To 50%

By Jeff Siegel

scty934While solar bears and short-mongers celebrated the 8% dip in SolarCity (NASDAQ:SCTY) yesterday, opportunists are sniffing around for another buying opportunity. Especially those who didn't take my advice to load up after the stock fell below $50 back in March. What a bargain that was!

In any event, SCTY took it on the chin yesterday, and I suspect there will continue to be some ebbs and flows in the near-term. Long-term, however, SCTY remains a solid play on the growth of solar in the United States.

It's also worth noting that SCTY has just unveiled a new solar mounting product called ZS Peak. It basically allows installers to install systems on flat roofs in half the time it takes today. And according to reps from SolarCity, this new product can increase generation capacity on flat roof buildings by 20 to 50 percent per building.

ZS Peak makes it possible for far more businesses, schools and other organizations to install solar power on their buildings and immediately pay less for solar electricity than they pay for utility power, and will significantly expand the addressable market for commercial solar.

It's this kind of innovation that continues to put SolarCity ahead of the curve, and it's also one of the reasons I remain bullish on the stock.

My very conservative price target on SCTY for 2014 is $75. Other price targets include the following:

  • Goldman Sachs: $85
  • Deutsche Bank: $90
  • Credit Suisse: $97

Full Disclosure: I currently own shares of SCTY.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

September 04, 2014

Trina Thrives On Solar Financing

Doug Young


Investors were applauding a new announcement by Trina Solar (NYSE: TSL), after it announced a deal that would see it help to finance and build a massive solar power farm in southwest Yunnan province. The deal should indeed help Trina generate big sales for the near-term, as it involves construction of a farm with huge capacity of 300 megawatts of power. But I’m just a bit wary of this kind of development, which will also see Trina pay most of the bills to build the facility.

This kind of creative financing, which sees solar panel makers take big stakes in plant developers and then sell their own panels to the projects, is good when many sophisticated long-term buyers are available to purchase those finished plants upon completion. But China is hardly such a market, and it’s far from clear that anyone will be ready to purchase this massive new solar farm from a Trina-controlled entity once construction is complete.

According to Trina’s new announcement, the company is taking a 90 percent stake in Yunnan Metallurgical New Energy Co, which will build the new plant in the southwestern Chinese province. (company announcement) Three local partners will hold the remaining 10 percent in the company, whose farm will become the biggest solar power generating facility in Yunnan province.

No financial terms were given, which is slightly unusual as this investment is likely to be quite costly. To put things in perspective, the 300 megawatts in new panel orders Trina is likely to get from the deal are equivalent to nearly a third of the panels it shipped in its most recent reporting quarter, when it generated $519 million in revenue.

Thus if panel prices remain relatively constant, this new plant could generate some $171 million in sales for Trina over the construction period, most likely the next 1-2 years. That means Trina’s investment in the developer should total nearly $200 million, again invested over the next couple of years. That’s not a small sum for solar panel makers like Trina that are still struggling under big debt burdens following a prolonged downturn for their industry.

Despite that risk, investors cheered the news and bid up Trina shares by 5.6 percent after the announcement. It’s probably worth noting that even at their latest closing price of $13.23, Trina’s shares are still nearly 30 percent below their peak reached back in March when solar shares were soaring on hopes for a rapid sector recovery. Since then those hopes have been tempered by new punitive anti-dumping tariffs on Chinese solar panels exported to the US, and signs that the EU could take similar steps.

All that said, let’s return to the main point, which is that this kind of self-financed plant construction is a risky proposition. This kind of model got former industry pioneer Suntech into big trouble, and ultimately set off a chain of events that led to the company’s bankruptcy. Rival Canadian Solar (Nasdaq: CSIQ) has used the model to build smaller plants in Canada, and Yingli (NYSE: YGE) earlier this year set up a similar $160 million fund to build solar plants in China.

Canadian Solar’s model has worked in part because most of the plants it has built are in Canada, where big institutional investors exist to buy such plants after their completion. China is still largely an untested market in that regard, and it’s quite clear that many local state-run enterprises are participating in these new projects to help Beijing meet its ambitious targets to build up the country’s solar power.

Perhaps this new farm is well-designed and a strong long-term buyer will recognize that fact and purchase it after its completion, providing big profits for Trina. But it’s equally possible the plant will run into unforeseen problems, which could easily leave Trina with headaches as it figures out what to do with the massive facility.

Bottom line: Trina could be left holding a big pile of problematic debt if its plan to build a massive new solar plant in southwest China runs into difficulties or fails to find a long-term buyer.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

August 22, 2014

3 Stocks For The Coming Solar Shortage

By Jeff Siegel

An impending glut of solar panels was going to be the death knell for the industry.

Or at least that's how the solar bears framed the argument just a few short years ago.

Today, however, it's a different story...

A shortage of solar panels is now going to kill the industry.

Or at least that's how the bears are framing the argument this time.

Meanwhile, I'm grinning ear to ear. Because just as opportunity existed during the great solar glut, opportunity exists as the solar industry gears up for a potential shortage.

So don't hate, my friends. Participate!

Solar Goose Bumps

On Tuesday morning, Bloomberg published a pieced entitled, “Solar Boom Driving First Global Panel Shortage Since 2006.”

Ah, that headline gives me goose bumps.

According to Bloomberg New Energy Finance, the solar industry may install as much as 52 gigawatts this year and 61 gigawatts in 2015. That's up from 40 gigawatts in 2013 and more than seven times what developers demanded five years ago.

Bottom line: The smart money is doubling down on the solar manufacturers gearing up for the shortage.

Easily Worth $75

Right now, Canadian Solar (NASDAQ: CSIQ) is building a new solar cell factory that, when completed, will be able to pump out 300 megawatts of annual capacity.

SunPower (NASDAQ: SPWR) has a new facility in the works, too. Production at this new factory is expected to begin in 2017 and will pump out 700 megawatts per year.

And of course, there's SolarCity (NASDAQ: SCTY). This financing and installation company announced in June that it would be acquiring solar panel manufacturer Silevo (as well as building a new manufacturing plant) in an effort to lock in a steady supply of product to meet demand.

We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team. At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity.

Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.

Even if the solar industry were only to generate 40 percent of the world’s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world’s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.

I remain extremely bullish on SolarCity, and I do hope you picked some up after I suggested you do so following the free fall that took the stock down to below $50 back in March.


Today, SolarCity trades for around $70 a share. On the low end, I maintain that this is easily a $75 stock, while Goldman puts it higher at $85 and Deutsche Bank at $90.

Of course, if you prefer a little more action and the opportunity for an even bigger gain in the solar space, consider one of the up-and-coming solar tech plays that don't get much attention in the mainstream but that are poised for major gains as the solar market continues to soar.

To a new way of life and a new generation of wealth...


Jeff Siegel

Full Disclosure: I currently own shares of SCTY.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

August 15, 2014

How the Don Quixote Principle Drives Solar

by Paula Mints
Don Quixote by Honore Daumier via Wikimedia Commons

For decades the photovoltaic industry has been driven by its beliefs, hopes, the availability of incentives, and what it is willing to ignore in terms of market realities and technological barriers. The apparent achievement of grid parity, even at drastically low margins, was hailed a victory. Continued deployment of multi-megawatt installations in the face of low margins for developers and likely gigawatts of poor quality installations has been regarded as proof of the inevitability of the industry’s success.

Given the competitive landscape for energy technologies and the short attention spans of many, it is courageous to continue the slow, iterative process of technology development in the face of naïve and easily disappointed investors and well-meaning government investment in technologies that, in some cases, have defied the laws of physics. The solar industry (and all of its technologies) continues to push ahead on hope — and this hope is a brave and necessary industry personality trait that must continue to be nurtured.

Don’t Tread on my Unwillingness to Face the Facts

Though there are many examples of companies/individuals/governments/investors persevering despite facts that indicate a change in direction might be a good idea, one of the best examples of unwillingness to fact facts is the prolonged period of negative margins during the late 2000s. 

From 2009 through mid-2013 aggressive pricing for PV cells and modules pushed manufacturer margins to dangerously low levels while losses pushed many companies into bankruptcy.  Low prices for PV technologies led to lower system prices, which were celebrated as proof that the industry had achieved grid parity.  As PV manufacturers began failing these failures were accepted as normal casualties of consolidation.  Figure 1 below depicts average module prices (ASPs) and costs, along with shipments and the delta between costs and prices from 2003 through 2014.

Figure 1: Module ASPs, Costs, Shipments and the Cost/Price Delta, 2003 through 2014  

Ignoring Political Risk, Margin Risk, Incentive Risk and Economic Risk Just May be a Survival Technique

Strong markets in the solar industry continue to be incentive driven.  Denying this fact does not make it any less of a fact.  In the mid-to-late 2000s the FiT driven markets in Europe surged, giving the region an >80 percent share of global demand.  During those days, incentive risk was largely ignored.  Following the retroactive changes that drove system in some countries into bankruptcy, demand into Europe began decreasing (dramatically). 

Currently, the incentive driven and government supported markets in Japan and China, at a combined >50 percent of global demand, are (essentially) providing a base on which the global solar industry can seek out its next dominant market. 

Expectations for strong markets typically ignore incentive risk (the risk that an incentive will be reduced drastically or end abruptly), political risk (in extreme cases war, in less extreme cases tariff interference), margin risk (the risk that a sale will result in loss instead of gain) and economic risk (the risk that a change in the regional/country economy will trigger lower demand).  Monetary risk (the risk of currency devaluation as is the case with countries in Latin America and India) can derail a project’s profitability.  It is common to assume that unpleasant or unprofitable outcomes have a lower probability of happening than do positive or profitable outcomes.  It is also normal to assume that today’s small regional or country market will be tomorrow’s booming market. 

It is difficult to hedge bets and develop a diversified portfolio of markets to serve in an incentive driven industry.  The learned behavior of solar participants is to serve (or over serve) the available market while assuming that another market will take its place when it finally slows.  Historically the industry has been rewarded for this belief.  No matter what, another incentivized or supported market seems to come along to replace a waning market. 

Figure 2 presents an assessment of 2014 global supply (shipment) and demand shares for the PV industry.

Figure 2: Supply/Demand Expectations for 2014  

Solar and the Don Quixote Principle

Figure 3 offers a picture of PV industry metrics from its demand/supply inventory at the end of 2013, through 2014 and into 2015. These metrics include demand/supply inventory, capacity, production, shipments, installations and defective modules.

Figure 3: Global PV Industry Metrics 2014 into 2015 

In an industry surrounded by obstacles, well-funded competitors, ill-thought-out government intervention (including poorly designed incentive programs) and often irrational market behavior, it takes a profound and steadfast hopefulness and belief structure to continue developing and deploying solar technologies.  The need to celebrate decades of often significant growth in a vacuum, that is, ignoring solar’s share in the overall energy mix is understandable given the bone shaking disappointment  experienced by many participants.  Amazing progress has been achieved by ignoring daunting realities. 

Don Quixote tilted at windmills, performed brave acts, fought imagined and real enemies and saw his comrades as heroes — acts of a demented mind or the courage of a man unwilling to be ordinary and saw a world filled with potential.  The solar industry combines courage, willfulness, imagination and a determination to ignore or remain ignorant of market and sometimes technological realities. 

The Don Quixote Principle is the willingness to persevere despite real or imagined obstacles and villains with the goal of heroic action and a more perfect world.  Into this definition, the solar industry and all of its participants falls quite neatly.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.

This article was originally published on, and is republished with permission.

August 10, 2014

Convertible Solar Bonds: Trina, SunPower Stoke Fire; Ascent Descends

by Sean Kidney

Trina’s $150m 3.5% 5yr convertible solar bond

In June Chinese solar manufacturer Trina announced the private placement of $150m of 5 year, 3.5% convertible bonds to “institutional investors” (no details provided). Trina weren’t clear how they would use the proceeds, but they are planning to build 400-500MW of solar plants over the rest of this year. Book-runners were Deutsche Bank, Barclays, J.P. Morgan and Goldman Sachs (Asia), with co-manager HSBC.

SunPower issues $400m 7yr 0.875% (!) convertible solar bond

That same month SunPower announced a private placement of $400 million, 7 year, 0.875% senior convertible bonds. What a great interest rate! Being 60% owned by Total may have helped; and then Total bought $250m of the bonds. Proceeds were for debt paydown, working capital and projects.

Then $32m Ascent 8% convertible solar runs into problems

Two weeks ago US thin-film solar developer Ascent Solar Technologies [ASTI] announced it was issuing $32 million of 8% convertible loan notes via private placement with institutional and other investors. Ascent is also owned by a Chinese company, TFG Radiant; it used to be controlled by Norsk Hydro.

A week later they announced it wasn’t happening after all – they’d been unable to get the permissions of one of their lenders and had to instead go for a much smaller ($4m) stock placement deal. Bummer!

Solar Power Inc issues a small convertible bond, but it’s converted 3 wks later. Hmmm.

In mid-July US PV developer SPI Solar (Solar Power Inc), a subsidiary of China’s troubled LDK Solar [LDKSY], one of the world’s largest solar PV companies, announced it had made a private placement of “common stock and convertible bond” for an aggregate $21.75 million to four investors. Proceeds to be used as working capital and to pay down debt.

We noted this as we generally count convertible bonds in our broader “Bonds and Climate Change” universe. At the time SPI didn’t specify the breakdown of stock and bond; but today it announced one of the investors had already converted their bond - a mysterious Hong Kong shelf company Robust Elite Limited. Geez, that was quick. Perhaps it’s something to do with LDK Solar’s re-structuring with the help of a company part-owned by China’s Xinyu City Government – where LDK is based in fact.


Environmental-Finance’s Peter Cripps reports that more convertibles look likely.

(He amusingly quotes a banker: “The markets are very like sheep – if one sees a rival doing something they immediately look at it and think should we do the same.” That BTW is one of the rationales for promoting a green bonds market.)

——— Sean Kidney is Chair of the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

July 31, 2014

EU, LDK & Suntech Undermine Solar Recovery

Doug Young 

The war of words against Chinese solar panel makers is heating up from both sides of the Atlantic, with growing signs that Europe may reconsider anti-dumping duties as the US moves closer to imposing its own new duties on the beleaguered manufacturers. Meantime, 2 of the biggest Chinese victims of the sector’s recent turmoil have risen from the ashes, with LDK (OTC:LDKSY) and Suntech (OTC:STPFQ) both announcing new moves more than a year after each became insolvent. Among those 2 moves, LDK’s looks the most worrisome, potentially bringing major new volumes of polysilicon, the main ingredient in solar panel production, back into a market whose current recovery is still quite weak.

All of these separate developments show the solar industry has yet to reach a new state of stability, and that such a new equilibrium could still be years away as market and government forces intermingle to keep the sector in a state of uncertainty. The latest destabilizing forces began late last week in the US, as Washington moved one step closer to imposing new anti-dumping duties on Chinese panels. (English article) That move was largely expected and aimed at closing a loophole in an earlier ruling, and drew the usual howls of protest from Beijing and most of the country’s major solar panel makers. (English article)

In a new and similar development from Europe, a major local trade group is blasting a compromise agreement reached between China and the EU last year that averted a similar trade war. (English article) I’ll admit I don’t completely understand the logic in the new sounds of dissatisfaction coming from EUProSun, a group that represents about 40 percent of EU solar panel makers, including Germany’s outspoken SolarWorld (Frankfurt: SWVKk, OTC: SRWRF).

But the bottom line is that the European manufacturers believe that last year’s landmark compromise agreement isn’t working. These latest protests come just over a month after the European panel makers previously complained that their Chinese rivals were finding loopholes to evade terms of the same compromise agreement. (previous post)

If there’s any truth to the European complaints, which seems likely, it could soon become difficult for the European Trade Commission to ignore the situation as more local companies struggle and even go bankrupt. Europe’s trade commissioner previously wanted to impose anti-dumping tariffs on the Chinese panel makers similar to those from the US, and was only prevented from doing so after several major EU leaders intervened to seek a compromise solution. Thus if the compromise really isn’t working, the EU could easily reopen its investigation into unfair state support for the Chinese panel makers and impose punitive tariffs as soon as by the end of this year.

Meantime, let’s look quickly at the latest news bits from LDK and Suntech, 2 former sector leaders that both went bankrupt and are just now starting to regroup and resume business after major reorganizations. The most worrisome of the news bits says that LDK is planning to restart a long-idled plant making polysilicon, the main ingredient used to make solar panels. (Chinese article) The massive 10 billion yuan ($1.6 billion) plant had been idled for 2 years, and its return to the market will inevitably put pressure on global polysilicon and panel prices.

Suntech’s news looks a bit more benign, and will see the company open a subsidiary to serve South Africa. (company announcement) The move is one of the first major ones by Suntech since its primary assets were acquired last year by Hong Kong-listed Shunfeng (HKEx: 1165), which is now trying to move ahead with the well-known Suntech name. An aggressive new Suntech in the solar market could also undermine the sector’s recent stabilization, hinting at turbulent times ahead for the sector for the rest of this year and into 2015.

Bottom line: The EU is likely to reopen an anti-dumping probe into Chinese solar panel makers and impose punitive tariffs, while new moves by Suntech and LDK will further undermine the sector’s recovery.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 30, 2014

New Tariffs Likely To Raise US Solar Prices

Jennifer Runyon

The US Department of Commerce announced preliminary findings in the new trade case against Chinese and Taiwanese PV products.

On Friday evening the U.S. Department of Commerce (DOC) announced its preliminary findings in the antidumping duty (AD) investigations of imports of some crystalline silicon PV products from China and Taiwan. Most solar products entering the U.S. market from China and Taiwan will now face import duties.

According to a fact sheet released by the DOC, the AD law “provides U.S. businesses and workers with a transparent and internationally accepted mechanism to seek relief from the market-distorting effects caused by injurious dumping of imports into the United States. The DOC believes that this creates  “an opportunity [for U.S. businesses] to compete on a level playing field.”

The DOC has prelimarily determined that “certain crystalline silicon photovoltaic products from China and Taiwan have been sold in the United States at dumping margins ranging from 26.33 to 58.87 percent, and 27.59 to 44.18 percent, respectively and will be collecting tariffs on the following manufacturers in the following amounts. The tariffs will be collected immediately, although final determinations will not be made until December.

From China:

  • Trina Solar (TSL) – 26.33 percent
  • Rensola (SOL) and Jinko (JKS) – 58.87 percent
  • Suntech (STP) – 42.33 percent
  • Another 42 unspecified manufactures – 42.33 percent
  • China-wide entity (those who didn’t respond to the DOC’s questionnaire) -165.04 percent

From Taiwan:

  • Gintech – 27.69 percent
  • Motech – 44.18 percent
  • All others 35.89 percent

The ruling is inclusive of many pieces of the solar manufacturing puzzle.  According to the DOC fact sheet it includes the following:

Crystalline silicon photovoltaic cells, and modules, laminates and/or panels consisting of crystalline silicon photovoltaic cells, whether or not partially or fully assembled into other products, including building integrated materials.

For purposes of this investigation, subject merchandise also includes modules, laminates and/or panels assembled in the subject country consisting of crystalline silicon photovoltaic cells that are completed or partially manufactured within a customs territory other than that subject country, using ingots that are manufactured in the subject country, wafers that are manufactured in the subject country, or cells where the manufacturing process begins in the subject country and is completed in a non-subject country.

Subject merchandise includes crystalline silicon photovoltaic cells of thickness equal to or greater than 20 micrometers, having a p/n junction formed by any means, whether or not the cell has undergone other processing, including, but not limited to, cleaning etching, coating, and/or addition of materials (including, but not limited to, metallization and conductor patterns) to collect and forward the electricity that is generated by the cell.

Thin-film PV will not face tariffs.  Also excluded are any products that are covered by the existing antidumping and countervailing duties as well as PV cells not exceeding 10,000 mm2 in surface area that are integrated into consumer goods who function to power that consumer good (like a solar-powered calculator).

The DOC estimates that in 2013, the value of solar PV products imported from China and Taiwan was $1.5 billion and $656 million, respectively.

U.S. Industry Reacts

SolarWorld (SRWRF), the solar petitioner in the case against China and Taiwan, commended the DOC’s determination.

“We and our workers are very gratified to hear that the U.S. government once again has moved to block foreign government interference in our economy and clear the way for the domestic production industry to be able to compete on a level playing field,” said Mukesh Dulani, president of SolarWorld Industries America Inc.  “We should not have to compete with dumped imports or the Chinese government.  Today’s actions should help the U.S. solar manufacturing industry to expand and innovate.”

Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE) released a statement calling the determination “another unnecessary obstacle” that he said will “hinder the deployment of clean energy by raising the prices of solar products.”

He said: “Due to these tariffs, previously viable projects will go unbuilt, American workers will go unhired and consumers that could have saved money through solar energy may not be able to benefit.”   

CASE maintains that America’s solar manufacturers are strong and are providing jobs for 29,000 U.S. workers.  In addition almost 100,000 Americans are employed downstream in the system installation, sales, distribution and project development sectors.

The coalition collected the following statements from some of its members:

Ron Corio, President of Array Technologies, based in Albuquerque, NM and representing over 100 jobs said: “As a U.S. solar manufacturing company, we’re very disappointed in today’s anti-dumping determination. By increasing the price of solar power through tariffs, SolarWorld is shrinking the market for our products here in the United States and punishing successful U.S. solar businesses. Our company is proof that American solar manufacturing jobs will decrease under these special trade protections.”

John Morrison, COO of Strata Solar, based in Chapel Hill, NC and representing over 1,000 jobs said: “Due to their scale, the utility and large commercial solar sectors are particularly sensitive to the uncertainty and price increases caused by these tariffs. Until this dispute is resolved, our industry will build fewer projects and install less solar. It’s time to end the litigation, negotiate a solution and put more Americans back to work.”

Ocean Yuan, Founder and CEO of Grape Solar, based in Eugene, OR said: “My company assembles and sells complete solar energy kits directly to customers and in major retail stores across the country. The number one reason customers cite when switching to solar energy is cost savings, but these misguided tariffs are inflating prices. A negotiated solution to this dispute will ensure the continued growth of our industry and small businesses like mine.”

Chinese Industry Reacts

In an interview with Bloomberg news, Sebastian Liu, director of Investor Relations at Jinko Solar said that top Chinese manufacturers would elect to pay the 2012 duties without using cells from Taiwan or a third-country. Jennifer Liang, a Taipei-based analyst from KGI Securities Co told Bloomberg that the duties would hurt producers from Taiwan the most.

Taiwanese solar stocks including Motech, Gintech, E-Ton Solar and Neo Solar dropped in reaction to the news, said Bloomberg.

Organizations Urge a Settlement

CASE’s Shah believes that SolarWorld should work with the U.S. solar industry to end litigation “in favor of a win-win solution like the Solar Energy Industries Association (SEIA) settlement proposal.”

He said that CASE members represent the industry majority and that they “demand a solution that ends uncertainty in the marketplace by preventing further trade litigation and that allows solar power to compete cost-effectively with traditional energy sources, thus enabling the market’s further growth.”

Rhone Resch, president and CEO of SEIA echoed Shah. “Enough is enough. The Department of Commerce continues to rely on an overly broad scope definition for subject imports from China, adversely impacting both American consumers and the vast majority of the U.S. solar industry,” Resch said. “We strongly urge the U.S. and Chinese governments to ‘freeze the playing field’ and focus all efforts on finding a negotiated solution. This continued, unnecessary litigation has already done serious damage, with even more likely to result as the investigations proceed.”

Resch believes that a “win-win” solution is still achievable. “As the old saying goes, ‘where there’s a will, there’s a way.’ Today, the parties are finally engaged and all sides seem committed to finding a negotiated solution. I am encouraging my U.S. and Chinese industry colleagues to roll-up our sleeves, work together, and find a deal that’s good for everyone,” he said.

For more discussion about U.S. trade relations, play the video below.

Timeline for Next Steps

Final determination of the AD investigation is expected on December 15, 2014. If that final determination is affirmative then the International Trade Commission will issue its final determination on January 29, 2015 and the order will be issued on February 5, 2015.

Jennifer Runyon is chief editor of and Renewable Energy World magazine, coordinating, writing and/or editing columns, features, news stories and blogs for the publications. She also serves as conference chair of Renewable Energy World Conference and Expo, North America. She holds a Master's Degree in English Education from Boston University and a BA in English from the University of Virginia.

This article was originally published on, and is republished with permission. 

July 18, 2014

Rulings Boost China Wind, Solar In US

Doug Young

In a quirk of timing, 2 completely unrelated rulings are boosting the outlook for Chinese new energy firms from the wind and solar sectors in their complex relationship with the US. The 2 cases are quite different, but each reflects the wariness Washington feels towards these Chinese firms due to their government ties. In the bigger of the 2 cases, a World Trade Organization panel has ruled that US anti-dumping tariffs against Chinese solar panel makers violate WTO rules. In the second case, a US judge’s ruling has given a boost to a Chinese firm that planned to build a wind farm in the state of Oregon, only to get vetoed by Washington over national security concerns.

Neither of these rulings is the end of the story, and it’s still quite possible that Washington could prevail in one or both cases. But the WTO ruling in the solar case could be a tough one for Washington to fight, for reasons that I’ll explain shortly. That could be good news for the entire solar panel sector, as it could force Washington to seek a negotiated settlement in the matter. Such a deal would benefit nearly everyone by maintaining strong global competition, which is a critical element to foster rapid industry development.

All that said, let’s start with a look at the WTO ruling, which was part of a broader series of decisions critical of Washington’s anti-dumping duties. (English article) Washington had argued that Chinese solar panel makers received unfair government subsidies in a number of ways, from subsidized use of government land, to cheap loans from state-run banks, and tax incentives. The US conducted its own investigation 2 years ago, which ended with its decision to impose punitive tariffs against the Chinese firm.

The WTO’s ruling doesn’t dispute Washington’s premise of unfair state subsidies, but rather finds fault with part of the process. Put simply, the WTO’s rules say countries can only impose such anti-dumping penalties if they can prove the guilty companies are wholly or at least partly state owned. That’s a bit problematic in this instance, since many of China’s biggest solar panel makers started out as venture-backed private companies that are now big publicly-traded firms.

In my view the WTO ruling seems based on a technicality, since China clearly subsidizes all domestic solar panel makers due to Beijing’s decision to aggressively promote the industry. But rules are rules, and Washington and everyone else needs to respect the WTO’s guidelines. Washington could still try to prove that private Chinese panel makers like Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ) are somehow partly state-owned; but I’m hopeful that maybe the Obama administration will use this moment to re-examine its stance and try to seek a negotiated settlement in the matter.

Meantime on the wind front, a US judge has ruled the Obama administration wasn’t transparent enough when it cited national security concerns as its reason for vetoing a planned wind farm being built by construction equipment maker Sany Heavy (Shanghai: 600031). (English article) This particular case dates back nearly 2 years ago, and reverses a previous ruling by a lower court that had sided with the Obama administration.

In this latest ruling, the judge said the Obama administration was too secretive about its reasons for vetoing the plan, which denied Sany the right to defend itself or seek modifications that might placate the government. Previous reports had speculated that Washington was worried about spying, since the wind farm’s location was near a defense plant making high-tech drone aircraft. I would agree with the judge in this matter, and say that Washington needs to provide at least some of the evidence behind its decision that is likely to cost Sany millions of dollars in lost investment.

Bottom line: A WTO ruling against US anti-dumping tariffs on Chinese solar panels could force Washington to re-think its stance in the matter and seek a negotiated settlement.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 08, 2014

RGS Energy: Troubling Inconsistencies

Garvin Jabusch

About three weeks ago, I posted a piece called "RGS Energy, Tempered, Opportunistic Growth," an optimistic bit of coverage on one of our holdings,  (RGSE), that included an 18-month price target of $10.00 per share. Since then, several developments and pieces of information have come to light that have caused us to revise our assessment of the company.

Thursday, July 3, a quiet half-market day, RGS Energy released a statement announcing plans to monetize its previously filed potential shelf offering; "RGS Energy (NASDAQ: RGSE) has entered into a definitive agreement to raise approximately $7.0 million in a private placement financing transaction. Under the terms of the agreement, RGS Energy will issue units consisting of an aggregate of 2,919,351 shares of its Class A common stock and warrants to purchase up to 1,313,708 additional shares of Class A common stock, at a price of $2.40 per unit." This deal has been offered to and accepted by as yet undisclosed buyers at well below RGSE's market price in the $2.90s on July 3. The market reacted unfavorably to this low self-valuation from RGSE, driving the share price down approximately 16 ½ percent in the two market days that have followed the announcement, but even so, the private placement valuation remains below market as of this writing.

It gets more interesting. Not only do participants receive this fire-sale valuation, but also, "[e]ach unit consists of one share of Class A common stock and a warrant to purchase 0.45 shares of Class A common stock at an exercise price of $3.19 per share. The warrants are exercisable beginning six months after issuance and for a period of five years thereafter." So participants are buying already in-the-money shares, and also getting up to 5 ½ more years to watch the company grow, risk free, before deciding whether to buy more shares at $3.19. Frankly, I'm surprised that management thinks little enough of their firm that they felt the need to offer such a cheap price and also such a fantastic sweetener to raise equity capital. Not knowing all the deal details, I may be missing something, but if this was the best valuation RGSE could get for equity, why didn't they use low-interest debt instead? As of last report, the company had zero long-term debt, a perfect position for a cash-flow positive business to fund operations on the cheap with some kind of note offering.

All in then, up to 6,137,936 dilutive RGSE shares may be sold at $2.40 and $3.19 per share, representing up to 13.65 percent dilution to the existing shareholders of the previously outstanding 44.97 million shares. This is in exchange for $6.4 million (net: of the $7mm raise, close to 8.6 percent, or $600,000, is going to fees and expenses) in "operating capital," and "debt repayment," and not necessarily so much for expansion, except a vague statement about proceeds "to support the launch of its residential leasing platform."

When we met with RGSE's CEO Kam Mofid on May 22, 2014, we asked him about the shelf filing that made this transaction a possibility. That day, he told us that a "shelf offering is filed, but it is to be used only opportunistically for tactical expansion." We understand that business needs can change -- even in just a six-week period -- but the terms of the execution of the shelf offering and the uses of capital as represented in the press release don't seem to agree with Mofid's in-person confidence in opportunistic growth via smart use of his war chest. And Mofid represented to us that RGSE has no debt except for a revolving credit line with Silicon Valley Bank (SVB), which in late May he told us they pay off in full every quarter. So in what sense can their press release be accurate about using proceeds to pay down debt? Only in the sense that they will pay off the SVB line -- something they were already doing with cash flow -- with the new capital. On the contrary, now would have been the time to take on debt rather than issue new equity, thus providing the opportunity to grow the firm to the point where they could get a much better valuation for its shares upon exercising the shelf offing in another year or two.

In the end, we can't help but feel that RGSE's newly announced sources and uses of capital conflict with the business approach as articulated to us by the firm's CEO less than two months before.

In the last post, I wrote that RGSE had every chance of hitting $10 per share by the end of 2015. That was based partially on the rapid growth of the solar installation industry, on our confidence in management ability to execute, and also partly on my assessment of RGSE's value relative to the total market capitalization of SolarCity (SCTY). Since that post, SCTY has announced plans for massive vertical integration of PV panel manufacturing of the most technologically advanced panels and at prices competitive with any panels out there. This has changed the fundamental nature of SCTY and renders moot my comparison of two installation-only firms.

Where SCTY has added a high-tech manufacturing firm to its business, RGSE has signed a supply agreement with SolarWorld to source panels for installation. We can't help but notice that it was SolarWorld that persuaded the Commerce Department to levy tariffs on Chinese solar panels imported into the U.S., thus doing more to slow the growth of RGSE's core business than has any other single entity. According to Forbes, SolarWorld has been called "a crazed agent provocateur" and "[a]t a recent dinner in San Francisco, Suntech chief technology officer Stuart Wenham, an Australian, was just as blunt. 'SolarWorld is a pariah…No one wants to deal with them.'" SolarWorld's continuing efforts to undermine the economic competitiveness of solar PV in the United States would seem to fly in the face of RGSE's long-term business interests.

Finally, then, we have to revise our price target. To external appearances, it seems RGSE may not be acting entirely within the best interests of the firm or its existing shareholders. Eschewing presumably cheap debt in favor of expensive, dilutive equity fundraising, and offering a sweetheart deal to get it done, seems to show an internal lack of confidence in the firm's valuation and near-term prospects. Nevertheless, the simple fact that RGSE finds itself in one of America's fastest-growing industries still bodes well for growth, and with the low current valuation, for the possibility of a takeover. We're lowering RGSE from "buy" to a "hold" rating, and lowering our 2015 price target to U.S. $5.00. While we're disappointed with current events, and we don't presently intend to accumulate more shares, we are not planning to immediately exit our position in RGSE, since, as our price target indicates, we do think there's upside potential from the current $2.53.

Disclosure: Green Alpha Advisors presently holds both RGSE and SCTY. 

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha ® Next Economy Index, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club’s green economics blog, "Green Alpha's Next Economy."

July 01, 2014

Chinese Commercial Solar Group Formed To Tackle Trade Wars

by Doug Young

Chinese solar panel makers have taken an important step to solving their ongoing trade spat with the west by formally launching a private sector trade association to speak on their behalf. The move gives the panel makers their first truly commercial representative to discuss the matter with peers in the US and Europe, providing a better alternative to the government-backed groups that previously spoke for them.

This kind of step is long overdue, and should help to de-politicize and hopefully solve what is largely a commercial matter, involving western claims of unfair state subsidies. China should encourage and support the formation of more such independent industry associations led and run by actual companies as an important tool to reduce broader frictions with its major trading partners.

China’s solar panel sector has been locked in a dispute with the west for much of the last 3 years, following a prolonged industry downturn that has led to numerous bankruptcies worldwide. The west argued that China helped to create the huge oversupply that sparked the downturn by giving unfair subsidies to homegrown companies through policies like tax breaks and low-interest loans.

Amid the turmoil, the US last year imposed punitive tariffs against Chinese panels and is now on the verge of implementing a second round of penalties to close a loophole in the earlier ruling. The European Union also threatened to impose its own tariffs, but reached a last-minute settlement last year after negotiating an agreement with a group representing the Chinese panel makers.

Now that settlement is also in danger of unraveling, following recent allegations by European panel makers that the Chinese firms are not honoring the agreement.
In the EU case, the Chinese panel makers were represented in negotiations by the Chamber of Commerce for Import and Export of Machinery and Electronic Products, a government-backed industry group. Such government-backed groups have traditionally been the main spokesmen for various Chinese industries, mostly for historical reasons. But due to their government connections, they often carry strong political overtones that sometimes hinder realistic, commercially-based discussions.

In a bid to break that cycle, the solar panel makers recently formed their own industry association, the China Photovoltaic Industry Association (CPIA). Last week the group elected the CEO of Trina Solar (NYSE: TSL), one of the industry’s largest players, to become its first president for the next 5 years. (company announcement)

The CPIA’s includes most of the sector’s major manufactures, such as Trina, Yingli (NYSE: YGE), Canadian Solar (Nasdaq: CSIQ) and JA Solar (Nasdaq: JASO), meaning it can truly represent the entire industry when dealing with issues like the current trade wars. Equally important, the group has also committed to maintaining close ties with the Chamber of Commerce for Import and Export of Machinery and Electronic Products, ensuring that Beijing will remain informed on all the latest developments in industry issues.

This kind of independent trade group formed and run by actual companies is quite common in the west, where governments realizes that such independent associations can best represent the interests of their individual members.

In a bid to solve the clash in the US, the locally based Solar Energy Industries Association (SEIA) offered up a plan last year suggesting the Chinese manufacturers set up a fund that could help to compensate US rivals for some of their losses due to unequal state support. (previous post) The SEIA is one of several private groups representing the sector in the US, and its plan has yet to gain any traction, at least not publicly.

But the group’s proposal shows that private industry organizations can often propose innovative plans that are better suited to solving trade disputes than those offered by governments that are less familiar with individual issues. By comparison, China’s deal with the EU deal resulted in a plan for Chinese companies to voluntarily raise their prices to be on par with European rivals. The EU plan’s current troubles hint that the Chinese manufacturers were never fully committed to the proposal, perhaps because of their limited participation in the negotiations.

The formation of the CPIA could provide some fresh new impetus to solve the current disputes, since the Chinese panel makers now have their own group that can directly speak on their behalf. The creation of more such groups could help to reduce China’s trade frictions with the west in other areas by providing creative solutions crafted by companies themselves, which are always the biggest losers when such disputes result in unilateral punitive actions.

Bottom line: A new private solar industry association could bring fresh impetus to solving an ongoing trade dispute between China and the west over state subsidies.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

June 18, 2014

SolarCity Buys Silevo for $200 Million, Plans GW Factory in NY

Meg Cichon

Silevo's Triex Solar Technology
In an effort to further streamline its solar business and lower the overall cost of solar energy, SolarCity (SCTY) announced today that it would acquire high-efficiency cell manufacturer Silevo for $200 million. In an effort to scale up the technology, SolarCity plans to construct a 1-GW manufacturing facility located in Buffalo, New York within the next two years.

The solar leasing company acquired mounting company Zep Solar in late 2013 in an effort to further vertically integrate its business. Now, chairman Elon Musk explained SolarCity’s imminent need for more, and cheaper, solar panel production, which he expects to reach “tens of GW” annually. “We thought that there was a risk of not being able to have the solar panels we need to expand [SolarCity] long-term…[When considering] the rate at which solar power is advancing, the amount of panels that are being made at a large scale today is really not fast enough,” he said during a conference call.

Musk emphasized the need for not only increased panel production, but a focus on advanced panel technology, which is what SolarCity believes that Silveo has to offer. A combination of higher volume and increased efficiency will “have a dramatic impact on solar and in particular be able to have solar power compete on an unsubsidized basis with the fossilized grid,” said Musk. “It is critical that you have high-efficiency solar panels and a total installed cost as low as possible.” 

The Technology

After reviewing dozens of companies, SolarCity ultimately decided to pursue Silevo due to its proven technology and manufacturing success. Silevo uses what it calls “triex” technology to create a crystalline-amorphous hybrid cell, which creates a tunneling oxide and amorphous silicon layer. These layers allow increased temperature tolerance and lead to a high efficiency that currently stands at 21 percent, but SolarCity hopes to reach 24 percent within the next couple of years. The manufacturing process also uses copper electrode metallization rather than silver, which leads to lower costs.

Watch Ucilia Wang discuss Silevo’s technology with then-vice president of business development and marketing Chris Beitel at the 2012 PV America Conference here.

SolarCity co-founder and chief technology officer Peter Rive explained during the conference call that the Silevo technology compares well to standard cells in the 17-18 percent efficiency range and thin film in the 13-14 percent range. While SolarCity’s goal is to eventually reach 24 percent, Rive also noted that 26.4 percent is possible with ground-mounted and tilted flat roof systems due to the technology’s bifacial nature, which means it can absorb sunlight from both sides of the panel.

Rive explained some of the advantages of higher efficiencies with a common residential rooftop system comparison: “Consider a typical 6-kW system with standard efficiency panels and then picture that same system with 24 percent efficiency tri-cell,” he said. “Currently the system requires 24 panels, but the triex-module will require 18 panels. So it requires less labor, less mounting, less wiring, and so on.”

Big Manufacturing Plans 

SolarCity is currently in discussions with the state of New York for its manufacturing facility. According to Rive, its initial target capacity is 1 GW within the next two years, making it one of the single largest solar panel productions in the world, creating thousands of local jobs. Groundbreaking is expected to happen very soon, according to Musk. Silevo currently has a 32-MW factory in China.

When comparing the relative costs of domestic vs overseas manufacturing, said Rive, “we believe that at scale we can achieve a competitive cost domestically as a result of having lower energy costs, avoiding import tariffs, a highly automated manufacturing facility and the fact that the triex cell has less labor content per module due to higher efficiency.”

The Silevo technology can be manufactured with off-the-shelf equipment from the semiconductor and flat-panel display industries and standard wafers, according to Rive. SolarCity also plans to open a research facility in silicon valley to ensure that it meets and even exceeds its efficiency targets.

When all is said and done, SolarCity will be one of the most vertically integrated solar companies in the world, spanning module manufacturing, installation, operations and maintenance, and energy sales. “What I am excited about is when we combine engineers at Silevo, Zep, and SolarCity to tailor manufacturing for all solar panels so they are specifically ready for installation,” said Rive.

Though the company does not have current plans to pursue any of the missing pieces to its vertically integrated puzzle, such as inverters or power optimizers, Musk said that they are open to suggestions and constantly looking to pursue the ultimate goal of the industry — to lower the cost of energy.

“We intend to put a lot of effort R&D on the panel side, into the hardware that we already own, and into inverter and battery technology to provide an overall solution to provide electric power at a price less than fossil fuels that are burdening the grid – that is the key threshold,” said Musk. “The demand grows exponentially as price drops, and it will grow at an enormous pace if we compete with grid electricity with no incentives. That is and has been the goal in order for the world to have sustainable energy."

Meg Cichon is an Associate Editor at, where she coordinates and edits feature stories, contributed articles, news stories, opinion pieces and blogs. She also researches and writes content for and REW magazine, and manages social media.  Formerly, she was an Associate Editor of ideaLaunch in Boston, MA. She holds a BA in English from the University of Massachusetts and a certificate in Professional Communications: Writing from Emerson College.

This article was first published on, and is republished with permission.

SolarCity Soars On Silevo Aquisition

Silevo's Triex Solar Technology
By Jeff Siegel


SolarCity Corp. (NASDAQ: SCTY) has signed a deal to acquire Silevo, a solar panel technology and manufacturing company on June 16th.

With Silevo now in the fold, SolarCity is in discussions with the state of New York to build a new manufacturing plant with a targeted capacity in excess of one gigawatt – within two years. Upon completion, this will be one of the largest solar panel production plants in the world.

Although there are plenty of manufacturers in the marketplace today, this exclusive deal gives SolarCity access to a wealth of standardized product at a very attractive cost.

Here's what SolarCity reps had to say. . .

Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.

SolarCity was founded to accelerate mass adoption of sustainable energy. The sun, that highly convenient and free fusion reactor in the sky, radiates more energy to the Earth in a few hours than the entire human population consumes from all sources in a year. This means that solar panels, paired with batteries to enable power at night, can produce several orders of magnitude more electricity than is consumed by the entirety of human civilization.

Even if the solar industry were only to generate 40 percent of the world’s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world’s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.

Clearly, the market was pleased with SolarCity's announcement. The stock soared more than six percent in morning trading. Of course, the stock is also down considerably from its March, 2014 high of more than $77.

I actually commented on this about a month ago, noting that it was time to buy shares. I remain bullish on SolarCity and continue to stand by my one-year price target of $85.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

June 15, 2014

RGS Energy: Tempered, Opportunistic Growth

Garvin Jabusch

Kam Mofid has a more long-term vision than most CEOs. His emphasis on the next earnings per share (EPS) report and his obsession with short-term focus are minimal relative to America's typical boss. He's not primarily managing to the next quarter.

His company, RGS Energy (ticker symbol: RGSE), is a solar-module installer, mainly in the residential vertical. RGSE doesn't directly compete with most solar panel manufacturers. Instead, it provides residential rooftop installation distribution for them. It then captures lease payments and revenues from selling excess electrical generation to the grid (in states that allow it). Whereas First Solar (FSLR), Canadian Solar (CSIQ), and Sun Edison (SUNE) are primarily engaged in module manufacturing and commercial and utility-scale installations (although not exclusively -- this is a fast-evolving area), RGS Energy and its larger competitor SolarCity (SCTY) are all about home/residential installations. For now, only three residential installation players have national reach: SCTY, RGSE, and Vivint, Inc. (Vivint is privately held and not discussed here).

RGS Energy Logo

RGS Energy was once the idealistic brainchild of green-oriented consumer -goods firm Gaiam, Inc. (GAIA), and was then known as Real Goods Solar. Mofid joined in 2012, soon after RGSE was spun off from its parent, and quickly moved to modify the makeup of the board, diversify the shareholder base, and "move away from the hippie business mentality," bringing on a number of individuals with practical experience and track records of delivering successful businesses.

Pragmatically, RGS Energy didn't become a true competitor to SolarCity until Mofid joined the company. Not that Kam Mofid and his team are necessarily trying to catch SolarCity in terms of scale or market share. They believe their industry's growth potential will generate enough market share to go around. In Mofid's words, "there's plenty of work to do." Since residential installations don't require any new land development, rooftops are effectively brownfields, and as such represent a great low-impact source of electricity. And Mofid sees many greenfield opportunities in those brownfields.

Whether via smart strategy or just good timing, Mofid and his team have had benefitted from observing SCTY's successes and encounters with pitfalls. SCTY in many ways has paved the way in the residential installation business, and RGSE has had a bird's eye view of the process -- stumbles and all.

As a result, RGSE has chosen not to directly emulate SCTY. In Mofid's opinion, that company is taking on inappropriately high risk. In particular, Mofid thinks SolarCity is banking too heavily on its retained-value-model and being too aggressive in terms of assumed value of solar modules after 20 years of depreciation and continuing technological innovation. Learning from SCTY's success and risks with this model, RGSE will soon no longer rely on tax-equity concepts, reflecting a belief that retained value made sense in the past but no longer applies in "2014 thinking." Already, RGSE has incorporated lower tax value into its growth model as a risk control.

Mofid is not as sanguine as SCTY is about the retained-value-model of valuing solar panels. He also believes that SolarCity is in general too aggressive and too eager for risk -- not only in poor potential realization of retained value of installations but also, and perhaps more importantly, in the "deteriorating policy and subsidy environment in the U.S.," and on a state by state basis.

In any fast-growing industry where the name of the game is to capture as much emerging territory as possible, it's always a struggle to manage between top line growth vs. EPS. Here, RGSE, like SCTY, has chosen to invest in growth at the expense of current EPS, but in a more conservative way than SCTY. As Mofid says, "meaningful GAAP revenue is possible soon with our model."

There is not yet a clear winner between the more and the less aggressive strategies, not that there needs to be. That two of the three largest solar installer companies in the U.S., SCTY and (the much smaller) RGSE, each employ one of these approaches means that a public equity investor can get exposure to both and not have to choose between methods. This is fortunate, because it's possible that both the rapid and the measured growth strategies could turn out to be winners. We like both the high-growth SCTY and the measured-growth RGSE, as each brings interesting and potentially valuable characteristics. Another benefit of investing in both approaches: Not only do RGSE and SCTY employ different approaches to managing growth but they also don't operate in many of the same states. However, for investors who find SCTY's all-out-for-growth approach too aggressive, RGSE may represent a more temperate alternative.

The residential installation market is new and growing fast, so larger players with more access to capital have a major advantage over smaller, locally based firms, both in ability to leverage pricing, engage more projects, and have the flexibility to emphasize growth in states with the most favorable conditions for the solar installation business. This last point is more important than it may seem: Many areas, under the sway of the local public utility commission and the monopoly or near-monopoly of electric utilities, can, or have, or may at some point attempt to stall growth in solar with policies unfavorable to the industry. A national model diversifies and mitigates this risk. Ultimately, as renewable energies cause overall electricity prices to fall, sentiment will cause states and utilities to relent, which will ultimately help solar and wind all along their value chains, but until then, geographic diversity is going to be key. RGSE currently operates in 16 states.

Mofid has a goal of becoming and remaining at least the third-largest installer nationally. His understanding of the scope and depth of the solar installation market in the U.S. shows strongly here: He is content to capture 1/10th of that rapidly growing business.

So RGSE is now beginning to take steps to accelerate growth. Primarily, this is taking the form of a financing joint venture called RGS Energy Asset Management, owned with Altus Power America Management. Goldman Sachs (GS) has agreed to provide capital access for the JV, but Mofid didn't address the terms or scale of its involvement. (Goldman evidently likes installation diversification as much as we do: They are also major capital providers to SCTY.)

RGSE has a couple of other sources of and access to capital. First, the firm currently has no long-term debt, only a revolving line of credit with Silicon Valley Bank that it pays down to zero at the end of each quarter. Long-term debt financing does appear to be in the cards going forward, though. As Mofid says, with respect to expansion, "there will be a debt aspect". Second, they have a $200 million mixed shelf filing reserved to fire growth (acquisitions and capital) when they perceive an opportunity.

Near-term, Mofid feels the industry has now and will continue to have access to state and federal incentives at least until 2016. After that, incentives most likely won't go away, but may drop by some meaningful percentage. So Mofid projects the solar installation industry will have record growth through 2016, then slow a bit, which concurs with our own view of the situation.

When asked what RGSE's key risks involve, Mofid gets more macro. Utilities present a patchwork, he says: "some good, some quite bad" (he says RGSE's home state of Colorado, for example, is currently a tough environment), so, again, a national model is key to offset that risk. As a result, the residential installation industry will likely experience both consolidation and failures of local installer firms, providing growth-by-acquisition opportunities for all three major, multistate players.

Regarding tariff risk involved with buying modules from Chinese manufacturers, Mofid sees the additional costs as "very low" relative to his business at $0.02 to $0.05 per watt (I note here that this actually presents meaningful inflation for utility scale plant developers that depend on Chinese prices, but that's a different discussion). Moreover, RGSE buys from multiple panel manufacturers, and most of these are positioning themselves to make and ship from plants outside of China (via possible additional manufacturing capacity in Mexico, for instance).

Manageable as Mofid sees them for now, there are definite political risks involved with being a solar installation business in the U.S., including states' regulations, utilities' intransigence, and national tariffs. Investors should consider their view of national and local policymaker sentiment toward renewables when assessing risks associated with an investment.

And perhaps those risks explain RGSE's recent lackluster share performance and high short interest of late. On the latter, RGSE has recently hired a professional short interest monitoring service to report violations of shorting rules (such as naked short selling) to FINRA. This may have the effect of dissuading unscrupulous shorters, but I doubt it. I'd rather see RGSE spend capital growing, and silence the critics that way.

There's also been bad press regarding RGSE's recent Hawaiian acquisition, Sunetric. And not without reason -- Hawaii presents other risks and opportunities. The business pipeline there is mostly comprised of commercial demand, so residential firms may face declining business and ultimately attrition, potentially including RGSE. But this may also mean larger firms with geographic diversity away from the islands and some staying power may be able to consolidate market share. It's too soon to tell.

That said, the Hawaii deal reveals some RGSE strengths. Mofid and team were willing and able to move nimbly from a cash/equity deal to an all-equity deal as the situation with Sunetric evolved. The Sunetric acquisition is interesting for another reason. Mofid says RGSE is, again, like SCTY, becoming active in the solar-to-storage space, and he thinks they can use isolated, contained-grid environment and expensive-utility bill center Hawaii as an ideal proving ground for perfecting a business model that can work. And the two residential installation firms aren't the only ones who think the panel-to-storage model will work. As Barron's recently reported, "Barclays this week downgrades the entire electric sector of the U.S. high-grade corporate bond market to underweight, saying it sees long-term challenges to electric utilities from solar energy… and recommends investors who can do so should underweight the electric sector versus the broader U.S. Corporate index, and rotate out of bonds issued by utilities in areas 'where solar + storage is closer to competitiveness.'" RGSE is looking at both Hawaii and California markets for the solar+storage model, and they will look to "innovate into those services as technology comes on line."

SCTY has a major advantage over RGSE in the storage race due to its sisterhood with Tesla Motors (TSLA) and its forthcoming Gigafactories, which may produce high-quality batteries for as little as 60 percent of the cost of other manufacturers. But this doesn't mean RGSE can't make significant progress with the same model, especially in states where SCTY is not present.

Similarly, RGSE plans to keep expanding within its existing markets. Where there is no strong local player, RGSE can establish its brand and presence de novo; where there is a local brand that is already valued by the community, there could be opportunities to acquire installers with their infrastructure, employees, trucks, and sales pipelines. Mofid mentioned twice that the residential solar installation space is still in its "constantly evolving," "Wild West" stage, and that keeping a war chest (no debt yet, shelf filing) ready for his "best opportunities" is his approach. It's hard to disagree with this, and yet we can't help but wonder whether he shouldn't be deploying his war chest a little faster; sometimes the largest risk is the one you don't take, and residential solar installation won't be an immature market forever.

When we asked whether sitting on the "war chest" of unused shelf offering and zero debt is itself a risk, Mofid sidestepped. While he did affirm their forward guidance, he gave little insight on a concrete path toward achieving this guidance, offering only, "we're gonna keep doing what we're doing." What we can glean from regulatory filings and conference call transcripts reveals only a bit more clarity. Important components for RGSE's roadmap include establishing new funding vehicles for project financing (that may or may not be part of the current JV), which must be an essential aspect of the plan to move away from relying on tax equity in financing and bankrolling ongoing business operations.

Mofid clearly passionately feels that the industry is compressing, and small installers will be pushed out, leaving space for companies like RGSE to move in with their larger bankrolls and resources to capitalize on the vacuum. For now, RGSE is estimating 50-55MW installed capacity in 2014, but it's not clear if this includes the acquisition of smaller private solar firms.

In any event, "what we're doing," for now, also seems to include expanding installation capacity via acquisitions. The last four of the company's buys were paid for primarily with RGSE shares; so far, Mofid seems to be taking a bet on dilution over debt. And it appears that RGSE is about as petal-to-the-metal as it can realistically be at this point: Mofid noted that the company's final acquisition in 2013 slowed its plans down significantly as it dragged on through the first quarter of 2014. It seems that RGSE has capacity to take deals one at a time, but not faster. And evidently, this suits their temperate growth model fine.

We asked Mofid if the confluence of new efforts to grow, emphasizing states where SCTY is not already present, and having not yet taken on any debt means RGSE is beginning to position itself as a possible acquisition target. Mofid says they have no current focus on becoming part of a larger peer such as SCTY or any other potential bidder. Further, since Mofid claims "there will be a debt aspect to our growth plan," it seems the zero debt balance sheet will at some point give way to the desire to expand. Still, while not currently courting suitors, Mofid admits that "everything is for sale."

Between now and 2016, both SCTY and RGSE are likely to accumulate small local installers within a chaotic environment of consolidation, regulatory changes and price fluctuations. It may well be that some panel manufacturers and utility-scale players such as SunEdison (SUNE) and SunPower (SPWR) are waiting for the residential space to sort itself out before deciding to make offers for firms like RGSE, which could then act as verticals to get their panels into the U.S. residential market.

Acquisition target or not, we see no reason why RGSE should not realize market capitalization growth to about eight to 10 percent of that of SCTY. As of the time of this writing, that implies a 300 to 400 percent upside for the stock, not counting 2015/2016 growth. Thus, we feel comfortable placing a $10.00 2015 price target on RGSE. And considering the rapid growth of the industry, higher valuations than that going forward from there are Mofid's to lose.

Background notes on Kam Mofid:

  • Canadian-born, from the Niagara Falls area
  • Undergraduate degree from University of Waterloo
  • Was a fellow at GM Canada, sent to
  • Georgia Tech for his masters
  • Strong engineering and primarily automotive background
  • 29 year old exec at UTC
  • First non-founding president at REC Solar
  • In 2011, brought over to MEMC (SUNE), just in time for the solar market crash
  • In July 2012, RGSE called Kam with CEO opportunity
  • RGSE at that time was controlled by GIAM, and had very low trading volume. Mofid turned over the board and diversified the shareholder base, now 17% owned by a Boston PE firm via several rounds of share issuance
  • He hasn't sold a single share of his holdings yet
  • Has little professed regard for analyst/commentators who write negative things about companies he leads -- he feels most focus too much on short-term results at the expense of long-term shareholder benefits

RGSE Suppliers:

  • Panels: CSIQ, STP, and several others. RGSE does not utilize long-term purchase requirements
  • Inverters: Fronius and several others (no share with question)
  • Racking: Uni-rack

– HQ Visit, May 22, 2014

Jeremy Deems, Robert Muir and Jake Raden contributed research for this post.

Disclosure: Green Alpha® Advisors has current positions in RGSE, SCTY, SPWR, FSLR, CSIQ, SUNE, and TSLA. Green Alpha has no holdings in or near-term intention to buy any other company mentioned in this post.

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha ® Next Economy Index, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club’s green economics blog, "Green Alpha's Next Economy."

June 07, 2014

Trina Joins Solar Fund Raising Queue

by Doug Young

Just a day after the solar panel sector was hit by a new negative trade ruling from the US, Trina Solar (NYSE: TSL) gave its investors another unwanted surprise with word that it is preparing to raise more than $200 million through a combination of new stock and bond offerings. Trina joins a growing list of solar panel makers that are looking to western capital markets as confidence returns to the sector following a prolonged downturn dating back to early 2011.

The fact that Trina and others are turning to western capital markets to obtain funding is probably a good sign overall, as it means these companies are healthy enough to raise their own money rather than relying on handouts from Beijing. But western investors are showing such money won’t come cheap, with Trina’s shares tumbling after it announced its plan.

In fact, shares of all the solar panel makers fell in the latest trading session on Wall Street, after a ruling from Washington laid the groundwork for new punitive tariffs on Chinese panels. (previous post) Shares of Trina, as well as Yingli Solar (NYSE: YGE), ReneSola (NYSE: SOL) and Canadian Solar (Nasdaq: CSIQ) were all down 4-6 percent in the trading session after the news.

But Trina shares fell another 4 percent in after hours trade after it announced its newest fund raising plan, meaning the company has lost nearly 10 percent of its value in the last 24 hours. Trina actually issued 2 separate announcements, starting with one detailing plans to issue $150 million in convertible bonds. (company announcement) That was followed by another announcement that it would issue 8.8 million new American Depositary Shares (ADSs). (company announcement)

Based on Trina’s latest closing price before the 2 announcements, the company could raise around $100 million from the share offering, bringing its total fund raising to around $250 million through the 2 different plans. There’s nothing else of major interest in the announcements, though Trina did say it could raise up to an additional $40 million if overallotments for the 2 plans are exercised.

Trina’s plan makes it the latest of China’s major solar panel makers to tap western capital markets for much-needed new funding. Last month Yingli raised a more modest $83 million through the issue of new shares. (previous post) But the company ultimately had to sell the shares for 20 percent less than its stock price before it announced the deal, reflecting the skepticism many western investors still feel towards solar panel makers. Canadian Solar has also raised $200 million through its own offerings of new stock and debt.

As I’ve said above, one could interpret these latest plans as a positive development because they signal a level of confidence that the companies feel about their near- to mid-term prospects. But growing protectionist sentiment in some of the world’s major markets makes these companies’ prospects look shaky at best.

The US ruling this week is just the latest in a growing series of protectionist moves against solar panel makers. China responded to earlier US tariffs with retaliatory moves against American makers of polysilicon, the main ingredient used in solar panel production. India has also taken its own recent protectionist moves, and Japan is taking similar though less obvious moves by refusing to finance projects that use non-Japanese solar cells.

Shares of the solar panel makers all staged a huge rally last year, as companies finally returned to profitability and signs emerged that the trade wars could be easing. But many shares have begun to retreat this year, and more downside is likely ahead if companies start to report they are feeling effects of all the protectionist moves happening in the market.

Bottom line: Trina’s new fund-raising plan is the latest sign of growing confidence in the recovering sector, but a fresh series of protectionist moves could put a damper on the turnaround.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

June 04, 2014

US Closes Solar Tariff Loophole

Doug Young


In a move that should surprise no one, the US has announced it will levy new punitive tariffs on China-made solar panels to close a loophole from an earlier ruling. This move won’t help anyone and could seriously stifle the industry’s development just as it starts to emerge from a prolonged downturn. It also looks worrisome from a broader perspective for Chinese panel makers, since signs are emerging that their products could also be shunned in Japan and India, 2 of the world’s other promising emerging markets for solar power plant construction.

I’ll return to the Japan and India angle shortly, but let’s start with the latest news that comes in the form of a new ruling by the US International Trade Commission (ITC). (English article) A panel recommended earlier this year that the ITC should levy anti-dumping tariffs against Chinese solar panels that were made with cells produced outside the country in places like Taiwan. Such cells are the main component used to make finished solar panels.

The ITC had ruled in 2012 that Chinese solar panels received unfair government support through policies like cheap loans from state-run banks and export rebates, and imposed anti-dumping tariffs against the products. But the Chinese manufacturers used a loophole to skirt the punitive tariffs, which didn’t apply to panels that were made using solar cells manufactured in other countries. Now the ITC is moving to formally close that loophole with this latest ruling.

Under the new preliminary ruling, the US Commerce Department has recommended preliminary duties of up to 35.21 percent on Chinese-made panels that had avoided the punitive tariffs through the loophole. Some duties are a bit lower, with one report pointing out that panels from Trina Solar (NYSE: TSL) will be subject to punitive tariffs of 18.56 percent. Actual amounts could differ slightly, but I do expect the tariffs will get finalized later this year and deal a new blow to the Chinese panel makers.

We’ll probably see a flood of disappointed statements from the Chinese panel makers soon, and Germany’s SolarWorld (SRWRF), which has initiated most of the complaints, was quick to issue its own praise for the latest decision. (company announcement) There’s still time for the 2 sides to negotiate a settlement before the tariffs are finalized, which is what happened with a similar complaint in Europe last year. But based on the recent climate of hostilities between the US and China, I doubt we’ll see such conciliatory actions take place.

This latest US move, while quite expected, is casting yet another shadow over solar panel makers just as it appeared the sector’s woes from a recent supply glut were in the past. India announced late last month it would levy anti-dumping tariffs against Chinese and US solar panels, in what looks like a highly protectionist move to promote its small homegrown industry. (previous post)

Meantime, I’m hearing that Japanese banks are making similarly protectionist noises by refusing to finance any new solar power projects in Japan unless they use panels made by local companies. That’s certainly not a positive sign, since Japan is quickly emerging as one of the world’s biggest hot spots for new solar plant production as the country seeks to diversify from its previous heavy reliance on nuclear power.

At the end of the day, all of these protectionist measure will slow development of the global solar sector. US and European companies should enjoy relatively free access to each others’ markets, and Chinese and Japanese companies will inevitably dominate solar power building in their respective home markets. But lack of competition means prices will probably remain artificially high in many of those markets, making construction of new plants less commercially attractive than it would be under a more competitive environment.

Bottom line: The latest US anti-dumping ruling against Chinese solar panels is the latest sign of a rapidly emerging protectionist mentality in the sector, which will keep prices artificially high and stifle development.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

May 24, 2014

SolarCity: Fanning the Flames

by Debra Fiakas CFA

SCTY residential solar.pngSolar power installer Solar City (SCTY:  Nasdaq) has attracted a swarm of shareholder lawsuits in recent weeks.  The stock is trading at a price level 44% below its 52-week high of $88.35 set in February 2014.  That has to be disheartening for those who were on the wrong side of the trades at those lofty levels. 

In February when traders were bidding $88 and change for SCTY, the stock was trading at about 50 times revenue and 47 times cash flow from operations.  Of course, since the company had yet to produce a profit, the price/earnings ratio was negative.  What was it about those valuation metrics that looked appealing?

From a technical standpoint SCTY shares had begun to look precarious even before the end of December 2013.  For example, the Commodity Channel Index (CCI) began signaling that the stock had entered overbought territory as early as the third week in December.  I frequently use the Moving Average Convergence/Divergence (MACD) line in combination with the CCI to make certain higher highs are not still in on the way.  Even with that nuanced analysis, the show appeared over by the end of January 2014.  Granted as the temperatures dropped in February, trading in SCTY was hotter than ever.  Unfortunately, it was more flame-out than solid price appreciation as the stock has been on a steady decline ever since.

So now that the stock price re-entered the atmosphere, is it a better value?  First quarter 2014 results, did not change the profitability picture for Solar City.  The company is still reporting substantial expenses that eat up profits.  However, in the twelve months ending March 2014, the company turned sales of $197 million into $150 million in operating cash flow.  The current price level near $50 per share implies a multiple of 30.7 times operating cash flow.  That is still rich, but an improvement from three months ago.

In one of my last posts on Solar City in March 2013  -  I suggested that management needs to spend a bit more time in explaining the company’s business model and a bit less time fanning the flames under the trading of its stock.  Apparently, they did not listen.  Analysts following Solar City do not expect the company to report a net profit any time soon, but it is clear the company has conjured a business model that generates positive cash flow.  Despite reporting net losses, the company has the cash resources to grow.  Management needs to fan the flames under that story.  The stock may not experience one of those dramatic climbs again, but there might be fewer lawsuits.

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

May 22, 2014

Investing In Solar Innovation

By Jeff Siegel

The road into the digital age has been paved with innovation. Everyday items have been electrified with panels and displays for endless possibilities of interaction.

Automobile windscreens, household appliances, even walls and furniture are lighting up all around us, wired with sensors and displays that receive and transmit information.

It seems the only surface left to electrify on this road to an everything-digital future is the roadway itself. Some folks believe one day soon, your local road network could be carrying not only the flow of vehicle traffic, but torrential flows of digital data and electricity as well.

Of the more than 4 million miles of roadways in the U.S., some 2.65 million miles are paved — occupying nearly 12,000 square miles of land, or about the area of the entire state of Maryland.

Now imagine if you covered that area with panels that are something of a cross between solar cells and digital displays. What you would have is an electrified road that generates enormous amounts of electricity from the sun’s rays by day, provides perfectly lit road markings by night, and keeps streets snow- and ice-free even on the coldest of days.

Slippery When Wet?

The brainchild of electrical engineer Scott Brusaw and his wife, the Solar Roadways system uses glass panels in the shape of hexagons that link together to coat the surface of roads, parking lots, and driveways.

Some folks question the safety of such a system. After all, glass is fragile, and no one would want to drive over sheets of glass, especially when wet.

But these panels have been specially designed to withstand more than normal amounts of weight and wear on even the busiest of city roads, with no loss of traction.

Embedded under the top layer of tough glass are arrays of photovoltaic panels that convert the sun’s rays into electrons. The electricity generated by the road panels can be stored in batteries during the day for powering street lighting at night, as well as augmenting the electrical needs of homes and businesses lining the street.

As well, heat cells can be used to warm the panels’ surfaces to melt ice and snow, keeping the road surface clear in adverse winter weather.

They could even be used to carry digital signals, including phone, television, and Internet data. No more digging up the road to install new cable lines.

Even overhead power lines could be eliminated, as electric power from power stations would be transmitted into homes and businesses via the Solar Roadway network.

Sounds Fantastic!

A series of important markers in the development of the Solar Roadway have already been established, including recognition and awards from GE (NYSE: GE), Google (NASDAQ: GOOG), the World Technology Award, and the IEEE Ace Awards.

Brusaw has also attracted attention to his electric road through speaking engagements at TEDx, NASA, and Google-sponsored Solve for X.

Funding milestones include the awarding of a two grants from the U.S. Federal Highway Administration, as well as contributions from a crowdfunding campaign on Indiegogo. The funding has paved the way for a prototype installation.

All in all, this sounds fantastic. But I have to be honest: Based on all the amazing and wonderful technologies I've seen fall through the cracks or blow up in investors' faces over the past two decades, I'm extremely skeptical that this thing will ever get off the ground.

Not only are you talking about working with a giant bureaucracy to transition miles and miles of roads — which alone would take at least a decade to cut through all the red tape — but if we can't fund basic infrastructure needs, you really think the government's going to be able to pony up for something like this? Especially considering that we're talking about solar here — the scapegoat for decades of flawed energy policies.

The truth is, we've been down this road too many times before. And as much as I love the idea of solar roadways, I wouldn't get too excited about this one. I sure as hell wouldn't invest in it, either. The fact that these folks crowdfunded through Indiegogo tells me there probably wasn't much smart money interest to begin with.

Look, if you're that hyped up about investing in the burgeoning solar space, stick with what you know works. Stick with companies that actually generate revenue. SunPower (NASDAQ: SPWR), SolarCity (NASDAQ: SCTY), even an alternative energy REIT like Hannon Armstrong (NYSE: HASI).

Point is, while immediately discrediting new technology does nothing to stoke the fires of innovation, throwing money at untested technologies and unrealistic goals hoping for a quick payoff will only leave you broke and angry.

And that's no way to live.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

May 21, 2014

Private Equity Giant Eyes Chinese Solar

by Doug Young

Following reports last month of the imminent formation of a major new private equity investor, media are now saying the company, China Minsheng Investment, has formally registered and is gearing up to make its first investments. The new company certainly has the resources and connections to quickly become a major player on both the domestic and global private equity scenes, with an initial 50 billion ($8 billion) in registered capital. Now it appears the company will start by helping to consolidate China’s embattled solar panel-making sector, which will become its first focus area.

According to the latest reports, Minsheng Investment formally completed its registration on May 9 in Shanghai, which is where several of its founding members are based. (Chinese article) One of its founders is Dong Wenbiao, chairman of Minsheng Bank (HKEx: 1988; Shanghai: 600016), China’s first privately funded bank. Previous reports said other Minsheng Bank officials would also invest in the new company. Another partner is Lu Zhiqiang, chairman of Beijing-based China Oceanwide, one of the country’s earliest conglomerates set up back in 1985.

Dong Wenbiao will act as chairman of the new company, while another Minsheng executive Li Huaizhen will be the general manager. The report adds that many of the new company’s other top executives will also come from Minsheng Bank. That’s a positive sign since Minsheng is considered one of China’s more entrepreneurial banks due to its private status, meaning it’s less likely to make decisions based on political considerations.

That said, many of the company’s top officials also have strong government connections, and its decision to focus initially on the solar panel sector also seems to have some political overtones. Beijing decided about a decade ago to strongly support the sector by offering a wide range of government support, in a move that quickly propelled China to become the world’s largest solar panel producer with more than half of the global market.

As with similar cases in China, many companies that flocked to the industry were state-run firms that had little or no experience in the sector but were simply rushing to help fulfill Beijing’s latest policy directive. Many of those facilities have been losing big money for the last 3 years, after the sector plunged into a prolonged downturn due to huge overcapacity created by the rapid China build-up.

Early signs last year seemed to indicate Beijing was preparing to engineer a consolidation for the sector, using the policy lender China Development Bank as the main driver. But such a unified rescue plan never came, and instead the market has so far seen a trickle of bankruptcies for big names like Suntech (OTC: STPFQ) and LDK Solar (OTC: LDKSY), and occasional acquisitions of smaller companies by big remaining players.

Beijing has indicated it won’t come to the rescue of bigger players like Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ), which are relatively healthy and can still raise limited money from overseas commercial sources. (previous post) But there are still dozens and probably hundreds of smaller state-run operations that are losing massive money and could become good acquisition and consolidation targets for the new Minsheng Investment.

We’ll have to wait and see how exactly Minsheng Investment proceeds, but I would expect it to move quickly following its recent registration and make its first acquisitions in the next few months. Most of those are likely to come at bargain prices, and the company could use its large cash pile to quickly assemble one or two major new “companies” with assets across China.

It would most likely shut down many of the weakest operations and move their best manufacturing assets into one or two single locations. Such an approach could produce an asset or two that would make an attractive purchase for Canadian Solar, Yingli or one of the other bigger remaining players in the sector, or even a foreign buyer. I would expect Beijing to provide financing for such a deal, which could come as soon as next year if Minsheng’s consolidation plan moves ahead.

Bottom line: Newly formed Minsheng Investment could become a consolidator for China’s smaller money-losing solar panel makers, assembling a new asset for eventual sale to one of the bigger remaining players.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

May 16, 2014

The Solar PV Shipment Shell Game

by Paula Mints

Outsourcing has been a common practice in the photovoltaic industry since…always. Ignoring it in favor of reporting higher shipment numbers has been a common practice since…always. There is more outsourcing now than there was ten years ago because the industry is bigger. When the PV industry was at megawatt levels, outsourcing was at megawatt levels. Now that the industry is at gigawatt levels, outsourcing is at gigawatt levels. Today’s outsourcing is also more acceptable — in the past everyone did it quietly, today it is out in the open. Yet despite this openness and acceptability, double counting continues and the industry continues to be oversized.

Figure 1 presents the various metrics that make up the PV industry during a calendar year with the exception of grid connections.  These metrics are supply and demand inventory, commercial capacity, production, shipments, installations and defective modules.  Think of production and shipments as conducting a little dance in and around inventory levels. That is, production can be lower than shipments depending on inventory levels. Production can also be misreported, that is, shipments are sometimes used as a stand-in for production and vice versa. In breaking industry activity down into its various components (except for grid connections) it appears as if should be easy to correctly size the PV industry's annual activities. Nope. 

Figure 1: PV Industry Metrics, 2013

The Shipment Counting Shell Game

A shell game is a now-you-see-it-now-you-don’t trick of evasive maneuvering.  The rules (such as they are) consist of this: there are three cups and one small object such as a stone. The stone is placed underneath the cups, the cups are shifted around and everyone places bets as to where the stone will end up. 

Shipments of PV cells/modules are counted in order to arrive at the correct business size of the industry during a specific calendar year.  The point is to accurately size the megawatts based on the technology developed and manufactured at point A followed to its arrival at point B; everything from point B on is a new count.

Most manufacturers buy from other manufacturers and many include what they buy as their own production or in their shipment count.  Manufacturers with wafer capacity and module assembly capacity send out their wafers for tolling and then assemble the cells in modules in-house. For example, manufacturer A ships 1-GWp of wafers to Manufacturer B who returns 1-GWp of cells to Manufacturer A.  Both manufacturers report shipments of 1-GWp of PV cell technology and the PV industry is oversized by 1-GWp. 

Another way in which shipment numbers are inflated is when subsidiary relationships are unclear and nontransparent. In this case, Manufacturer A ships 100-MWp to a wholly owned subsidiary that may or may not install the technology and may even ship it back to the parent. In this way and over the course of many such exchanges the PV industry can also be oversized, significantly.

Why This Is Dangerous for PV

The PV industry has been experiencing accelerated growth for quite a few years — not always profitably.  It has also been underutilizing its available commercial capacity for quite a few years.  In 2013, capacity utilization for the PV industry was 82 percent — based on shipments to the first point of sale.  This is a vast improvement over the past few years during which capacity utilization fell at times below 60 percent. 

Overtime, the systematic oversizing of PV industry output, whether through outsourcing or through shipping to subsidiaries, has made the industry look significantly more successful than it is and helped (along with too low prices) bring about the end of most of its incentives.  Conventional energy, of course, does not need to worry about its success interfering with its ongoing incentives and subsidies. 

Pragmatically, stakeholders all along the PV value chain have a vested interest in having access to data about capacity, production, shipments and inventory that is as accurate as possible — for business planning purposes.  Successful strategies require good data.  Unfortunately, shipment reporting has often been a matter of saving face and looking successful more than arriving at an understanding of what is really happening. 

Think of it this way: you are wandering through a shopping mall and you come across a map of the facilities with a helpful icon indicating where you are in terms of the other stores as well as your destination.  The helpful icon typically reads: You are here. So, now that you know where you are, you can figure out how to get to where you are going, or, you can decide to go someplace else entirely.  If the helpful icon pretended you were further along, it would not be very helpful.  The point of shipment and production reporting is to offer accurate information as to where the industry is at a certain point in its history so that it can develop a strategy to get where it wants to go.

The PV Industry Is Here

Figure 2 offers capacity, production shipments and inventory from 2008 through 2013.  During this period PV industry capacity to produce commercial c-Si and thin film modules increased by a compound annual 34 percent with production and shipments increasing by a compound annual 44 percent.


Figure 3 presents technology (c-Si and thin film) shipment market shares for 2013.  Crystalline technologies had a 91 percent share of shipments in 2013.

Figure 3: Crystalline and Thin Film Shipment Shares 2013


You Are Here, Where Do You Want To Go?

One problem with outsourcing is that the farther production gets from the original manufacturer the lower the quality gets over time and the bigger an industry gets, the more outsourcing is conducted. Currently there are module quality complaints from Japan, the US, Europe as well as other countries.  In some cases, quality complaints go back seven or eight years (about the time the PV industry surged into gigawatt levels of shipments).  In many cases cells and modules are reshipped so many times that it is almost impossible to pinpoint where the lower standard production began in the first place.  Unfortunately, more than one region is responsible, so, pointing fingers is counterproductive to solving the problem. 

Outsourcing is not going away and, aside from the unfortunate oversizing of the industry, the focus should be on quality.  Back to oversizing the industry, at this vulnerable stage in its always vulnerable history, the PV industry should exert tight controls on both quality and representations of its size so that it can have a clear eyed vantage point from where it wants to go and how to get there.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.

This article was originally published on, and is republished with permission.

May 10, 2014

SolarCity: Sunburn, or Healthy Glow?

By Harris Roen

SolarCity (SCTY) fell 9.1% Wednesday when the company released its first quarter earnings report, but gained all of it back and then Thursday on huge volume. Still, the stock has plummeted 22% in three months, and is down 37% from its highs in February 2014. Is this just a healthy correction from its outsized 400%+ gains from the IPO just 17 months ago? Or have we entered into a new lower trading range more in line with financial realties? This article will analyze current developments to this distinctive energy stock, and project where SolarCity should go from here.


SolarCity Revenues Climb as Profits Fall

SolarCity revenues have been steadily gaining for over a year. Revenues are up 34% from the previous quarter, and are more than double the same quarter last year. At the same time, net income has continued to deteriorate, with losses twice that of the previous quarter. Revenues are not the problem, it is the expense side of the ledger that is keeping SolarCity in the red.


SolarCity Debt

SolarCity’s debt long-term debt is at reasonable levels, and improved slightly this quarter. Total liabilities/total assets fell to less than a percent to 69%. The current ratio, looking at short-term liabilities and assets, deteriorated somewhat, and now hovers around 2.3.

Comparing SolarCity debt levels to other industries poses a challenge because it is a hard company to categorize. We classify SolarCity primarily as a financial company because of the way it interacts with its clients through financing, lease arrangements, notes, etc, and how those instruments appear on the liability side of its balance sheet. Looking at debt for financial companies is different from other sectors because in many ways, their business is debt. Having said that, the chart above shows SolarCity’s current ratio compared to other industries the company is commonly grouped under. The higher the number the better, so SolarCity debt remains under control.


SolarCity Client Ratios

The chart above shows ratios of revenues and expenses per customer for FY 2009 through 2013. 2014 ratios are projected using current rates of customer growth, revenues and expenses. The results show a mixed picture for SolarCity.

Total revenues per customer have been steadily declining. This is to be expected, as SolarCity moves more and more into home and small business installations, revenues per customer get diluted when compared to its larger utility-scale clients. So long as client growth continues at an ample pace, which it has, falling total revenues per customer is not a grave concern.

Net revenues per customer, though still negative, have been steadily improving. In a company’s early stages, net loss per customer should shrink as revenues grow. This has been the case through 2013, and should remain around the same level for 2014. I view this as a very positive sign: the more this trend stays on track, the sooner SolarCity becomes profitable.

On a more negative note, SolarCity’s acquisition cost per customer has risen to over $2,700. It is still below 2010-2011 levels, but has not improved at the pace one would hope. This ratio must be kept under control as SolarCity’s business model hinges on unremitting growth of its client base. Similarly, total expenses per customer are below 2010-2011 levels, but have basically flattened since then.

Glowing Profits or Wall Street Sunburn?


Source: SolarCity Q1 2014 Earnings Conference Call

There is much conflicting analysis of whether SolarCity remains a good investment, or will turn out to be a case of Wall Street sunburn. I was concerned with projected time to profit for SolarCity in my previous article, and that bias remains. Total expenses per customer will need to drop significantly before SolarCity turns a profit, no matter how many customers they add. It could take several years before earnings turn positive.

On the other hand, SolarCity’s business model aims to do just that, bring expenses way down. By recouping the investment in panels in 5-7 years, revenues will continue to flow at essentially no cost for as long as the lease lasts and as long as the sun shines. And if its projections are realized, straight-line growth could mean enormous profits in the future. SolarCity is likely overpriced current levels, but I still remain bullish on SolarCity as a profitable long-term investment.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

May 08, 2014

Flying into the Sun

by Debra Fiakas CFA

Shares of two solar panel producers appeared on one of our favorite stock screens the other day  -  energy stocks that have traded downward to a point they appear oversold.  Trina Solar, Ltd. (TSL:  NYSE) recently closed at $11.22, down 39% from its 52-week high set in early March this year, but well above where the stock was trading a year ago.  RenaSola, Ltd. (SOL:  NYSE) has followed a similar track, recently closing at $2.61 well above its 52-week low. 

The question for investors is whether investors should take advantage of the current price weakness to pick up shares of long-term winners in the solar power race…..or not!

Neither company has reported a recent profit.  RenaSola lost $258.9 million on $1.52 billion in sales in the last twelve months.  Trina Solar reported higher sales of$1.8 billion in the same period, but managed to keep its net loss at a more modest level of $72 million.  The losses came amidst a global shakeout in the industry, allegedly triggered by dumping by China’s numerous solar panel producers.

The half dozen or so analysts who follow these companies seem to think the worst is over.  The consensus estimate for Trina Solar is $0.86 earnings per share in 2014, followed by $1.52 in 2015.  Those estimates are the results of upward adjustments to published estimates made within the last couple of weeks.  Only one analyst has published estimates for RenaSola, but this brave soul also thinks RenaSola is going to report a net profit in 2014 and 2015.

If these solar companies are about to round the corner, it makes sense to load up for long positions at relatively cheap prices.  Or does it?

It is not hard to find viewpoints the solar industry.  For example, industry analysts at the sell-side firm Credit Suisse recently issued a warning on slowing growth in the solar sector.  If they are correct that means the competitive battle is about to go from bloody to gory.  There are hundreds of solar panel producers still operating around the world, with a good share of them located in China.  I believe some will not survive.  I think the ones that are more likely to survive will the among those that 1) have the most efficient and therefore most marketable solar panels and 2) have strong balance sheets with low debt and ample cash.

SunPower (SWPR:  Nasdaq) is widely hailed as the developer with the most efficient solar power technology, that is how well the solar cells convert the incoming solar rays into electricity.  While most solar panels deliver efficiency in the range of 11% to 15%, SunPower has developed panels that have tested at 20% conversion.  What is more SunPower has come up with a multi-junction concentrator that converts a whopping 44% of the solar energy they receive to energy.  When these two modules come into the market place, I would wager it will result in capture of significant market share.

Trina Solar offers solar cells with efficiencies in a range of 12.9% to 16.7%, while Renasola’s efficiency range is 13.5% to 16.0%.  Trina spent $131.7 million on research and development over the last three years or 4.1% of sales during that period.  Over the last three years RenaSola has spent $90.5 million on research and development or 1.8% of sales.

Interestingly, SunPower spent $179.4 million over the last three years, or just 2.5% of its sales to deliver those industry leading efficiency ranges.  It appears both Trina Solar and Renasola will need to step up their respective R&D games to keep apace.

Performance superiority has paid off for Sunpower, which has converted 1.3% of its sales to operating cash flow over the past three years.  Consequently, the company has managed to keep its debt level to a respectable level and its debt-to-equity ratio to 0.74.  Trina has been a net user of cash over the past three years, so it should be no surprise that its debt levels and are higher.  Its debt-to-equity ratio is 1.56.  RenaSola managed to squeeze out positive cash flow in the last three years, but its conversion ratio is less than 1.0%.  RenaSola’s tepid cash flow generation is probably why the company has racked up some debt to the point its debt has built up to 2.48 times is equity.

From these few data points, it might be premature to count RenaSola or Trina Solar out of the solar panel market despite that they do not compare favorably with the industry leader.  Both companies still have ample cash balances.  Coupled with an improving profit picture, some might conclude both have a chance to remain viable competitors in the solar industry.  In the meantime, traders appear skeptical and both TSL and SOL are trading as if the companies are about to fly into the sun and burn.  

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

May 02, 2014

Can't Put Solar On Your House? Four Ways To Invest In Solar Leases

Tom Konrad CFA

Disclosure: I and my clients have long positions in HASI. I have sold NYLD $40 and $45 calls short.

The secret sauce for bringing residential solar into the mainstream is the solar lease.  With the simple value proposition of little or no money down and cost savings from day one, a homeowner does not have to be an environmentalist or green to be interested in the green of a solar lease.  He or she simply needs to live in a state where the combination of annual sunshine and state incentives provide the economics to make solar leases profitable for the lender and installer.

Low interest rates and the rapidly falling price of solar panels have rapidly expanded the number of states where solar leases are available in recent years, so much so that residential solar lease pioneer SolarCity (NASD:SCTY) grabbed 26% of the rapidly growing residential market in 2013.  Of the top five residential solar installers on GTM Research’s 2013 U.S. PV Leaderboard, four offer solar leases.  Commercial solar leases were pioneered by SunEdison (NASD:SUNE) a decade ago, but they only began to transform the solar market place when SolarCity and competitors like SunRun and Vivint Solar began offering them to homeowners.

Solar Gardens

While the opportunity to take advantage of attractive solar economics is expanding rapidly to more states, not every home owner has a suitable unshaded roof.  Those who want to democratize the solar opportunity usually favor community solar farms, also known as solar gardens.  These structures allow community members to each buy a share of a larger central solar installation, receiving credits on their electric bill, as well as a proportional share of the tax benefits. Unfortunately, creating solar gardens requires specific state legislation or action by the local utility or utility regulatory commission, and the difficultly of making such rule changes means that solar gardens are available in far fewer locations and to fewer individuals than solar leases.

Solar Crowdfunding

Solar Mosaic is also working to democratize solar investment through crowdfunding.  The company avoids the complexity of direct investment in solar farms by making loans to solar developers backed by a solar farm’s cash flow.  It then offers pieces of loans to small investors though its crowd funding portal, taking a small cut of the interest to pay for its operations.  While individuals can investment as little as $25, securities laws currently limit this opportunity to accreditied (i.e. wealthy) investors and residents of California and New York.

In practice, an even greater limitation has been the lack of available projects, with only $5.6 million invested in 34MW of projects since the first investment in late 2012.  That is approximately as much solar as 5,683 typical 6kW residential solar systems.

Fortunately, the size and number of Solar Mosaic’s loans has been increasing.  One particularly intriguing forthcoming project is the Mosaic Home Solar Loan in partnership with national installer RGS Energy (NASD:RSGE).  I expect this product will appeal to Solar Mosaic’s investors, since it will finance residential systems.  Financing solar for a homeowner will likely have more emotional appeal than financing a commercial installation on a convention center or school.

Another crowdfunding site, SunFunder, enables individuals to invest in solar projects bringing power to the developing world.  It offers interest-paying investments to accredited investors.  Ordinary investors can participate with loans that earn repayment of principal as well as interest credits in the form of “Impact points.”  Impact points cannot be withdrawn, but they can be re-invested in other projects.

Solar Bonds

It seems likely that it will be some time before Mosaic can get enough solar loans (residential or otherwise) into its system to satisfy investor demand.  Until that happens, and until Mosaic is able to offer investments to ordinary investors nationwide, many will have to look elsewhere to invest in solar installations.

One promising option on the horizon is bonds backed by solar leases.  SolarCity was the first to issue such bonds, with a $54.4 million offering in November of last year.  That offering was 71% backed by residential solar leases, with the balance backed by commercial solar.  They followed this with a 87% residential $70 million offering which closed on April 10th.   Like most green bond issues in recent months, SolarCity’s bonds were only available to institutional investors.  SolarCity has little incentive to offer these bonds to small investors, because demand from institutional investors greatly exceeded supply.

Another company likely to issue bonds partially backed by solar leases is Hannon Armstrong Sustainable Infrastructure (NYSE:HASI.)  This REIT invests in a wide range of sustainable infrastructure, and then issues Sustainable Yield Bonds (SYBs) backed by these projects, but also keeps some on its balance sheet.

Hannon Armstrong’s CEO, Jeffrey Eckel, told me in an interview that he believes Hannon Armstrong is unique in that it explicitly measures the climate emissions reduction associated with each project it invests in.  The first $100 million round of SYBs, issued in December, invested in projects which reduced greenhouse gas emissions by 0.61 metric tons per $1,000 investment.   That means a typical US-based investor with a carbon footprint of 17.6 metric tons per year could offset a year’s worth of emissions with a $28,852 investment in the first tranche of SYBs.  While that is far more than the cost of equivalent carbon offsets, such offsets are a cost, while SYBs are an investment which also pay a competitive 2.79% interest rate.

Investors interested in funding solar leases should be interested in Hannon Armstrong’s future SYB rounds, since the company just signed two deals to fund solar leases.  On April 16th, the company announced a deal to jointly originate and fund up to $100 million financing for distributed solar projects with Sol Systems.  This followed the April 3rd announcement that the company had provided $42 million in debt to fund SunPower Corporation’s (NASD:SPWR) residential solar lease program.

According to Eckel, solar leases tend to have a lower climate impact per dollar invested than most of it other investments, but the impact will be positive for both these investments.

Solar Lease Stocks 

With bonds backed by solar leases mostly being sold to institutional investors, stocks are probably the easiest way for individual investors to gain exposure to solar leases.  Both SolarCity and Hannon Armstrong are retaining a portion of their solar leases on their own balance sheets.  By far the purest exposure to solar leases will come from industry leader SolarCity, while Hannon Armstrong’s exposure to renewable energy projects will always remain below 25%, since this is a requirement of its REIT status.

SolarCity had deployed approximately 380 MW of solar through the end of March.  With a market capitalization of $5.28 billion, that means each $14 dollars invested in SCTY was backed by 1 watt of a solar lease.  In other words, if you’re thinking of investing in SolarCity stock as an alternative to putting solar on your roof, you’re essentially paying $14 a watt.  That is far more expensive than any installation SolarCity has installed.  The typical cost per watt for a residential solar system in California was $5.75 in the fourth quarter of 2013.

While Hannon Armstrong has funded far fewer solar systems, the two deals for $142 million described above should account for about 15% to 20% of its future market capitalization.  If the $42 million for SunPower comes in at $6 per watt, and the $100 million of distributed commercial systems cost $4 per watt, that will amount to a total of 32 MW of solar.  As of the end of 2013, Hannon Armstrong had invested 32% of its capital (or $202 million) in clean energy projects, some of which would have been solar.  If 20% of this was solar at $5 per watt, that would amount to another 40MW of solar.   Putting this together, my best estimate is that each $10 to $20 invested in HASI will include funding for 1 watt of solar, as well as 5 or more watts of wind and geothermal projects and yet more energy efficiency.  Unlike SolarCity, Hannon Armstrong is currently profitable and pays a 6.6% dividend yield at the current $13.34 stock price.

Another yield-focused stock with some investments in solar leases is NRG Yield (NYSE:NYLD.)  This company has a dividend yield of 3.1% at the current stock price of $42.50.  The company owns a mix of thermal and renewable generation, with 34% of its generation from renewables in 2013.  It owns 313 MW of mostly utility scale solar, and 101 MW of wind farms, and has a $2.09 billion market capitalization.  Hence each $6.67 invested in NRG Yield funds 1 watt of utility scale solar and 1/3 of a watt of wind.


If you always wanted to own a solar system, but lack a suitable roof, a large and rapidly growing number of investments are now available.  If your primary goal is attractive financial returns, the best investments are Solar Mosaic (4.4% to 7% yield) and Hannon Armstrong (6.6%.)

Solar Mosaic investments have a number of downsides, such as the limited number of available projects, restriction to accredited investors and residents of New York and California, and the requirement that you hold your investments to maturity.  While most of the money invested in Hannon Armstrong goes to fund types of sustainable infrastructure other than solar, each dollar funds approximately as much solar as a dollar invested in SolarCity, but also includes much larger investments in other types of clean energy and in energy efficiency.

At $6.67 per solar watt, NRG Yield is the cheapest way to fund solar with a stock market investment, but this company includes considerable fossil generation and has a much lower yield (3.1%) than Hannon Armstrong.

While none of these investments is perfect in its ability to replicate the economics and climate impact of putting solar on your home, the number of options is rapidly increasing.  If you live in one of seven states (MA,CO, ME, RI, VT, WA,DE, OH) you may be able to invest in a solar garden.  Until then, my top pick combining high climate impact with high yield and ease of investment is Hannon Armstrong Sustainable infrastructure.

This article was first published on the author's blog, Green Stocks on April 21st.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

April 30, 2014

Beijing Taking Hands-Off Approach To Solar Recovery

by Doug Young

China sent an important message to the struggling solar panel sector last week when one of the country’s major manufacturers was forced to turn to global capital markets to raise new funds, hinting that it couldn’t receive the money from state-backed domestic sources. The move sparked a sell-off for New York-listed shares of Yingli Green Energy (NYSE: YGE), as its request for funds met with a frosty response on Wall Street.

The fact that Yingli had to seek funding from commercial-oriented western investors indicates Beijing is taking a hands-off approach to financing for this important but embattled industry as it tries to emerge from a 3 year slump. Chinese leaders should continue to send similar signals not only for the solar sector but also other key industries, in a broader effort to wean them from state support and create sustainable companies that can become global leaders.

Yingli hasn’t posted a profit for more than 2 years, and reported a net loss of $128 million in its most recent reporting quarter. The company and most of its peers have been losing money since 2011, when the industry tumbled into the red due to overcapacity.

The downturn caused many firms to go bankrupt, with former giants Suntech (OTC: STPFQ) and LDK Solar (OTC: LDKSY) as the 2 most prominent examples in China. In the meantime, the financial position of surviving players like Yingli remains weak as prices finally start to rebound. To shore up its position, Yingli turned to Wall Street last week to raise a relatively modest $83 million through the issue of new American Depositary Shares (ADSs) in New York where its stock is currently traded.

The company ultimately sold the shares for $3.50 each, or more than 20 percent below its stock price when it first announced the plan. (company announcement) The need for such a big discount reflected ongoing investor concern about both Yingli and broader prospects for the solar sector’s recovery. Announcement of the discount sparked a sell-off in Yingli’s shares, which tumbled 18 percent in the 3 trading days after the plan was first announced, wiping out around $100 million in shareholder value.

Yingli’s decision to tap western markets for its fund raising followed two similar earlier developments that showed Beijing was taking a more hands-off approach to the solar panel sector in the uphill climb from its downturn.

The first of those came in February, when Canadian Solar (Nasdaq: CSIQ) announced plans to issue new stock and bonds to raise $200 million. That announcement sparked a smaller 8 percent sell-off in Canadian Solar’s shares as investors also greeted the plan with limited enthusiasm, even though the company is one of the few to recently return to profitability.

The second sign of Beijing’s laissez faire approach came last month when mid-sized panel maker Chaori Solar (shenzhen: 002506) missed an interest payment on some of it domestic bonds, becoming the first default on such domestic corporate debt in modern Chinese history. Many viewed that move as a sign that China was preparing to allow similar defaults on corporate debt, and abandon its past practice of sending in state-run entities to rescue such companies.

In all 3 cases, it would have been quite easy for Beijing or local governments to come to the assistance of Canadian Solar, Chaori and Yingli. Officials could have provided critical assistance in a number of ways, such as ordering local state-run banks to make low-interest loans or calling on other state-run entities to provide funding.

But in each instance, the government has shown a determination to let market forces dictate developments, even if that meant wiping out millions of dollars in investor value or shaking the domestic corporate bond market by signaling the potential for more defaults. Such actions may cause some pain in the short term for companies, their investors and local economies, but will help to create a profitable, sector that can be commercially viable over the longer term.

Beijing should extend this market-oriented approach to other sectors that are also struggling with overcapacity, such as steel and aluminum, which would help to build commercially viable industries over the longer term. In place of direct financing, it could gradually introduce less aggressive, more western-style incentives like tax breaks to foster growth in sectors it wants to develop.

Such an approach will inevitably create some pain for the affected sectors, forcing plant closures and lost investment dollars. But over the long run it will put China’s economy on a sounder footing to ensure healthy sustainable growth.

Bottom line: Yingli’s move to raise capital in New York signals Beijing will take a laissez faire approach to the solar sector as it claws its way back to health.Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

April 21, 2014

Don't Bet Against SolarCity

By Jeff Siegel


SolarCity truck It wasn't an April Fool's Day gag when I said it was time to buy SolarCity Corp. (NASDAQ: SCTY) at the beginning of the month.

After a brief standstill, the company's battery-backed solar projects have begun to move forward again.

The State of California Public Utilities Commission has added an important item to its May 15 agenda that will make a huge difference for SolarCity. Utility companies may finally be blocked from imposing big fees on battery-backed solar systems.

For more than a year, California's largest utilities companies demanded that battery-solar systems undergo costly and time-consuming inspections to prevent them from “laundering” power they pulled off the grid.

Non-battery solar systems were not a concern for the utility companies, because that energy could be unquestionably verified as solar in origin as it was fed back into the grid. Battery systems did not provide an equal degree of certainty.

Each new battery-backed PV user had to submit an application to connect to the grid that cost $800 and required additional meters and hardware that cost as much as $3,700. Only a dozen of SolarCity's customers completed the application and approval process out of the more than 500 customers who had signed up.

In March, SolarCity had had enough. It halted its applications for interconnections to Southern California Edison, Pacific Gas and Electric, and San Diego Gas and Electric.

Now, the Public Utilities Commission seeks to exempt battery solar installations from these huge fees, so these customers can get their systems. SolarCity has resumed filing applications.

The Threat to Utilities

Energy companies expressed concern that solar batteries could store power from the grid rather than from solar panels, and feed it back into the grid for net metering billing reductions.

Net metering is a system that allows residential solar users to send their unused solar energy back into the grid and roll their traditional electric bills backwards. With this type of system in place, people can install solar panels on their home and not really rely on them to power anything except the grid.

Since solar batteries allow customers to store the power they generate, this means they can save their energy to use on themselves and not even have to participate in net metering if they don't want to.

It essentially rearranges residential power priorities into a pyramid with solar on the top, solar battery as the backup, and traditional grid as the backup to the backup.

Solar battery systems, therefore, threaten to slash customer reliance upon local power monopolies.

SolarCity, however, isn't positioning itself as a threat. It wants to work with the power companies.

In a blog posting entitled “Put Battery Storage in the Hands of Grid Operators,” SolarCity Co-founder and CTO Peter Rive said:
“While cutting the cord enables one household to be 100% renewable and self-sufficient, it limits what these technologies can do. In short, the grid is a network, and where there are networks, there are network effects. When batteries are optimized across the grid, they can direct clean solar electricity where (and when) it is needed most, lowering costs for utilities and for all ratepayers. This is true of homeowners’ behind-the-meter storage units, and it’s also true of larger commercial and utility-scale units.”

Despite SolarCity's apparent goodwill toward power companies, the threat this technology poses to power companies is still strong.

All in the Family

SolarCity was co-founded by brothers Peter and Lyndon Rive, and they have a very important cousin: Elon Musk, CEO of Tesla Motors (NASDAQ: TSLA).

Together, the family is pushing for a battery-powered future.

In the automotive sector, batteries mean drivers do not have to rely upon costly gasoline to get around, and in the residential power sector, it means users don't have to rely upon energy monopolies.

The combined effect of two battery-crazy companies in different sectors is a massive economy of scale.

Tesla's so-called “gigafactory” is going to produce enough lithium-ion batteries at such a high volume that prices will drop. Both Tesla and SolarCity will reap the rewards.

The Gigafactory is not expected to be built until early 2017, and production ramping will not begin until 2020. It may be a long way off, but think of what can be done in the meantime.

SolarCity has only existed for eight years, and it has grown in explosions. In the third quarter of 2013, it grabbed a 32 percent share of the solar installation market, and it expected to grow its number of installations by more than 80 percent in 2014. This means it could deploy upwards of 525 Megawatts of photovoltaic cells this year alone.


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

April 17, 2014

New Yingli Fund Evokes Shades Of Suntech

Doug Young

I wrote earlier this week about troublesome signs for the solar panel sector’s fledgling recovery after a revenue warning from Trina (NYSE: TSL), and now we’re seeing another worrisome signal with news that Yingli (NYSE: YGE) is launching a new fund to build solar power plants. This kind of scheme looks eerily similar to one that kicked off the downfall of former industry leader Suntech (NYSE: STPFQ), though there are also a few differences. Still, Yingli’s latest move signals that the industry may not have learned its lesson from the Suntech debacle.

Yingli’s decision to launch this new scheme also suggests that the hoped-for explosion of new solar plant construction in China isn’t coming as quickly as many had hoped, forcing panel makers to bridge the gap by helping to finance and build new projects. Most major players have used this kind of process before, building new plants using their own resources for eventual sale to long-term buyers.

But in most of those cases, probable buyers were already in place before plant construction began. This new plan by Yingli seems to depart from that model, and looks like it will involve the speculative construction of new solar plants first, and then identification of potential buyers later.

All that said, let’s look more closely at Yingli’s new scheme that has it teaming up with Chinese private equity firm Shanghai Sailing Capital to launch a renewable energy fund. (company announcement) The fund will initially have 1 billion yuan ($160 million) in capital, with Yingli holding a majority 51 percent and Sailing holding the remainder. Yingli will provide its roughly $80 million contribution in installments rather than immediately, reflecting the difficulty it faces in raising even this kind of modest amount of cash.

Not surprisingly, the fund will mostly build solar power plants in China using panels supplied by Yingli. If any industry watchers are getting a sense of deja vu after reading all this, it’s because the now-bankrupt Suntech did something quite similar back when it was still an industry leader.

In that instance, Suntech set up the Global Solar Fund (GSF), which became a major building of solar power plants, mostly in Italy. Like Yingli, Suntech was the controlling shareholder in GSF, and the fund used Suntech-supplied panels for most of its projects. That arrangement allowed Suntech to post billions of dollars in sales, even though others would later argue it was effectively selling its panels to itself.

Solar historians will know that Suntech ultimately had to publicly discuss its cozy relationship with GSF when the partnership soured over a financial issue. That disclosure, which came at the height of the solar sector’s recent downturn, set Suntech on a downward spiral that ultimately ended with its bankruptcy declaration last year and its current liquidation.

So, what, if anything, is different with this current Yingli scheme? From what I can see, the biggest difference is that the Yingli fund is far smaller than GSF, meaning its financial impact on Yingli’s sales could be much more limited. The other big difference is that Yingli’s fund is based in China, which has embarked on an aggressive plan to build new solar plants under a directive from Beijing.

That means that the new Yingli solar fund could find plenty of potential buyers for its plants in the form of state-run companies eager to help Beijing meet its ambitious solar plant construction goals. It’s probably still too early to get too worried about this new plan from Yingli, and we’ll have to see how it develops. But if I were an investor, I would certainly keep a watchful eye on this fund, which has the potential to create major headaches for the company down the road.

Bottom line: A new Yingli-invested fund to build solar power plants in China looks like a risky bet that could ultimately undermine the company if no buyers emerge for newly constructed plants.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

April 15, 2014

Trina Warning Foreshadows Solar Gloom

Doug Young


After watching their shares and prospects soar over the past year, solar stocks are suddenly hitting a cloudy patch as investors anxiously wait for most companies to return to the profit column following a 2 year sector downturn. That wait may have just gotten a lot longer, following a warning from Trina (NYSE: TSL) that it will fall far short of its previous sales forecasts for the just-ended first quarter.

Trina blames the problem on short-term factors, as it and other Chinese panel makers work to finalize an agreement to avoid the European Union’s previous threat of anti-dumping tariffs. But hidden in the optimism from Trina and its Chinese peers is the fact that the new agreement is likely to have many of the same effects as the original punitive tariffs. That means most of these Chinese companies will suddenly face resurgent new competition from western rivals in Europe once a deal is reached.

According to its newly issued warning, Trina said it now expects to report it shipped 540-570 megawatts worth of panels in the first quarter that just ended on March 31. (company announcement) That figure is down sharply — about 20 percent to be precise — from the 670-700 megawatts worth of panels that it previously forecast just 6 weeks ago. Trina blames the shortfall on failure to finalize an agreement with the EU, after the 2 sides last year reached a landmark deal that would see the Chinese panel makers voluntarily raise their prices to offset the effect of unfair subsidies from their home government. (previous post)

Most solar shares have rallied strongly over the last year over hopes that a 2 year sector downturn was in the past. But the stocks have given back a big chunk of those gains in the past month, in a needed correction as investors realize a turnaround may be slower in coming than many had hoped.

Trina shares dropped 3.8 percent after its warning, and are down nearly 40 percent since early March. Other panel makers are down by similar amounts, with Yingli (NYSE: YGE) down 42 percent over the same period, including a 6.5 percent drop after Trina’s warning. Even superstar Canadian Solar (NASD:CSIQ), one of the only major panel makers to return to profitability, has lost 34 percent since early March, including a 6.3 percent drop after Trina’s warning.

Some might argue that the current sell-off may be nearing an end, since a 40 percent correction is certainly quite large. But many optimists in the crowd are failing to realize that the new EU agreement will have virtually the same effect as punitive tariffs, since it will force Trina and its peers to raise their prices to levels similar to those from their US and European rivals. That means all the Chinese manufacturers will face stiff new competition under the new agreement in Europe, which has traditionally been their biggest market.

Meantime, the companies could also soon face similar competition in the US, which last year imposed its own anti-dumping tariffs to protest China’s unfair state support for the industry through policies like cheap loans and preferential taxes. The US is currently working to plug a loophole in its earlier decision that allowed the Chinese panel makers to avoid many of the extra tariffs. When that happens, the Chinese companies will also face renewed competition in that market. (previous post)

Two bright spots for the Chinese manufacturers will be their own home market and also Japan, where the governments and private companies have launched ambitious programs to rapidly build up solar power capacity. But those developments won’t be enough to offset the big obstacles in the US and Europe, meaning that Chinese solar panel makers are likely to see both their sales and stocks come under pressure for the rest of the year.

Bottom line: Trina’s sales warning hints at new obstacles for Chinese solar panel makers in the key EU market, putting pressure on their sales and shares for the rest of this year.

aDoug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

April 09, 2014

SolarCity's Second Solar Lease-Backed Bond Closes Thursday

SolarCity is on the road with a $70.2m, 8yr, BBB+ rooftop solar leases securitization; closes Thursday

SCTY residential solar.pngSean Kidney

US company SolarCity (NASD:SCTY) has priced a solar bond backed by cash flows from a pool of 6,596 mainly residential solar panel systems and power purchase agreements in California, Arizona, and Colorado. Expected bond figure is $70.2 million, but the bond doesn’t close until Thursday this week. Interest rate is 4.59%. Credit Suisse is structurer and sole bookrunner.

This is SolarCity’s second solar securitization in six months. Their previous (ground-breaking) bond was for $54.4 million with an interest rate of 4.8% – but 13 year tenor.

——— Sean Kidney is Chair of the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

April 08, 2014

It's Time to Buy SolarCity

By Jeff Siegel

Well, it was a record-breaking day for Texas last week.

On March 26, at 8:48 p.m., nearly 30% of the Lone Star State's electricity was generated by wind.

Most came from West Texas, and there wasn't a single issue regarding integration.

Despite the common refrain of “the grid can't handle all this intermittent power,” Texans had no problem turning on the lights with all those extra wind-powered electrons.

Of course, for those of you who rely on actual data instead of empty rhetoric, this should come as no surprise. In fact, a new study just published by PJM Interconnection indicates that large amounts of integrated solar and wind won't just be safe for the grid — they also won't cause energy prices to rise.

The 30% Solution

PJM Interconnection is a regional transmission organization that serves 13 states and the District of Columbia. It’s actually the biggest wholesale electricity market in the world, serving about 60 million people with nearly 60,000 miles of transmission lines across its service area.

So yes, any time we get new data analysis from PJM, we take it very seriously.

According to PJM, wind and solar could generate about 30% of all electricity for its territory by 2026 without any significant issues. This would be the equivalent of about 113,000 megawatts of installed wind and solar resources, powering 23.5 million homes annually.

Now, the entire report is about the size of a small novel, so I'll just break down a few of the key findings that analyst John Moore recently shared with Greentech Media.

Based on estimates of 30% penetration, we can see the following benefits:

  • Lower average energy prices across PJM's footprint because wind and solar would avoid $15.6 billion coal and natural gas fuel costs.
  • Very little additional power (only 1,500 megawatts) needed to support the minute-to-minute variability of the renewable power.
  • No additional operating reserves (spinning) needed for backup power.

Moore goes on to write:

“Getting all of this additional clean energy will require more transmission lines, which PJM’s study estimated would cost $8 billion. That is still far less the $15.6 billion in energy savings. But even that’s probably an exaggeration, since PJM’s study looked only at renewable energy expansion inside PJM. It didn’t consider, for example, the savings from importing some of the wind power from the Dakotas, Minnesota, Iowa, or other parts of the wind-rich Midwest and Great Plains. When you factor in those possibilities, the total transmission cost of achieving the 30 percent renewables integration could be lower than PJM’s predictions.

It’s clear that the grid can handle high levels of renewable power without compromising reliability. Of course, we already know this because the Midwest and Texas grids have seen wind energy constitute a significant portion of the power on the grid at a given time. The PJM study affirms that the grid can handle much higher power levels. It also provides a stepping stone to evaluating the impacts and savings of even more renewable power on the grid...”

Of course, folks still need to put this stuff into perspective.

Yes, the continued integration of renewable energy is a lock, but that doesn’t mean it’s going to send fossil fuels packing. In fact, natural gas will continue to provide the lion’s share of our power generation for decades to come. That being said, it's indicators like the one PJM just provided that further validate our long-term bullish stance on alternative energy.

The question is, if you're looking to take advantage of this continued integration of renewables, where can you get the most bang for your buck?

Sizing Solar

Based on PJM's report, here's how the breakdown looks for its territory:

Although wind makes up a sizable piece of the pie, there are few pure plays in this space. I do like Pattern Energy Group (NASDAQ: PEGI). I actually recommended it back in October when it was trading for $23. Here's how it's performed so far...

Pattern Energy Group is an independent power company that owns and operates eight wind power projects in Canada, the United States, and Chile. Total owned capacity is just over one gigawatt.

I particularly like the 4.5% dividend on this one, too.

However, looking at the chart, you can see solar's offering the biggest growth opportunity. And there are a number of ways to play this...

Personally, since the solar space absolutely crushed it last year, I'm getting a bit pickier about which solar stocks to own in 2014. But a couple of weeks ago, one solar stock in particular got hammered. And it didn't take long for me to buy a few cheap shares on the dip.

On March 19, SolarCity (NASDAQ: SCTY) took it on the chin after the company reported earnings and investors saw that guidance had fallen below expectations. The stock fell hard, and it is now oversold.

As of April 7th, you can pick up shares of SCTY for less than $55 a share.

The way I see it, this is a $75 stock that's offering a huge discount to bargain hunters. Even Goldman is maintaining its $85 price target, and Deutsche Bank is holding its $90 price target.

Bottom line: An overreaction to lowered guidance opened up an excellent buying opportunity.

To a new way of life and a new generation of wealth...

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

April 07, 2014

Ascent Solar: Grounded

By Brandon Qureshi

Recently, Ascent Solar Technologies (ASTI:  Nasdaq) , a publicly traded solar power company, received an additional $5.0 million from institutional investor Ironridge Technology, thereby completing a $10 million Series B Preferred Stock investment.  AST, based in Thornton, Colorado, has emerged as a leader in the development of flexible, thin, high-performance solar panels.

In order to examine AST within an industrial context, a profile of the solar power industry is necessary: According to sources such as Time and E&E Publishing, the industry has experienced record levels of popularity in the United States in the last few years. Indeed, a report published by the Solar Energy Industries Association and partner GTM Research demonstrates that the industry has grown by a whopping 41 percent in 2013 alone, citing record levels of installations in the utility sector. Moreover, solar electric installations continue to increase in value – from $8.6 billion in 2011 to $11.5 billion in 2012 to $13.7 billion in 2013.

What has driven this industrial surge? The report names decreasing prices spurred by technological advancements in the field of solar energy: the average price of a solar panel has declined by 60 percent in the past three years, and the national average photovoltaic installed system price declined by 15 percent in 2013 alone.

With this in mind, what role does AST play in the development of the solar power industry? AST uses substrate materials in its creation of photovoltaic modules, which causes them to be exceptionally flexible, thin, and affordable. These modules can then be implemented in the manufacture of traditional solar panels, building materials, and consumer electronics. Thus, AST is one of several solar power companies that, by decreasing the price of solar energy products, have contributed to their increasing availability, consumption, and production.

How does AST plan to use Ironridge Technology Co.’s investment? It seems that the funds will go largely to marketing efforts: aside from the proceeds that will be used to finance ongoing operations, the funds will be used to develop the Enerplex brand. Enerplex of one of AST’s projects, which involves the implementation of AST’s solar panel technology into everyday appliances including phone cases, chargers, and battery packs.

What does the future hold for the solar power industry? It’s hard to say. There is the obvious: the United States solar industry has experienced unprecedented growth in recent years and is currently the second-largest source of new electricity generating capacity in the nation; but is the situation really so simple? Every year, tax breaks for renewable energy expire – these expirations are bound to adversely impact the industry. The cost of solar power is hardly certain: because a significant portion of the diminishing costs of solar panel manufacture is due to imports from China – which installed of 12 gigawatts of solar capacity in 2013 alone – experts fear an upcoming “trade war” characterized by taxes and rising prices.  Clearly, the future of the solar power industry is no safe bet – or at least not as safe as current conditions suggest.

Is AST a reliable investment opportunity? There can be no doubt of the strength of the company’s product – indeed, its unique CIGS technology has been listed among the top inventions of 2010 and 2011 by both Time and R&D Magazines. Moreover, in the month since Ironridge Technology’s investment, investors have enjoyed a 13.85 percent return on their investments. Within a larger time frame, though, this positive return rate is misleadingly optimistic: since 2008, return rates have plummeted by almost 90 percent, and have barely changed between 2013 and 2014. Despite the obvious innovation of AST’s technology, the company itself doesn’t seem to be going anywhere fast – especially when one considers the uncertain future of the solar power industry.
Brandon Qureshi is a student at Columbia University, majoring in economics. He has a particular interest in alternative energy topics and has devoted some of his recent academic projects to the economics of new energy sources. 

This article first appeared on
Crystal Equity Research's Small Cap Strategist web log.

Neither the author, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

April 02, 2014

LDK Melts Down, Solar Default Signs Grow

Doug Young 

One of China’s 2 major meltdowns in the solar panel sector has taken a big step forward with word that trading in shares of LDK Solar (NYSE: LDK) has been suspended and the de-listing process formally begun as the company liquidates. Meantime, word of a missed interest payment by a building materials maker is sending the latest signal that China will let more companies in ailing sectors default on their debt rather than pay off their creditors. That’s an important signal for the solar sector, which relies heavily on such debt to finance its operations and where many smaller players are in danger of similar defaults.

Let’s start this solar summary with LDK, which together with former solar superstar Suntech (OTC: STPFQ) is in the process of liquidating amid a broader sector clean-up. But whereas Suntech has been liquidating under the supervision of a bankruptcy judge, LDK has chosen the stranger route of winding down without such protection. Perhaps that’s not too surprising since China is quite new at bankruptcy reorganizations, though it has created a strange process where LDK has been quietly talking with its creditors and selling off assets in a process that’s not too transparent.

The company gave an update last week on talks with its bondholders and an interim financing agreement (company announcement), and has just provided a further update on the imminent de-listing of its stock. (company announcement) According to the announcement, trading in shares of LDK has been formally suspended — something that should have happened long ago. LDK also said the New York Stock Exchange has begun a process of de-listing the company’s shares.

Suntech’s shares were de-listed from the New York Stock Exchange months ago and now trade over the counter, following the company’s bankruptcy declaration about a year ago. Such a de-listing didn’t happen for LDK because it never formally declared bankruptcy, which is why the stock exchange itself is finally taking an action that should have happened months ago.

According to its latest announcements, LDK is still talking with bond owners about terms for paying off its debt, offering 20 cents for every $1 of investment. The process still looks like it may take a while to complete, but I expect LDK to disappear as an independent company by the end of this year.

Meantime, let’s look at the other major news that sends the latest signal that more solar companies could soon default on their debt payments. That would accelerate a process that saw 1 company default on a bond interest payment last month and another move in a similar direction. The latest reports say that closely held building materials maker Xuzhou Zhongsen failed to make a 180 million yuan ($29 million) payment on some high-yield bonds that was due on March 28. (English article)

That particular story is related to the real estate sector, which is gearing up for its own much-needed correction following a housing bubble that has seen property prices soar to ridiculous levels over the last decade. But the more important message is that Beijing will let ailing companies default on their debt, and make investors more responsible for losses when they buy risky bonds. That would mark a sharp shift from the past, when government entities would almost always come to the rescue of state-run companies that were in danger of defaulting on their debt.

Last month saw a major milestone when mid-sized solar panel maker Chaori Solar missed a bond interest payment, becoming the first such corporate bond default in modern Chinese history. Not long after, trading in shares of Baoding Tianwei (Shanghai: 600550) was suspended as it too flirted with a debt default. (prevoious post) This latest default by Xuzhou Zhongsen shows that the flow of defaults is likely to pick up in the months ahead, hitting many mid-sized and smaller solar players and hurting the ability of larger players to raise new funds.

Bottom line: LDK’s liquidation is likely to be complete by year-end, while the latest market signals indicate more smaller solar companies will default on their debt in the months ahead.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 30, 2014

SolarCity: Overpriced or Opportunity?

Does SolarCity (SCTY) look like a good investment at current prices? The most recent financials released by SCTY fills out the picture of how this unique company performed for 2013. Do the numbers justify the outsized stock performance, which has risen 222% in the past 12 months, and 384% since its Initial Public Offering in December 2012? Or on the other hand, are recent filings more reflective of the 42% drop since the highs of a month ago? This article will follow the data to see where this distinctive energy stock stands now, and forecast where this dynamic solar company may go from here.


Figure 1. SolarCity Revenues.

SolarCity Revenues Are Climbing…

First the good news: sales have been steadily gaining for SCTY. Figure 1 shows that sales, or revenues, are up 29% from 2012 levels, and almost triple what they were in 2011. Revenues came in at the high end of projections made in November 2013. Gross profits, accounting costs of revenue such as operating leases, incentives and sales (but not expenses or other losses), have also been growing.

…But Profits Are Falling

Profits for the company, however, are a different story. Figure 2 shows that net losses have been growing, over double now what they were in 2011. Figure 1 points out that revenues are not the problem, it is the expense side of the ledger keeping the company in the red. This divergence between revenues and net income, can clearly be seen on a quarterly basis in Figure 3.


Figure 2. SolarCity Losses.


Figure 3. SolarCity quarterly revenue and income.

Classifying SolarCity Debt

It is always beneficial to look at debt when evaluating a company’s financial health. When debt ratios are compared to industry-wide levels, a clearer picture emerges of whether a company is successfully deploying debt, or if it is swimming in financial liabilities.

Figure 4. SolarCity total liabilities to total assets.

Figure 5. SolaCity current ratio.

This type of comparison poses a challenge for SolarCity, because it is a hard company to classify. Most financial websites mistakenly put SCTY in the semiconductor industry, since the majority of solar companies are in this business sector. The SEC classifies SolarCity in Construction Special Trade Contractors which is partially true, but does not fully cover its business model.

I see SolarCity more as a financial company, because of the way it interacts with its clients through financing, lease arrangements, notes, etc, and how those instruments appear on the liability side of its balance sheet. Additionally, looking at debt for financial companies is different from other sectors. In many ways, their business is debt. This is all the more reason why classifying SCTY correctly is important when making industry comparisons.

Figures 4 and 5 show how SCTY stacks up against debt levels of the industries mentioned above. The ratio of total liabilities/total assets has been consistent for SolarCity over the years, and came down slightly in 2013. Though SCTY is higher than semiconductors and construction services, it is well below the average for the financial sector.

The current ratio is a measure of a company’s shorter-term debt, and the higher the number the better. On this measure, SolarCity appears to be more of concern when compared to industry averages.


Figure 6. SolarCity client growth.

SolarCity Client Growth

Despite the difficulties outlined above, there is much that SolarCity has been doing right. Figure 6 shows how SCTY has been successfully executing its business plan by growing its customer base at an extremely rapid pace. Keeping up this growth is essential to becoming profitable, and SCTY shows no signs of slowing its expansion.

If you dig in to these numbers more deeply, however, a mixed story again emerges. As seen in Figure 7, total revenues per customer have been steadily declining. This is to be expected. As SolarCity moves more and more into home and small business installations, revenues per customer get diluted when compared to its larger utility-scale clients. So long as client growth continues at a decent pace, falling total revenues per customer is not a grave concern.


Figure 7. SolarCity client ratios.

Net revenues per customer have also been improving for SCTY. In a company’s early stages, net loss per customer should shrink as revenues grow. This has been the case, with levels in 2013 about 31% better than 2012. It is crucial that this ratio continue to improve if SCTY hopes to get in the black in a timely fashion.

A key way to see how this is progressing is to watch SolarCity’s acquisition cost per customer. This ratio has been shrinking, but not at the pace one would hope. In fact, in 2013 acquisition cost per customer seems to have stabilized at 2012 levels. I will be watching this number very closely to evaluate when, or whether, SCTY will be on track to turn a profit.

Overpriced or Opportunity?

Without having access to SolarCity’s inner cogs, my back of the envelope calculations show that the company may be many years out until it enters into positive earnings territory. If total revenues per customer levels out in the $1,500 range, and operating expenses stay at current levels, then SolarCity will need to double the +/-100,000 clients that it currently has before it turns a profit. Even at the current rapid rate of client growth, it would take SolarCity two years to get to the 200,000-client level.

SolarCity has a lot of moving parts, so it is surely possible that revenues could advance quicker than my estimates, and/or expenses could become much tamer. In addition, SolarCity’s business model is quickly evolving, so unknown developments may greatly change its financial landscape. SolarCity is likely priced to perfection at current levels, but I would not discount this company as a profitable long-term investment.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

March 26, 2014

China, EU Reach Solar Settlement But More Defaults Loom

Doug Young

China and the European Union have reached a new settlement that should formally end their ongoing dispute over solar panels, contrasting sharply from a more confrontational tack taken by the US in a similar spat. Meantime in other solar news, a looming new bond default by a mid-sized panel maker has become the latest sign that Beijing is prepared to let more of these smaller companies miss their debt payments. That approach will force these smaller firms to either leave the industry or sell their money-losing operations to larger peers, in a much-needed industry consolidation.

Let’s start with the latest China-EU settlement, which involves polysilicon, the main ingredient used to make solar panels. Beijing opened an anti-dumping investigation into EU polysilicon in late 2012, a move that many saw as retaliatory for an earlier EU probe that found Chinese solar panel makers were selling their products in Europe at unfairly low prices. The original dispute centered on complaints by both the US and Europe that Chinese solar panel makers were undercutting their western rivals after receiving unfair government support in the form of subsidies like low-cost land and cheap loans.

China and Europe settled their initial dispute over solar panels last year, in a landmark deal that saw Chinese manufacturers agree to raise their panel prices to a minimum level agreed to by both sides. (previous post) Now this latest agreement will see European polysilicon makers also agree to sell their products into China at a minimum price agreed to by both sides. (English article) The main beneficiary of this new deal is Germany’s Wacker Chemie, which is Europe’s main polysilicon seller to China.

The EU’s 2 settlements contrast sharply with the approach taken by the US, which conducted its own investigation and last year imposed anti-dumping tariffs on Chinese solar panels. As a result, China opened its own probe into US polysilicon, which ended this year with retaliatory anti-dumping tariffs against US-made polysilicon.

On the one hand, I should applaud the EU for its more reasonable and pragmatic approach to this matter, even though the setting of minimum prices has nearly the same effect as imposing punitive tariffs. But that said, I do also think the US approach sends a stronger message to Beijing that it needs to stop its practice of giving money to industries it wants to promote. Perhaps this mixed approach by the US and Europe is the best way to send the message to Beijing, providing both positive and negative incentives to change its behavior.

From that solar dispute, let’s look quickly at the latest looming bond default from smaller panel maker Baoding Tianwei (Shanghai: 600550). The company has announced that trading of 1.6 billion yuan ($260 million) worth of its bonds has been halted on the Shanghai Stock Exchange. (English article; company announcement) Tianwei has lost big money for the last 2 years, so it’s not a huge surprise that it might not be able to repay its debt. The bigger surprise is that it might be allowed to default on the bonds, since Beijing or local governments often come to the rescue of companies that risk debt defaults.

We saw something similar happen earlier this month when Chaori Solar (Shenzhen: 002506), another smaller player, failed to make an interest payment for some of its bonds, becoming the first corporate bond default in modern Chinese history. (previous post) This latest case involving Tianwei shows that Beijing is preparing to allow more such defaults on solar debt. That should ultimately force many of these smaller players to either shut down or sell their operations to larger players like Canadian Solar (Nasdaq: CSIQ) and Trina (NYSE: TSL), which are emerging as industry consolidators.

Bottom line: Europe’s latest solar settlement with Beijing will end their trade dispute in an amicable way, while a new looming bond default by Tianwei reflects China’s ongoing resolve to consolidate the sector.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 13, 2014

Nuclear and Solar From Down Under

by Debra Fiakas CFA

Last week the Aussies invaded New York City, bivouacking at a popular hotel and parading a string of Australia-based companies in front of investors.  Of course, there were the usual mining and minerals companies for which resource-rich Australia is so famous.  However, the Australia Stock Exchange  -  one of the event sponsors  -   has diversified with listings in communications, biotechnology and alternative energy.

One of the presenters, Silex Systems, Inc. (SLX:  ASX and SILXY:  OTCQX) is a talented little company with technologies for solar and nuclear power generation.  Silex has developed a laser for uranium enrichment.  The laser alternative presents a lower cost alternative to conventional centrifugal methods.  The company landed a sweet deal with GLE, the joint venture of General Electric and Hitachi, and began receiving payments in fiscal year 2013.  Silex has stepped into the solar industry with concentrating photovoltaic system for electric power utilities.  In June 2013, the company completed construction of Australia’s largest concentrating photovoltaic solar power facility.  Silex is also working on a demonstration concentrating solar power station in Saudi Arabia.

Silex is also dabbling in materials development.  The company is using rare earths for semiconductor substrates.  Applications are diverse:  photonics, solar and electronics.  A fourth revenue source is ChronoLogic, a producer of test and measurement products in which the Silex has a 90% interest.

In the fiscal year ending June 2013, Silex reported a profit of AU$850,544 on AU$23.7 million.  Milestone payments from GLE for laser enrichment technology tipped continuing operations into the black from a deep loss in the previous fiscal year.

Silex is recording revenue, but still has the character of a developmental stage company.  Its financial reports are noisy with events as the Silex moves ahead with construction projects and meets milestones in customer relationships.  While financial results are choppy, there appear to a number of anticipated events ahead that will serve as catalysts for the stock price.  The company expects to begin construction of another concentrating solar power facility in late 2014 and its GLE customer is expected to begin negotiations with the U.S. Department of Energy for enrichment of uranium tailings sometime in 2014.  What is more, Silex is able to bandy about the buzz words that get investors’ attention:  rare earths, alternative energy.

Investors have a choice between the Silex Systems listing on the ASX or the Over-the-Counter quotation of an ADR in the U.S.  The stock is trade in both case near 52-week lows.  The ADR trades infrequently and the Australia exchange sees only a little more activity.  Thus it seems to me the stock is best suited for a buy-and-hold strategy and makes sense only for those investors with thick enough skins to tolerate some price volatility.    

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  SUNE is included in the Solar Group of Crystal Equity Research’s The Atomics Index, composed of companies using the atom to create alternative energy sources.

March 10, 2014

China's Solar Panel Makers Set For A Correction

Doug Young

After a massive rally over the last year, shares of solar panel makers could be set for a few months of winter following a disappointing earnings announcement from superstar Canadian Solar (Nasdaq: CSIQ) and a debt default from second-tier player Chaori Solar (Shenzhen: 002506). Such a correction was almost inevitable after last year’s huge rally and shouldn’t be cause for concern among long-term buyers of shares in top players like Canadian Solar. But shareholders of second-tier firms like Chaori might think strongly about selling their stock, as these smaller companies could easily end up getting wiped out or sold for bargain prices in the sector’s ongoing consolidation as it emerges from a 2-year downturn.

Before we look more closely at Canadian Solar’s latest earnings and why they disappointed, it’s important that we first review just how much the company’s shares have soared over the last year. Canadian Solar’s stock traded as low as $2 as recently as late 2012, before embarking on a massive rally that saw it top the $40 level this year. Other solar panel makers also surged as their sector began to rebound, but Canadian Solar led the rally by becoming the first major player to return to profitability after most players reported 2 years of losses.

All that said, Canadian Solar’s latest earnings report looks respectable enough on the surface, but clearly wasn’t strong enough to support the huge expectations that it has created among investors. The company’s fourth-quarter shipments shot up 53 percent from a year earlier, easily beating its previous guidance, and revenue also jumped 76 percent. (results announcement) Canadian Solar also managed to stay profitable, though the profit was slightly below market forecasts.

But investors were clearly spooked by Canadian Solar’s outlook for the current quarter, in which it expects shipments to reach around 480 megawatts and revenue to hit about $425 million. Both of those figures are down significantly from the fourth quarter, when the company shipped 621 megawatts worth of panels and posted $520 million in revenue. That weak outlook, which Canadian Solar blamed partly on seasonal factors and severe weather in North America, sparked a sell-off in the company’s shares, which fell nearly 11 percent after it announced its results.

Meantime, the solar sector got some more bad news when Shenzhen-listed Chaori announced it would default on an interest payment for some of its domestic bonds. (English article) The amount of the default was relatively small, with Chaori saying it couldn’t fully make a payment of 89.8 million yuan ($14.7 million) due earlier this week. It added that it could only pay 4 million yuan of the interest payment.

The fact that Chaori couldn’t make such a relatively small payment reflects the fact that many solar panel makers currently have little or no access to new financing. Most lenders and investors are reluctant to give more funds to these money-losing companies right now, and that’s unlikely to change until they return to profitability. But many smaller companies like Chaori lack the scale and resources to compete, meaning they may never return to profitability and we could see more defaults from this group in the year ahead.

At the end of the day, I do expect that shares of the largest companies are likely to take a breather for the next 6 months, following their huge run-up in 2013. That doesn’t mean we may not see one or two rallies for individual companies, especially as others follow Canadian Solar in returning to profitability. Meantime, I wouldn’t hold out too much hope for smaller players like Chaori in the year ahead, as many could face similar cash crunches due to persisting losses and lack of access to new financing from banks and private investors.

Bottom line: Shares of major solar panel makers are set for a correction this year after a 2013 rally and as their growth slows, while smaller players are likely to face a growing cash crunch.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

March 03, 2014

New Suntech Rises From Ashes, Eyes UK

Doug Young 

Suntech. faces final sunset.

Opportunities for me to write about former solar pioneer Suntech (OTC: STPFQ) are growing fewer with each passing day, as its life as an independent company nears an end with the imminent finalization of its bankruptcy liquidation. That said, a company announcement saying that a new Suntech has emerged after the yearlong bankruptcy storm seems like a good opportunity to write about this company one last time before it and its stock permanently disappear. The announcement features a photo of Suntech’s youthful looking new CEO, Eric Luo, and says the company is preparing a new push into Europe, starting with Britain. (company announcement)

Before we go any further, I should point out this new announcement is coming from Wuxi Suntech, owner of the main production assets of the original Suntech Power Holdings, which was formally forced into bankruptcy about a year ago after defaulting on more than $500 million in debt. Wuxi Suntech was auctioned off as part of the bankruptcy liquidation process, and was purchased by Hong Kong-listed Shunfeng Photovolatic (HKEx: 1165) last year.

In its latest announcement, Wuxi Suntech says its sale to Shunfeng will close imminently, which means the parent Suntech’s bankruptcy liquidation plan is also close to finalization and will likely be approved by its creditors. I would expect all of that to happen sometime this month, at which time the original Suntech will formally be disbanded and become a chapter in future history books on solar energy.

To this day, stock buyers don’t seem to have a strong idea of how much their holdings in the original Suntech are worth, as reflected by the stock’s wild swings even as the final liquidation approaches. In the latest session alone, the stock rose 30 percent, recouping some of the losses from a 40 percent slide over the previous month. I expect we’ll see one or two more major swings before the final plan is approved, at which time investors will finally lose this popular betting vehicle.

The latest announcement says that Wuxi Suntech will remain as an independent entity after its sale to Shunfeng is complete, which means the brand will stay intact. The statement also implies that Suntech may become the flagship brand of the new Shunfeng, which isn’t a huge surprise due to Suntech’s status as one of the industry’s most recognized names. Luo says the new Suntech will also make some strategic acquisitions, and that it expects to ship a record 2.5 gigawatts worth of panels for this year, 20 percent higher than its previous peak in 2011.

While Suntech’s shares have swung wildly over the last year, Shunfeng’s have been on a more positive trend, rising from their previous level of about HK$1 as recently as last June to around HK$7 at present. I’ve previously said that Shunfeng could be a company to watch going forward, and do expect it should benefit strongly from Suntech’s strong brand, as well as its technology and sales networks. I wouldn’t be surprised if Shunfeng ultimately takes the Suntech name as its primary brand, though it will probably want to wait at least a year until the bankruptcy is well in the past.

I should close out this post with a final memorial to Suntech, whose biggest fault was probably hubris. Founder and former chief executive Shi Zhengrong will be remembered as a visionary for his early entry to the market, becoming the first solar panel maker to list in New York in 2005. But too much praise for his firm and his own self confidence led Shi to take unnecessary risks that ultimately led to Suntech’s downfall, ending a brief but turbulent life for this colorful but ill-fated sector pioneer.

Bottom line: Shunfeng could position Suntech as its leading brand after finalizing its purchase of the company’s main assets, and could use Suntech as a platform for future acquisitions.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

February 27, 2014

Why SunPower (SPWR) is a Solid Bet on Solar

By Jeff Siegel

I've been singing the praises of SolarCity (NASDAQ: SCTY) since the company first went public.

Even as renewable energy bears attacked anything with the word "solar" in the name, I stuck to my guns. And I'm glad I did.

Here's a quick look at how SCTY has performed since its debut:


Of course, at this point, SCTY is an easy ride. Even if the company's next earnings disappoint, the long view remains solid. So when the company delayed earnings this week, I didn't lose any sleep.

The fact is, those who took my advice and jumped in early can weather any potentially negative news along the way. We're just that far ahead of the curve.

For those who didn't, there's still plenty of opportunity in the solar space.

This is a Very Big Deal

It was one of the first major solar players to capitalize on the solar bull market back in 2006.

Launching from an IPO price of $28.00 to $164.00 in just two years, many thought SunPower Corporation (NASDAQ: SPWR) couldn't be stopped. That is, until the market imploded in 2008.

By 2009, SPWR was trading between $25 and $30 a share. And over the next four years, it sunk even further, hitting a low of $3.71.

Of course, it was around late 2012 or early 2013 when we saw the global solar market begin to pick up speed. And while SPWR isn't trading anywhere close to its all-time high of $164.00, had you picked some up at the start of 2013, you would've more than quadrupled your money! That's no joke.

Now here's the interesting thing about SunPower...

Many initially wrote the company off, as it couldn't compete on price with the Chinese. But upon a closer look, you would see that today, the price gap isn't as wide as it once was. In fact, last week, the company announced it had been able to reduce manufacturing costs by 20% last year. That came on the heels of a 25% reduction in balance-of-system costs in 2012.

On the surface, this may not seem like a huge deal. But it is. You see, with this 20% reduction comes the realization that margins are finally competitive.

As Giles Parkinson from RenewEconomy recently wrote, "...the company can lift its margins from slightly negative to nearly 20 percent and deliver a solid return to shareholders. Further cost cuts means it will either improve its margins, and therefore its returns to shareholders, or be able to meet price drops in the consumer space if another surge in capacity emerges."

I agree 100% with that statement and remain bullish on SPWR going forward, with a price target of $38.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

February 21, 2014

SunEdison Launches Yieldco; Trend Will Be Transformative For Solar

James Montgomery
Sunedison Logo.png
SunEdison proposes Yieldco IPO

The proposed initial public offering (IPO) of common stock for a new yieldco vehicle, with terms yet to be determined, was announced hours before the company's quarterly and year-ending financials. Reports over the past couple of months have suggested a SunEdison (SUNE) yieldco could generate a $300 million payday. Later this month (Feb. 24) the company will hold its Capital Markets Day with a more extensive analysis of its business strategies, and surely this will be a big topic of conversation.

Here's why SunEdison and the rest of the industry is so keen to pursue new finance options. Back in its 3Q13 financial results SunEdison calculated its current business model of building and selling solar projects yields about $0.74/Watt -- but those assets' true value could jump as high as $1.97/W if the company can find ways to enumerate and apply various methods: lower the cost of capital, apply various underwriting assumptions, and factor in residual value in power purchase agreements. That's a startling 2.6× increase in potential value creation that SunEdison thinks it can unlock, and creating a yieldco structure to attract interest from the broader investor community is a big part of the answer.

In its 4Q results SunEdison puts more numbers to that value-creation equation: in the fourth quarter it captured an additional $158 million by retaining projects vs. simply selling them off. And by applying most of the 127-MW on its balance sheet with an estimated $257 million in "retained value" to this yieldco, the company says it has sufficient scale to unlock the true value of those solar assets.

In the past year several yieldcos have come to the forefront. Last summer NRG Energy launched NRG Yield (NYLD) with a 1.3-GW portfolio of energy generation assets, though fewer than half of them were renewables (solar and wind); earlier this month NRG Yield proposed to raise another $300 million. Pattern Energy (PEGI) issued its IPO in the fall backed by a number of wind farms. Other recent yieldco examples include Brookfield Renewable Energy Partners (BEP) and Hannon Armstrong (HASI).

More directly from the solar sector, SunPower (SPWR) recently talked about doing a yieldco maybe in late 2015, likely to feature its 135-MW Quinto project and possibly its 120-MW Henrietta project. Others eyeing the yieldco model reportedly include Canadian Solar (CSIQ), Jinko Solar (JKS), and First Solar (FSLR).

"This trend is transformative for the solar industry" because of how it can unlock so much more value and thus returns, explained Patrick Jobin, Clean Technology Equity Research analyst with Credit Suisse. (Disclosure: SunEdison is one of his top picks specifically for that reason.) "We're probably in the first or second inning of the public capital markets appreciating what this does for the industry."

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

February 18, 2014

Trina Drives Consolidation As Solar Trade War Flares Up

Doug Young 

As if the solar trade war between the US and China wasn’t bad enough, tensions just got worse with a preliminary ruling in Washington aimed at closing a loophole to a previous ruling imposing anti-dumping tariffs on Chinese solar panels. I’ll admit I was a bit surprised by the preliminary ruling just announced by the US International Trade Commission (ITC), as I’d previously predicted this latest action in the Sino-US solar trade dispute would quickly fizzle. Meantime, industry consolidation is continuing in China, where more than half the world’s solar panels are currently made, with word that Trina (NYSE: TSL) is buying a controlling stake in another smaller rival.

I said above that the ITC’s latest move surprised me a bit, but what certainly hasn’t surprised me has been China’s defiant protest at this latest development. I obviously don’t know what’s happening behind the scenes, but at least on the surface it appears that Beijing has done little or nothing to try and address western concerns underlying this 2-year-old trade war. Those concerns center on allegations by the US and Europe that China unfairly supports its solar panel makers by providing a wide range of government subsidies ranging from low-interest bank loans to cheap land for building new factories.

Rather than try to find a solution that would satisfy these western governments, Beijing is embarking on its own building spree for new power plants that could raise further complaints of unfair government support. Meantime, this new purchase by Trina should be a welcome development, but could also raise new tensions since the company is probably paying little or nothing for its controlling stake in Hubei Hongyan, which itself is most likely a state-run enterprise.

All that said, let’s take a look at the latest development in Washington that saw the ITC make a preliminary determination that Chinese-made solar panels that use Taiwanese components may violate fair trade principles. (English article) That determination means the case can go forward, and a final ruling could come later this year. Washington last year imposed punitive tariffs on Chinese-made solar panels after the ITC determined that Chinese producers received unfair government support. But China-made products using key components from Taiwan were exempted from the ruling — a loophole that the US arm of German producer SolarWorld (OTC: SRWRF) is now trying to close.

SolarWorld was predictably pleased at the initial ruling (company statement), but others were less thrilled. A group representing US installers of solar panels, the Coalition for Affordable Solar Energy, said that closing the loophole would drive up prices for everyone, since China produces so much of the world’s supply. Beijing has yet to formally react to this latest development, but late last month called on Washington to stop the probe and said it has “serious concerns.”

Meantime in the day’s other solar news, Trina has announced it will acquire 51 percent of solar panel maker Hubei Hongyan from its parent, Shenzhen S.C. New Energy Technology. (company announcement) No financial terms were given, which means that Trina is probably paying very little for the stake, or possibly even getting it for free. That wouldn’t come as a huge surprise, since the company has relatively modest manufacturing capacity of 50 megawatts per year, and is probably losing lots of money.

I’ve had a look at Shenzhen S.C.’s website, and there’s no indication of whether it’s a state-owned company. But I would be willing to bet it is, though its parent is probably making the sale out of commercial pressure rather than pressure from Beijing. Still, a foreign buyer almost certainly would never have been considered for this sale, and Beijing in general has shown no signs of encouraging a more open and commercial-oriented approach for the market. Until that changes, look for tensions to continue to simmer, slowing development of this important sector that will be critical for the world’s future energy security.

Bottom line: A new preliminary ruling from the US will boost tensions between Beijing in a long-running trade dispute over solar panels, benefiting nobody.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

February 10, 2014

End Draws Near for Suntech

Doug Young 

Sunset looms for Suntech. Photo by Tom Konrad

The month of February could mark the final sunset for solar panel maker Suntech (OTC: STPFQ), with 2 major events on the calendar that look like the swansong for this former solar energy pioneer. If the ending does indeed come, it would be almost a year after Suntech first was forced into bankruptcy in a Chinese court in its home city of Wuxi, kicking off a contentious process that saw many of its top executives and board members leave and rival Shunfeng Photovoltaic (HKEx: 1165) purchase most of its China-based assets. One of the biggest remaining questions will be how much, if anything, holders of the company’s stock get for their shares.

Suntech announced the first important date on its calendar last month, when it said it would hold a creditors meeting on February 12, or next Wednesday, in the Caymen Islands where it is technically based. (company announcement) Items on the agenda for that meeting include election of a liquidation committee, hinting that a final plan was finally near.

A newer hint that the end was finally coming came over the just-ended Lunar New Year holiday, when Suntech announced it had reached a settlement with a group of creditors trying to force it into bankruptcy in a New York court. (company announcement) Under that settlement, the creditors agreed to temporarily halt their bid if Suntech could provide a liquidation plan agreeable to everyone by February 21.

That agreement hints that the creditors behind the New York petition have gotten a look at terms they are likely to get under the final liquidation plan, and are satisfied with what they’ve seen. That means we could potentially see a final plan announced at the February 12 meeting, which could be followed by a vote and finalization of the plan by February 21. If the plan is approved, which looks increasingly likely, Suntech could cease to exist as an independent entity by the end of this month and its shares could finally be de-listed from the over-the-counter market.

The question of how much those shares will be worth is still a big one, as reflected by a 22 percent drop in Suntech shares to 40 cents during the last trading session, valuing the company at about $72 million. Before the sell-off, the company’s shares had been relatively stable since December, trading in the 50-60 cent range. That sudden volatility probably represents shareholders’ realization that the end is drawing near, prompting some to sell at any price while they can still get money for their stock.

One research house told me as recently as early January that Suntech should be valued at around $130 million based on the latest price of its debt at that time. The price of the debt has probably dropped sharply since then, resulting in the current market value. I suspect the share price could creep down further still as we approach the February 12 meeting, though I don’t have enough information to make an educated guess about where it will finally bottom out.

When the end comes, Suntech will formally become the biggest victim of a painful period of restructuring for the solar energy sector. The company was one of the first to tap a boom in solar energy plant construction, but its heavy debt caused it to collapse when the sector got hit by oversupply after a massive build-up of new capacity in China. The company’s formal departure signifies an end to this painful chapter in the sector’s brief history, though we’re still likely to see 1 or 2 other major failures before the consolidation is finally complete.

Bottom line: Suntech could formally be dissolved by the end of this month, and its shares are likely to creep downward before final terms of its liquidation are announced in the next 1-2 weeks.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

February 09, 2014

Solar Micro FiT 3.0 as an Investment

Brian Kennelly

I am asked this question over and over again and I can answer quite emphatically, YES! Most think I answer that way because I’m a nut about renewable energy and sustainability and my business also sells solar arrays. These are valid points but I still maintain that the OPA FiT program is one of the best, secure and environmentally friendly investments you will ever make!

Most people that know me probably are not aware that I was educated and began my career in finance and accounting. A very satisfying time, but alas my entrepreneurial urges got the better of me and I left the profession many years ago. The background and experience in that field have served me well over the years by keeping my various business interests on a stable financial track. It has certainly helped these past five years as we have grown our renewable energy business throughout the ups and downs of the Ontario solar marketplace.

Now, I am also able to draw on my financial background as I help to demonstrate to our clients the financial benefits of green energy technology. In this article I will hopefully clearly demonstrate to the reader the financial benefits of investing in a solar array. I will focus specifically on the Ontario Feed-In-Tariff (FiT or Micro FiT) and how an investment in solar panels outperforms any fixed income investment available today. I don’t presume to be an expert on investments so I encourage you to do your own investigations – and I challenge you to come up with a different conclusion.

First lets quickly go over the FiT program for those that are unfamiliar with it. In Ontario, the Ontario Power Authority (OPA) will sign a twenty-year contract to buy electricity from renewable energy systems (wind, solar, biogas and hydro) installed by you. The rates for each kWh sold vary by type and size of system and can be found on the OPA web site. For this article we will focus on a solar roof mounted system at 10 kW’s in size. For this type of system, under the new FiT 3.0 rules, the OPA will pay you $0.396 per kWh. Two years ago the rate was $0.802 per kWh. Unfortunately, this rate was too good to be true and could not last, but if you were one of the lucky ones to get a contract at that rate and then waited until PV prices dropped then you did quite well. So, is it too late? Absolutely not! The cost of a solar array back then was about 3 times what it cost today so the program is still very attractive, which we will demonstrate for you here.

micro fit

Now lets consider a typical 10kW solar array, roof mounted with a southern exposure. In today’s market you would pay about $30,000 for this system, installed. Factors affecting pricing include type of inverter (micro or string), roof type (metal, slate, asphalt), access to roof (steep or low pitch) and location, but $30k is a good estimate. When I am working with a client I usually present a range of estimated annual energy production numbers for the array based on several estimating tools including Homer and PVWatts. I also refer back to our installed projects that have monitoring and reporting capabilities in order to provide a fairly conservative production and revenue projection for anyone contemplating this investment. For this example, and under the new FiT3.0 rules on array and inverter sizing, I would conservatively estimate that for each installed kW, the system would generate 1,289 kWh’s per annum/ installed kW or 12,890 kWh’s for a 10 kW array.

At a rate of $0.396 per kWh, that would result in an annual payment of $5,104 from the OPA. Now, there are costs involved that need to be taken into consideration as well as the fact that the panels will degrade slightly over the 20-year contract, but these are minor adjustments. For arguments sake, I’m going to use a 20-year average of $4,620 in net revenue (before income taxes). You will note that I am not including HST in any of the calculations. If you do decide to invest in a solar array under the FiT program I highly recommend you speak with your accountant about the various tax strategies but it is beneficial to voluntarily set yourself up under the HST program and claim back the HST on the initial investment and remit the HST on the payments from the program.

Using my trusty HP12C financial calculator (that I’ve used for the past 30 years), or a PVOA table, you can easily calculate that the rate of return on this investment is greater than 14%. Now compare that to a similar investment with a 20-year locked in rate, with a quasi Government credit rating and you would be hard pressed to find anything paying close to 4 or 5% on your money. Some arguments I have heard are that the Government will renege on the contracts (massive law suits, many, many angry voters, therefore very unlikely) or that the energy production and revenue are dependent on the amount of sun. Well, if in some crazy world the OPA does void contracts, your array still has value in its ability to offset your homes energy consumption, and given rate increases over the next 20 years, this is still a better than breakeven scenario. Solar irradiance data (sun intensity) has been reliably predicting the amount of sun for a given area for over 40 years so the production estimates used will hold true. Now if the sun does stop shining, we all have more important things to worry about than our investments!

Absent from this calculation is any consideration for the useful life of your array. Realistically, your array will provide 30 – 35 years of energy so after the contract is up with the OPA, you can easily have your local electrician reconfigure the wiring so that the solar energy is consumed by your house first, and any extra will turn the meter backwards saving you on your electrical bill. Its called Net Metering.

In conclusion, the FiT program here in Ontario is one of the best investments of its type (fixed income) and should be seriously considered by anyone with a roof and available investment capital living in Ontario. It is also a great way to invest in the future of our planet, as every kW generated by your solar array is one less kW generated by a fossil fuel source. We think that’s important and that’s why we do what we do. If anyone is interested in the financial aspect of such an investment we have copies of a very comprehensive spreadsheet that takes into account taxes, insurance and borrowing costs to name a few and we would be happy to forward a copy to you to do your own comparative analysis. Just send a note to

Brian Kennelly is the President and owner of Daisy Energy, a renewable energy systems provider located in Hamilton, ON. Daisy Energy installed one of the first renewable energy FiT projects for a local school board in 2009 and has been helping clients embrace renewable energy ever since.

January 29, 2014

EBODF Owns Over $22 Per Share Of Solar Developer Goldpoly,Trades Under $7

by Shawn Kravetz

In ten years of solar investing, we have never encountered an opportunity as obscure and potentially lucrative as Renewable Energy Trade Board Corporation (OTCPK:EBODF).  Disclosure: I am long EBODF.

Before walking through the long thesis, we must caution potential investors that EBODF "went dark" with the SEC in March 2013. However, we have conducted rigorous due diligence on the ground in Asia and through the Hong Kong Stock Exchange filings of Goldpoly New Energy Holdings (0686.HK) - EBODF's sister company sharing the same parent/leading shareholder - China Merchants New Energy Group (part of massive Chinese State-Owned-Enterprise China Merchants Group). Further reinforcing our view, EBODF engaged in several publicly disclosed transactions in December 2013 ( and Given its tremendous unappreciated value and recent activities, we suspect EBODF will not remain "dark" for much longer.

So what excites us about an anonymous, tiny solar company?

  • Simply stated, EBODF owns a sizeable stake in its sister company Goldpoly New Energy Holdings - the premier, Chinese solar independent power producer (IPP) listed in Hong Kong with a $1.3B market capitalization
  • Those shares of 686 HK alone are worth ~4.0X EBODF's current market capitalization or ~$22 per share
  • While we believe that several other intriguing catalysts/options could drive EBODF to even greater heights, we believe that the 686 HK position alone holds tremendous value not reflected in EBODF's share price.

Goldpoly (0686.HK)

US investors covet exposure to downstream solar economics as evidenced by oversubscribed capital raises from US-listed, downstream solar companies in the past few months:

  1. Jinko Solar (JKS) just raised ~$260M in January 2014 by marketing the deal as a means to gain exposure to Chinese downstream projects
  2. SunEdison (SUNE) raised $1.2B through 2 convertible bonds in December 2013 to finance 2014 downstream solar plans
  3. SolarCity (SCTY) raised ~$400M in October 2013 to finance its rapidly growing downstream business

While US investors have flocked to companies offering exposure to downstream solar projects, they likely have gazed right past the best positioned downstream solar opportunity, Goldpoly. We believe that owning EBODF offers a massively discounted method to invest in Goldpoly shares.

Goldpoly is the leading solar power plant investor and operator in China and one of the largest in the world

  • Whereas SolarCity manages ~460 megawatts (MW) of solar projects, Goldpoly operates ~530 megawatts of grid-connected solar projects in China
  • In addition, Goldpoly has ensured years of future growth having harvested a robust 7 gigawatts (GW) project pipeline through strategic alliances with powerful state-owned enterprises like State Grid Corporation (controls China's electric network) and China Guodian (massive Chinese power company) as well as major solar players like GCL (3800.HK), Yingli (YGE), and Zhongli Talesun Solar (002309 CH)
  • Unlike its US-listed peers, Goldpoly enjoys strong sponsorship from its leading shareholder and state-owned enterprise China Merchants Group
  • Despite an operating portfolio and pipeline that every US-listed solar company would envy coupled with a unique platform and strategic alliances, Goldpoly trades a steep discount to its US-listed peers
  • While downstream solar models differ from company to company, we think a simple comparison between Goldpoly and its US-listed peers reveals this discrepancy:

686 HK Valuation.png

686 HK Portfolio.png

We believe this discount will evaporate as Goldpoly continues to deliver on its lucrative pipeline and is recognized as the leading global, solar downstream player. However, rather than wait for that discount to fade, we prefer to exploit this arbitrage opportunity and express our view on Goldpoly through EBODF today.

EBODF Stake in Goldpoly (686 HK)

  • EBODF acquired its stake in Goldpoly through a series of transactions involving the sale of various assets in exchange for 686 HK shares back in May and November 2012
  • As a result of these transactions, EBODF beneficially owns ~42.2M shares of Goldpoly and another ~160M underlying shares from an in-the-money convertible bond
    • EBODF also may have received another 23M shares of Goldpoly in consideration for some other asset sales, but Goldpoly's most recent filings cannot verify these incremental shares
      • As such, we do not include these 23M shares worth ~40-50% of EBODF's current market cap in our valuation of EBODF
    • Details of the transactions available here (pages 17-18)
  • Interestingly, EBODF acquired another 1M shares on the open market on December 9, 2013 - EBODF's first acquisition of Goldpoly shares since 2012
  • To further buttress our view, Goldpoly's Hong Kong Stock Exchange filings and further validated that EBODF still retains their Goldpoly stake via a November 2013 proxy statement (pages 34-35)

686 HK Ownership Structure_11.2013 Proxy.png 686 HK Ownership Structure EBODF Footnote_11.2013

Confident that EBODF still owns a major stake in Goldpoly, we value that stake at nearly $50M or ~$22 per share. This valuation EXCLUDES the incremental but unverifiable 23M shares of Goldpoly noted above which are worth ~$2.25 per share.

EBODF Valuation of 686 HK Stake.png

Since EBODF has not filed a balance sheet since the June 30, 2012 period, we EXCLUDE the $5/share in net cash & equivalents reported for that period. For conservatism, we ascribe no value to the non-Goldpoly net assets which totaled $2.64 per share as of last filing. However, including these items leads to a valuation closer to $30 per share for EBODF.

Free Options/Catalysts

Our diligence also suggests that EBODF may be pursuing a truly unique downstream solar strategy to complement 686 HK which entails:

  1. Acquiring distressed and underperforming Chinese solar projects and re-selling the rehabilitated assets (likely to 686 HK on a right of first refusal basis)
  2. Brokering solar project transactions - connecting buyers and sellers for a fee
  3. Arranging financing/structuring such as sale-leasebacks and collateralized loans for solar projects

Finally, we hypothesize that the leading shareholder of 686 HK and EBODF, China Merchants New Energy Group, may be taking notice of US investors' insatiable appetite for downstream solar exposure as noted above and could seek to capitalize through its US-listed entity - EBODF. In December 2013, EBODF co-invested in a sizeable solar project with 686 HK, and while we admit no special insight on this topic, we find the timing peculiar given the capital market activities by other downstream players. We speculate that China Merchants could transform EBODF into a US-listed version of HK-listed Goldpoly thereby unleashing the first US-listed, Chinese solar yield vehicle offering US investors' exposure to downstream solar economics in China.

We ascribe no value to either option above; however, should either of these scenarios materialize, we believe EBODF is worth many multiples of the 686 HK stake.


With a $22-$30 per share of conservative intrinsic value plus the free option of a potential first mover, US-listed solar yield generating vehicle, we believe EBODF will quickly emerge from the dark.

Shawn Kravetz 2013 crop.jpg Shawn W. Kravetz is President of Esplanade Capital LLC, a Boston-based investment management company.   Esplanade Capital manages two private investment partnerships.   Esplanade Capital Partners I LLC, launched in 2000, is focused on a handful of sectors, including: retail, consumer products, casino gaming, business services, education, and solar power.   Esplanade Capital Electron Partners LP, launched in 2009, intends to be the world’s premier private investment fund dedicated to public securities in solar energy and those sectors impacted by its emergence.  

January 27, 2014

US-China Solar Wars Enter Second Round

Doug Young

Trade War
Trade War. photo via Bigstock

Just days after China finalized anti-dumping tariffs on US makers of polysilicon, the main ingredient used to make solar panels, the US has announced it is opening a new anti-dumping investigation into solar panels imported from China. The close timing of this latest round of developments in a solar trade dispute between the US and China may look worrisome on the surface, especially if they had come a year ago. But in this case the solar signals seem less confrontational to me, as both Washington and Beijing finally realize the sector is too important for the world’s energy security to jeopardize with more trade wars.

All that said, it’s still important to look at these 2 latest solar signs and what they might mean. To quickly recap, the dispute began about 2 years ago when the US accused China of providing unfair state support to its solar panel makers, and ultimately imposed anti-dumping duties on Chinese-made products last year. China retaliated by opening its own anti-dumping investigation into US-manufactured polysilicon, the main ingredient used to make solar panels. All of this was happening as the sector underwent a major downturn that is only now beginning to ease.

Against that backdrop, China announced this week it would impose punitive anti-dumping tarrifs against US-manufactured polysilicon, finalizing an earlier decision and bringing its investigation to close. (English article) The duties were rather high, ranging from 53 to 57 percent, and will undoubtedly price many US makers out of the market. But the move was largely expected and didn’t contain any major surprises, after the US levied its tariffs on Chinese-made panels last year.

Meantime, a newly announced investigation by the US seeks to close a loophole in the first round of anti-dumping tariffs imposed last year. That loophole allowed Chinese companies to avoid the US tariffs if other countries supplied them with solar cells, the central component used to make finished solar panels. The US arm of German panel maker SolarWorld (SRWRF) said earlier this month it was petitioning Washington to close the loophole (previous post), and now the US Department of Commerce and International Trade Commission (ITC) have said they are launching a new investigation. (English article)

The ITC will announce its findings by February 14. If it determines that the Chinese companies are still receiving unfair state report, the Commerce Department could issue preliminary decisions on the matter in March and June this year. A new round of tariffs would deal a blow not only to the Chinese manufacturers, but also to Taiwanese companies that have become one of the main suppliers of solar cells being used in the finished Chinese panels to avoid US tariffs.

So, why am I cautiously hopeful that this latest investigation won’t be as contentious as previous ones? Most importantly, I have to believe that the ITC and Department of Commerce knew about this loophole when they made their initial decision last year. Thus they must have felt at the time that panels made with cells from Taiwan and other countries weren’t receiving unfair support from Beijing.

Secondarily, I also believe that Washington may be tiring of this current trade war with Beijing, especially as both sides realize the importance of solar power to their future energy security. China has recently embarked on its own major campaign to build up its solar power sector, and the US has been trying to boost solar power now for several years. A continuation of this trade dispute won’t benefit either side, and would probably hurt the chances of western solar panel makers to win big contracts in the Chinese solar build-up. Accordingly, I’m cautiously hopeful that the ITC will return a negative finding next month in this latest investigation, which would send a positive signal that Washington wants to quietly end this ongoing solar spat.

Bottom line: A negative finding by the US in its latest anti-dumping investigation into Chinese solar panels would help to bring its clash with Beijing to a close and promote development of the important sector.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

January 09, 2014

Solar Trends in 2014 and Beyond

Benefits, Barriers, and Chances

Paula Mints

Time is the primary difference between a fad and a trend. Fads are fleeting. Trends develop over time altering behavior in some relatively permanent fashion. The adverb relatively is used as permanence has become, over time, far less permanent. Fads ebb and flow more quickly than trends. The best way to tell the difference, unfortunately, is in hindsight.

For example, the European feed-in tariff (FIT) model is responsible for jump starting the utility scale (or multi-megawatt) application for solar technologies.  The initial highly profitable FITs attracted investors who, forever in pursuit of the holy grail of safe investments, encouraged demand and supply side solar participants to build ever larger installations.  Initially, many long time solar participants believed that demand for multi-megawatt installations (particularly for PV) would reach a peak and decline, likely along with the profitable FITs. Instead this trend appears to be here to stay – for better or worse, or, for profit or not-so-profitable.  Another example, turnkey equipment sales, appears to have been a fad that faded away relatively quickly – that is, in solar years.  Just as dog years are longer than human years and often used as a metaphor for the slow passing of time, solar years are also longer than human years.  To gauge the length of a solar year observe announcements and the accompanying timeline creep from announcement, re-announcement and fruition. 

Turn the page to see five potential trends and the likelihood of continuation or cessation:

Potential Trend 1: Merchant systems:  These systems may or may not be multi-megawatt and are sold without a PPA or tender and potentially without an incentive.

Why this may not become a trend:  The high upfront cost of installation, no matter how low component prices go, is a roadblock to many potential system buyers.  Moreover, in many countries it is illegal to set up an independent utility from which electricity is sold.  For merchant systems to become a trend, laws would have to change and/or deep pocket customers must be found and cultivated. 

Why this may become a trend:  Utilities understand the efficiency of owning the means of production. Once they become more comfortable with solar in terms of the variability of its resource it will make sense to control it because of a) its free fuel b) low maintenance c) positive PR afforded the utility and d) return of control over profit.  Mining concerns are often remote and require reliable power; solar is a long-term investment that when combined with storage (yes too expensive still) or another power source (hybrid) offers a long-term answer to energy requirements.  Finally, should laws change the lure of becoming an independent utility; though this is in-and-of-itself probably a fad should encourage system ownership.

Benefits of this trend: Solar (PV, CSP, CPV) is ideal for this potential trend as once installed it is low maintenance (though not zero maintenance), reliable and works well as part of a hybrid installation. 

Odds of this becomming a full-fledged trend: 40% this potential trend will get a lot of press in 2014, but to become a true trend (something that brings with it relatively permanent change) more than announcements are needed. The laws of some countries will need to change and the initial gold rush atmosphere (which will bring with it saviors and shysters) must subside. The likely timeframe for development of this trend is five years, but ten years to mature.

Potential Trend 2: Residential Lease Model:  Removes the onus of educating energy consumers about owning the means of production and encourages more rapid adoption of PV.

Why this may not become a trend:  Currently a U.S. phenomenon, there is no standardization of lease vehicles, little understanding of solar among energy consumers, not everyone owns his or her roof. Its also possible that even when potential solar lessees do own a roof that is young enough in its lifetime to support solar that they will find that once the math is done, a low interest loan that supports buying the system outright makes better economic sense. Other drawbacks include what happens should the lessee want the system removed, or sells the house, or abandons the house.  Should there be expensive and well publicized roadblocks to system removal this potential trend would end.

Why this may become a trend:  Particularly in the U.S., independence (from practically any interference in anything) is a closely held value.  Many energy consumers would like to control energy costs but cannot afford to buy a PV system, plus, the lure of free solar (a promise in many ads for solar leases) is compelling to many.  The lease concept is familiar, even though many may find the details confusing.  Finally, the concept of owning the means of electricity production has proven stubbornly difficult to get across or to encourage excitement about – the solar lease hops over the need to educate and still may lead to more residential PV system ownership. 

Benefits of this trend: More solar is the obvious benefit of the solar lease. The assumption is that seeing more solar in neighborhoods will encourage people to explore owning or leasing a system.  There is also the potential of expanding this trend to apartment complexes, wherein (similar to the merchant system) the apartment house owner would sell electricity from the solar installation to apartment dwellers (a group is pursuing this model in France). 

Odds of this becomming a full-fledged trend: 67% for better or worse and love it or hate it, the solar lease trend is likely real and will hopefully mature into a vehicle with costs (including escalation) that more closely resemble the true costs of owning a solar system.  Escalation charges based on assumed utility rate increases need to be rethought.  

Potential Trend 3: Community solar, solar gardens or group-owned solar:  Call it whatever you like, typically this model allows people to buy shares in solar installations that serve the community.  The installations can be ground-mounted or on roofs on or near community centers or schools and also on reclaimed land (among other areas). 

Why this may not become a trend:  The initial installation remains costly and community buy-in must be encouraged in order for this to make economic sense. That is, enough people need to buy shares and agree to whatever the terms are or the cost would likely appear prohibitive even though the benefits such as cleaner air and controlled costs in the long term are clear.  

 Why this may become a trend:  The off-grid solar community has much to teach the grid-connected solar community in terms of educating populations, gaining enthusiastic buy-in and finally deployment of a concept that is decades old.  In the developing world this concept is not a trend, it is established.  Communities with group owned installations are enthusiastic about being a part of an energy generating asset, their participation in ameliorating climate change as well as the educational aspects. 

Benefits of this trend: Educating the community about solar technologies, climate change and energy independence is one of the most significant benefits of this trend.  Participation in community solar projects and plans also encourages utilities (in the U.S. there is slowly growing utility participation in this model) and energy consumers to work more closely together as well as share ideas and, well, energy.   

Odds of this becomming a full-fledged trend: 63% this trend is building slowly in the U.S. and the model can be co-opted by other countries and regions around the world.  Studying village grid (micro grid) models in the developing world would offer insight as to how community members learn to work together towards the success of these installations.

Potential Trend 4: Storage:  Storage technology is, on its own, not a trend (its R&D is decades old), nor is it necessarily crucial to future grid connected solar deployment. Interest in storage technology for grid-connected deployment is currently high, but interest alone does not a trend make. Storage is crucial for successful off-grid solar deployment and is mature in this regard through the use of lead acid battery technology. 

Why this may not become a trend:  Storage is expensive and its value, essentially independence from the utility grid, has not been established. The true costs of storage are currently obscured, that is, current prices do not reflect costs.  Unfortunately, it may not be possible to increase the price to one that provides enough cushion in the margin for quality control, R&D and profit.  As with other technologies, unfortunately, many may enter with potentially viable technologies and many may fail because they could not price product appropriately.  Finally, disconnecting from the grid and becoming self-sufficient requires a willingness to conserve, which is rarely popular.

Why this may become a trend:  Utilities are showing concern about the growing size of residential and small to medium commercial installations that are sized to cover 100% of the energy needs of the building and its inhabitants. This cuts into utility profits. The only way for utilities to control this is to a) own more solar installations (the means of production) and sell the electricity from these utility-owned assets; b) develop utility solar lease models for their rate payers where the utility installs solar on the roof and charges the roof owner a set rate; and finally c) charge a monthly fee for grid access as back up, among other reasons.

Benefits of this trend: Self consumption and the use of solar encourage a more pragmatic attitude towards energy also encouraging conservation. Storage could allow for true energy independence from escalating energy costs.

Odds of this becomming a full-fledged trend: 31% Storage is still too expensive and a sudden miraculous technological breakthrough is unlikely.  Instead, options that do not reflect the true cost and thus teach nothing about the true value of the technology are currently being deployed.  This potential trend likely needs ten years and a lot of investment to begin approaching viability. 

Potential Trend 5: Solar Deployment in Latin America:  Solar technologies are not new to the countries in Latin America. Deployment of off-grid applications in the region is well established.  Tender bidding is the preferred vehicle for large commercial installations and there is potential among mining concerns for merchant system sales.  

Why this may not become a trend:  High import duties in many countries, unstable economies, significant reserves of oil, potential reserves of natural gas (fracking), unwelcoming topographies and low tenders are a few of the risks in the region that indicate the hoped for level of deployment may not come to pass.

Why this may become a trend:  The need for reliable energy generating options is strong among the countries in this region and though affordability is not strong, there are entities willing to invest in merchant installations (mining concerns) as well as almost monthly tenders for energy generation in the countries of Central America, South America and the Caribbean.  Deployment has begun on a fraction of the multi-gigawatts of potential. 

Benefits of this trend: As solar deployment increases and should it begin to tiptoe near the promised multi-gigawatt level, this region is likely to invest in domestic manufacturing, which hopefully would mean cell technology development as well as module assembly. Given the high cost of Greenfield manufacturing, module assembly appears more likely.  Nonetheless, the construction (demand) sector would provide necessary jobs and the supply (cell, thin film and module assemble) would provide necessary jobs. Deployment of reliable, clean solar energy technologies could be a stabilizing factor of future energy costs. 

Odds of this becomming a full-fledged trend: 44% Though deployment has begun and queues of solar projects in many countries are long, taxes are high and actual deployment is moving at a snail’s pace. A regional economic shock could derail many projects. Tenders are, in most cases, too low to support profitable installations. The highest likelihood is that deployment will continue resulting in a percentage of the expected gigawatts but certainly above past levels of annual installations.

Paula Mints is founder of SPV Market Research, a global solar market research practice: All Solar All of the Time.
This article was originally published on, and is republished with permission.

January 08, 2014

Two More Mega Solar Deals In China

Doug Young 

Renesola logoMore bright signs are emerging in the solar panel sector with word of 2 major new tie-ups, one involving ReneSola (NYSE: SOL) in Japan and the other Yingli (NYSE: YGE) in China. In the first, ReneSola has signed a massive deal to sell panels to a Japanese solar power plant developer. The latter case looks similar, with Yingli in its own deal for a major joint venture to co-develop new solar power plants with one of China’s top nuclear power companies.

The deals point to the huge potential from the China and Japan markets for solar panel makers in the next 2 years. Up until now, neither market has been a major player for the sector, with the lion’s share of sales going to the US and Europe. But that is starting to change, following Beijing’s roll-out of an aggressive plan to build up its solar power generation capacity and Japan’s efforts to diversify its power generation base after the Fukushima nuclear disaster of 2011. The rise of the Chinese and Japanese markets is a welcome development for China’s solar panel makers, who are seeing their access limited to US and European markets due to allegations of unfair state-subsidies from Beijing.

Let’s start with ReneSola, whose tie-up will see it supply panels for up to 420 megawatts of generating capacity for more than 10 new power plants in Japan. (company announcement) ReneSola didn’t give the Japanese developer’s name, but said it will construct the plants over the next 2 years. The amount is quite sizable for a company like ReneSola, whose panel shipments totaled 851 megawatts in its latest reporting quarter. It’s also one of the largest single deals I’ve seen in 3 years of writing about the sector. ReneSola shares didn’t move too much on the news, though it’s worth noting they are up 22 percent since the start of the year.

The case was different for Yingli, whose shares jumped 8 percent after it announced a new joint venture with China National Nuclear Corp. (company announcement) Following that rally, Yingli’s shares are up a hefty 40 percent in just the first week of 2014, a year that promises to see most of the sector’s major surviving players finally return to profitability after 2 years of losses during a prolonged downturn.

Under its tie-up, Yingli will form the joint venture with China Rich Energy Corp, a subsidiary of China National Nuclear. The deal will see Yingli supply panels for 500 megawatts of new generating capacity, with at least 200 megawatts of that to come from sites supplied by China National Nuclear Corp. No time frame was given for the supply deal, though presumably most deliveries will occur over the next 2 years as state-owned plant operators race to meet Beijing’s ambitious goal of 35 gigawatts of capacity by the end of next year.

Yingli logoAnnouncement of its new tie-up comes less than a week after Yingli announced another joint venture with Datong Coal Mining Group for new solar plant construction. (previous post) I commented that the tie-up looked smart because Datong is one of China’s top coal producers and thus has experience in the energy sector. Equally important, Datong also has strong cash flow to pay for new plant construction.

Yingli’s latest joint venture follows a similar trend, though I suspect that China National Nuclear Corp has far less cash flow and thus could run into potential financing problems as construction accelerates. The new ReneSola plan looks more solid, even though it’s slightly strange that it didn’t include the name of its partner in the tie-up announcement. Despite those potential issues, investors are clearly growing bullish on the sector after 2 years of bearishness, and I expect we could see some more upside in the stocks during the first half of this year.

Bottom line: New solar plant construction tie-ups by ReneSola and Yingli point to a boom in demand from Japan and China in 2014, providing potential upside for solar panel maker stocks.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

January 04, 2014

China Solar Tariffs Round II, Yingli's Smart JV

Doug Young 

The new year has just begun, and already we’re getting signals that 2014 will be full of new twists and surprises for the solar panel sector as it struggles to emerge from its downturn dating back nearly 3 years. A clash involving Chinese panel makers accused by western rivals of receiving unfair state support looks set to enter a new phase, based on an announcement of new action in the US by SolarWorld (Frankfurt: SWV, OTC: SRWRF), the German panel maker that has led the charge against the Chinese companies. Yingli logoMeantime, a separate new joint venture announcement from Yingli Green Energy (NYSE: YGE) looks smart, and reflects the new reality that China will become a major driver of solar plant construction in 2014.

The solar sector’s prolonged downturn is the result of massive oversupply, following a build-up in China that has the nation now producing more than half of the world’s solar panels. That build-up has led to resentment from western panel makers, who say the Chinese build-up was largely the result of unfair state support via incentives ranging from tax breaks to cheap bank loans. Both the US and European Union conducted probes into the matter, and the US imposed punitive tariffs against the Chinese manufacturers last year after determining the claims were true.

Now SolarWorld, which made the original complaint in the US, is saying it will file a new complaint with the US International Trade Commission (ITC) to close a loophole that has allowed many Chinese panel makers to avoid the punitive tariffs. (company announcement) The loophole allows Chinese-made modules to avoid the tariffs if they contain solar cells made in countries outside China. Solar cells are the key component used to make modules, which are the finished product used to generate solar power.

This particular loophole was widely discussed when the US first announced its tariffs last year, and many of China’s solar panel makers said they would be able to avoid the punishment by using solar cells manufactured offshore. I find it difficult to believe the US was unaware of this loophole when it announced the original sanctions, since it was so widely discussed at the time. Accordingly, I doubt SolarWorld’s new complaint will result in any new action by the ITC. Still, the issue is likely to make headlines during the year, and there’s a small chance we could see some new punitive tariffs to close the loophole.

Moving on, Yingli’s newly announced joint venture with Datong Coal Mine Group is much less controversial and looks like a smart business model as China gets set to embark on an ambitious construction program to build solar power plants with 35 gigawatts of capacity by 2015. We’ve already seen a number of major new projects announced recently by other panel makers, including Trina (NYSE: TSL) and ReneSola (NYSE: SOL).

But unlike most of the previous tie-ups that involve partners with little or no experience in the energy sector, this new venture looks a bit smarter because Datong is China’s third largest coal producer and thus should have quite a bit of experience in the sector. (company announcement) Equally important, Datong’s status as a company with a real business means it should have a strong cash flow to pay for new projects. That contrasts with many other new project developers, which look mostly like special entities set up by state-run organizations to execute Beijing’s ambitious solar construction program.

For all those reasons, this new tie-up looks like a smart move that could serve as a template for other panel makers to follow. I’ve previously said there’s a real danger that many of these new projects could run into difficulties because plant developers may lack financial resources and operating expertise needed to succeed. But on the surface at least, this new Yingli partnership looks like it should have a good chance of success and could lead to a major new source of reliable business for Yingli.

Bottom line: A new anti-dumping complaint by SolarWorld in the US is unlikely to succeed, while Yingli’s new joint venture looks like a smart template for new solar plant construction in China.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

December 31, 2013

Two Mega-Deals Illustrate China's Massive Solar Building Plans

Doug Young


A couple of year-end announcements from solar majors Trina (NYSE: TSL) and ReneSola (NYSE: SOL) are pointing to a coming flood of new orders for the entire solar panel sector next year, fueled by huge new demand from their home China market. I fully expect we’ll see a steady stream of similar announcements throughout next year and even into 2015, providing a flow of good news for rebounding solar stocks after a 3-year sector downturn. But amid the bright news, potential downside lurks in the risk that payments for some of these mega-orders could be slow to come, as many solar plant operators are big state-owned entities that may lack the funds and skills to pay for and operate all of their ambitious new projects.

I certainly don’t want to throw too much cold water on this nascent rebound for China’s solar panel makers, who along with their global peers have suffered through a prolonged downturn dating back to early 2011 due to massive overcapacity. Much of the older, less efficient capacity has now been shut down through a series of facility closures and bankruptcies, putting most remaining players on track to return to profitability in 2014. Aiding the rebound is an extremely aggressive build-up plan by Beijing to have 35 gigawatts of installed solar power generating capacity by 2015, compared with virtually nothing just 2 years ago. (previous post)

Achieving such a grand target will be tough, but big state-run companies are showing they will embark on a major new building spree to help Beijing reach the goal. As part of that, Trina announced has just signed a new framework agreement to build 1 gigawatt of generating capacity through a new tie-up in the far western Xinjiang area. (company announcement) Investors cheered the news, bidding up Trina’s shares by more around 7 percent in early trade after the announcement.

The tie-up will see Trina team team with the local government in the Turpan region in a series of projects over a 4 year period starting from next year. The first 2 phases are designed to have 300 megawatts of capacity and be connected to China’s national grid by the end of 2014. In a noteworthy disclaimer, Trina says that each new phase of the project will require approval from local governments and China’s national grid operator before work can begin.

Meantime, ReneSola has announced its own similar deal involving 3 solar plants also in western China, with a more modest capacity of 60 megawatts. (company announcement) Under the deal, ReneSola is building the plants and will sell them upon completion to the longer-term owner, a company based in eastern Jiangsu province. ReneSola stock also got a nice boost from the news, rising nearly 5 percent in early New York trading.

Such “build-and-transfer” arrangements are becoming relatively common, and Canadian Solar (Nasdaq: CSIQ) has become particularly adept at the business model. The new projects for Trina and ReneSola follow Canadian Solar’s own announcement of 3 separate China-based deals over the last 2 months, which will see it supply solar modules with total capacity of 232 megawatts. (previous post)

While all this news certainly looks good, one big cloud looming on the horizon is the element of payments for all these projects. Big state-owned companies are famous for rushing to comply with Beijing’s wishes, even when such firms may lack the financial resources and other expertise for such projects. One of my sources has told me some panel makers have already begun building projects for such clients, even though they have yet to receive any payments. I do expect that most panel makers will get paid for their goods eventually. But I also suspect that many problems will emerge as this building spree runs into a wide range of issues, resulting in delays and even the scrapping of some less well-conceived projects midway through construction.

Bottom line: New deals from Trina and ReneSola mark the start of a massive building spree for new solar plants in China, though some new projects could run into delays and financing problems.

Related posts:

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

December 26, 2013

When Will Solar Microinverters Reach Commercial Scale?

James Montgomery

Back in mid-August, Vine Fresh Produce in Ontario unveiled a 2.3-MW solar rooftop array on its greenhouse, the largest commercial rooftop project under the province's feed-in tariff (FIT). This system notably incorporates a technology that's been more familiar in the U.S. residential solar market: microinverters. (The devices, made in Enphase Energy's [ENPH] Ontario plant, helped the project qualify for that FIT.) Weeks ago Enphase followed that up with another large-sized project using microinverters, 3.1-MW of distributed solar across 125 buildings for the San Diego Unified School District.

Vine Fresh solar

Vine Fresh Produce’s 2.3-MW (2-MW AC) solar project in Ontario, Canada. Credit: Enphase.

Those announcements were meant as stakes in the ground. "We've proven [microinverter technology] in residential, we're proving ourselves in small commercial... but our ambitions are much bigger than that," said Raghu Belur, Enphase co-founder and VP of products and strategic initiatives. "We're seeing people deploy [microinverters] in significantly larger systems."

The technology is rapidly gaining traction, according to Cormac Gilligan, IHS senior PV market analyst. Microinverter shipments will reach 580 MW this year, with sales topping $283 million, and average global prices sinking 16 percent to $0.49/Watt, he projects. By 2017 he sees shipments soaring to 2.1 GW with revenues of about $700 million, and expansion beyond the U.S. into several regional markets, especially those in early stages of development that might be more open to newer technologies: Australia, France, the U.K., Switzerland, and even Hawaii. Japan's big residential solar market is especially attractive, but poses certification challenges and strong domestic competition.

But as those two Enphase projects illustrate, there's another growth area for microinverters that's emerging alongside regional expansion — up into commercial-sized rooftop solar installations. The same reasons residential customers like microinverters apply to small-scale commercial projects as well: offset partial shading, more precise monitoring at the individual module level, provide a more holistic readout of what the system is producing, and improve safety because they typically use a lot lower voltage. Just nine percent of microinverter shipments in 2012 were to commercial-scale use, noted Gilligan — but he sees those surging to nearly a third of shipments by 2017.

Who’s Making Microinverters

The microinverter space is getting crowded (see table below), if not yet a model of parity. Enphase continues to dominate with more than half of the sector's revenues in 2012, four million units cumulatively shipped and four product generations. "We are a high-tech company that happens to be in the solar sector," Belur explained. Compared with what he called the "big iron, big copper guys" who are now broadening their inverter portfolios with microinverters, "we're all about semiconductors, communications, and software." The company designs its own chips for its microinverters, and outsources manufacturing to Flextronics.

SMA got its entry into the game with the 2009 acquisition of Dutch firm OKE. "In the residential market it became clear to us that customers were interested in the microinverter architecture," said Bates Marshall, VP of SMA America's medium-power solutions group. SMA also sells the string inverters that have gained favor over big centralized inverters, so SMA's simply broadening its portfolio. With the emergence of the U.S. solar end-market, SMA is more willing to push some R&D and product development over here; "we get to drive the bus to a greater extent," he said. SMA recently started shipping microinverters to the U.S. from its German inventories, but a production line is now being qualified at the company's Denver facility.

Similarly to SMA, Power-One (recently bought by ABB) aims to supply whatever type of power conversion capability customers need, noted Chavonne Yee, Power-One's director of product management for North America. So far demand for microinverters has come in the U.S. residential market, offering high granularity and maximum power point tracking (MPPT), but she sees most of the commercial-scale demand switching from traditional central inverters to three-phase string inverters, not microinverters.

Module supplier ReneSola sells a standalone microinverter, touting the typical features with some higher (208-240) voltage options for small light commercial, but at a 15-20 percent lower price point, explained Brian Armentrout, marketing director for ReneSola America. "We are seeing some demand" in small light commercial applications ranging from 50-kW up to 500-kW at which points there's "the breaking point where string inverters make more sense."  Down the road the company wants to take the end-around route of integrating microinverters directly onto panels; its gen-2 microinverter should be available in the spring of 2014. Armentrout projects ReneSola will be "in the top three" next year for microinverter sales, while simultaneously aiming high for the top spot in module shipments.

Others are looking to integrate microinverters directly into the modules. SolarBridge has worked closely with SunPower and BenQ to design its microinverters to eliminate several components that typically fail, notably the electrolytic capacitors and opto-isolators, explained Craig Lawrence, VP of marketing. They also minimize other typical costs such as cabling, grounding wires and even tailoring the microinverter for a specific module type to optimize the microinverter's firmware, he explained. He sees the trend to bring microinverters into the commercial-scale environment, particularly with SolarBridge's more recent second-generation microinverters in the past year or so.

Microinverters vs. String Inverters 

In general, installers are making a choice between microinverters and string inverters, comparing functionalities and costs. Both sides make a case for reliability: microinverters use fewer components and represent lower cost when something does fail; string inverter vendors point out microinverters have only been on the market for a few years and can't make substantial claims about reliability. IHS's Gilligan noted the sheer number of microinverter devices in the field potentially requiring repair/replacement could be daunting.

UCSD solar installation

Solar panels on a building for the San Diego Unified School District. Credit: Enphase.

SolarBridge's Lawrence argues in favor of microinverters on an operations & maintenance basis. Central inverters account for half of an operations & maintenance budget and it's the single highest failure component in a solar PV system; that's why there's been a shift from those to string inverters on commercial-scale solar. "All the reasons you'd do that, are the exact same reasons to go from string inverters to microinverters," he said. "You want as much redundancy and granularity as you can possibly get, to maximize your rooftop utilization and simplify your O&M." Factoring in replacement costs, labor savings in not having work with high-voltage DC, "for most of our customers that alone is enough to justify the additional [price] premium." With a microinverter you'll know when (and which) one panel is underperforming, and it might be tolerable to just leave it alone; on a string inverter you might not know where the problem is while you lose power over the entire string, he pointed out.

Scott Wiater, president of installer Standard Solar, acknowledges that microinverter technologies and reliability have improved over the past couple of years, but he's not convinced this is an argument in their favor vs. string inverters. "I have concerns over the long term," he said. "If you truly believe you're going to get 25 years out of a microinverter with no maintenance, that might hold true, but we haven't had that experience." In fact he advises that any residential or commercial system should plan to replace whatever inverter it uses at least once over a 20-year lifetime. 

Commercial-Scale Adoption: Yes or No?

microinverter industry playersTalking with both inverter vendors and solar installers, the choice of microinverters vs. string inverters for commercial solar settings is making some initial inroads into light commercial applications, but might not be quite ready to move up in scale at that commercial level.

"For projects under 50kW, we have found that microinverters can be positive for the project LCOE on an 'all-in' basis," explained Jeremy Jones, CTO of SoCore Energy, an early adopter of microinverters, including commercial solar projects into the hundreds of kilowatts in size. In general the technology's "high granularity of real time data is very useful in the ongoing asset management," and SoCore's projects with microinverters "have consistently outperformed our other string inverter and central inverter sites." The technology stacks up favorably to central and string inverters (especially for three-phase 208-volt systems) in terms of added costs, he said: warranty extensions, third-party monitoring, and other balance-of-systems costs. Microinverters' performance and low-cost warranties also benefit longer-term finance deals, he added.

However, above 50kW "we have had a harder time making microinverters 'pencil' on typical projects," Jones added. Until costs come down, those larger-sized projects where microinverters can make sense tend to be unique cases where there's a higher value per kilowatt-hour (higher electric rates or SREC values), or sites that can maximize kWh per kW due to high balance-of-systems costs, such as parking canopies, he explained.

SMA's Marshall is "bullish on the commercial market, that's where the volume will be" for inverters in general, but he doesn't see it as a big boon for microinverters because of what he calculates as a 25-30 cents/Watt cost delta from residential string inverters. In the residential space there are ways to knock prices down to mitigate that difference, but in the commercial space that gap is too big for the average buyer, he said. "As a mainstream option? We don't see it today." Microinverters may have a play for "some unique projects" such as campuses or municipalities spanning multiple buildings, but the big growth in commercial solar will be in large retailers, "big flat open roofs, and big flat structures like carports," he said, and there a three-phase inverter "blows the door off in terms of raw economics." 

SolarBridge's Lawrence is "seeing a lot of activity" in smaller commercial settings (100-kw or less), tallying to 15-20 percent of the company's product installations. But while the company is bidding into projects ranging up to 1-MW, it's "harder to make the case above 250-kW," he acknowledged; "those don't pencil out for us right now."

"Anything below around 1 megawatt, we are shifting from a central to more of a string inverter, but we're certainly not going to the microinverter level yet -- nor do we think we will anytime soon," said Standard Solar's Wiater. "The economics behind the projects and having it pencil out, microinverters just can't compete with string or central inverters on a larger scale." While microinverters can help on some rooftop applications where shading might be an issue (close to elevator shafts, vents, HVAC units), a more tightly-designed system with an efficient string inverter "can have a much better return for the customer," he said.

Jeff Jankiewicz, project/logistics manager at Renewable Energy Corporation in Maryland, "definitely considers" microinverters as part of a system design; "we like the performance and efficiency they provide." But for his company it's really only for residential and small commercial projects; the largest they've done is a 20-kW system out in Maryland's horse country. Any bigger than that and it's a case-by-case comparison, specifically looking at shading and energy conversion.

Microinverters and the Grid: The Solar Industry’s Next Battle

Everyone we talked with about microinverters agreed on one thing, however: there's a trend coming that will incorporate more advanced grid management capabilities, such as reactive power and low-voltage ride-throughs, to give utilities more control and the ability to reach in and curtail availability to support grid reliability. California's Rule 21 proceedings is the first such example, seeking to mandate control functions in distributed generators. Those grid-management capabilities are already coming and "very, very soon," Lawrence urged, pointing to new requirements being codified in Australia and the U.S. probably following within a year or so.

SMA Solar Technology [S92.DE] is becoming very vocal about this topic. Its microinverter architecture incorporates a multigate feature with wired Ethernet that allows for a single point of interface into the array, which he emphasized is important for modern grid codes and providing grid management services, Marshall emphasized. Power-One's [PWER] Yee, ReneSola's [SOL] Armentrout, and SolarBridge's Lawrence echoed the concern over regulations and requirements coming down the road that will necessitate microinverters becoming more grid-friendly. They also questioned whether all microinverter architectures are suited for such site-level controls -- specifically market-leading Enphase, which they said is limited in its architecture and topology.

Enphase's Belur responds strongly to this debate. "We 100 percent support the need for advanced grid functions, and we are absolutely capable of providing those," he replied, calling those criticisms an "oversimplification of the problem." Enphase, he said, is "the most proactive company" pushing for those grid-management requirements — but is seeking to do it judiciously through standards bodies and with proper certification and testing bodies, "and you cannot ignore the policy on top of that," he said. "It needs to be done; let's do it properly," he said.

Integration of energy storage, which also recently got a California state mandate, is another looming question as it relates to inverters. Standard Solar's Wiater thinks that's a bigger challenge for inverter functionality than grid-friendly controls, to more directly address the issue of buffering solar energy's intermittency. Some inverters are being designed to interact with energy storage, he noted, but he questions how that would work for a microinverter because it "defeats the purpose" to switch from DC to AC on a roof, then convert back to DC again. Power-One's Yee, meanwhile, sees more distributed solar combined with battery storage as a tipping point in favor of multi-port string inverters being a more cost-effective approach.

Wiater agrees that grid management features are coming, and that the bigger inverter technologies have been out in front of some of these requirements, e.g. to curtail output. On the installer side, SoCore's Jones isn't seeing customers or utilities push strongly for such capabilities yet, but "spec'ing these features in now will allow us to future proof our designs and open up possible future revenue streams."

This issue might have bigger ramifications than just competitiveness between inverter suppliers. Once distributed solar generation gets enough penetration into the grid, utilities will say they can't support it without stronger control capabilities, Lawrence warned. That's likely going to be hashed out as a negotiation between the solar industry and utilities and implemented via codes and standards applicable to everyone, and the industry needs to get out in front of that resolution, he pointed out. "The solar industry is going to have to participate, or utilities will have a good case why they can limit the penetration of solar PV," he said. He cited discussions with a large U.S. solar developer who listed these smart-grid control capabilities as one of their top-four priorities for the coming year: "They believe it's coming," he confirmed. Getting the solar industry working together to help these speed these capabilities along "will help head off utility objections to more and more solar."

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

December 13, 2013

Canadian Solar Caps 2013 With Mega-Deals

Doug Young

Santa Hat
Canadian Solar "caps" 2013 with big solar deals

The year 2013 will go down as a major turning point for China’s solar panel makers, with some names emerging as new sector leaders after a prolonged downturn while others quietly disappeared. The latter category saw former leader Suntech (OTC: STPFQ) go bankrupt and LDK (NYSE: LDK) quietly sell off many of its assets, while the former category has seen Canadian Solar (Nasdaq: CSIQ) and Shunfeng (HKEx: 1165) emerge as names to watch in the future. Canadian Solar in particular has been coming back strong in the second half of this year with a steady stream of good news, including its latest mega-deal to sell panels in China.

Sensing the end of a nearly 3-year-old downturn is finally in sight, investors have sharply bid up shares of many healthier solar panel makers this year. Canadian Solar’s shares have posted some of the biggest gains, rising from about $3 at the beginning of the year to their current $28. For anyone too lazy to do the math, that means anyone smart enough to buy the shares in January would have received a 9-fold return on their investment. The rally has helped Canadian Solar shares to regain most of the value they previously held at their peak in 2010 when bullishness towards the solar panel sector was at its height.

All that said, let’s take a look at Canadian Solar’s latest mega-deal, which will see it sell 100 megawatts worth of modules to Chinese power plant developer Zhenfa New Energy to build 3 new plants in Gansu province and one in Inner Mongolia. (company announcement) Normally I don’t write about individual deals, since companies frequently make such announcements. But in this case the size of the deal is quite large, especially when one considers the amount is more than a fifth of Canadian Solar’s total sales for its latest reporting quarter.

This deal also caught my attention because it followed another 100 megawatt deal for the company announced last month with 3 Gorges New Energy, a company associated with the massive 3 Gorges Dam project in interior China. Canadian Solar also announced another big China deal in November to sell 32 megawatts of modules to China Perfect Machinery Industry Corp. That means in the last 2 months alone, Canadian Solar has signed deals for 232 megawatts of modules in China.

Canadian Solar LogoIndustry followers will note that this series of deals comes as China embarks on an ambitious campaign to build up its solar power generating capacity. Despite producing more than half of the world’s solar panels, China historically wasn’t a strong buyer of those panels. But that has rapidly changed in the last year, as Beijing has steadily raised its targets for an ambitious plan to build new solar plants throughout the country.

In the latest adjustment to its plans, reports last month said Beijing aims to have 12 gigawatts of solar power capacity installed by the end of next year, up from a previous goal of 10 gigawatts. (previous post) It plans to triple that figure to 35 gigawatts by the end of 2015. That means that if Beijing really follows its plan, these orders we’re seeing now from Canadian Solar should be just the beginning of an ordering frenzy likely to accelerate in 2014.

I fully expect such a buying binge to materialize, as state-owned power plant builders and other local entities will be anxious to carry out Beijing’s plan. That should be great news for the panel makers, and should help propel most back to profitability next year. The binge could be more problematic for China’s grid operator as it tries to connect all these new facilities to the national grid. But that’s a problem for Beijing and not the panel makers.

Bottom line: A recent series of mega deals for Canadian Solar augers a buying binge in 2014 by solar plant builders, as they rush to fulfill Beijing’s ambitious solar energy targets.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

December 04, 2013

Your Solar Panels Aren't Facing the Wrong Way

Tom Konrad CFA

Dilemma Compass photo via Bigstock

Contrary to some confused bloggers, solar panels produce the most electricity over the course of a year when pointed south, not west.

A recent report from the Pecan Street Research Institute started a chain of articles with increasingly inaccurate conclusions.

The lemmings at QuartzGizmodo, and Grist, followed each other off the cliff of delusion saying that homeowners could produce more power by pointing their solar panels west, rather than south.  (UPDATE: Now even USA Today is jumping off.)  The title of an article “Are Solar Panels Facing the Wrong Direction?” on Greentech Media seems to have started the lemmings rushing cliff-ward, even though the article itself got the facts right.

It simply ain’t so.  The study found that the average house in a sample of 14 houses with west-facing solar arrays produced more electricity than the average of 24 houses with south facing arrays in Austin, Texas during the three months from June 1 to August 31st, 2013.

The study (which I obtained from Pecan Street) specifically says “Over the course of a full year, a south-facing orientation produces more total energy than other orientations.”   In addition, Brewster McCracken, the president and CEO of Pecan Street, told me that he did not expect that the finding that the west facing arrays produced more energy even during that three month period was statistically significant, given the small sample size.

pecan street net grid impact.pngPoint It West

That said, the study concluded that there were significant benefits to pointing solar panels west.  While the highest annual electricity production will be produced with south facing panels, west-facing arrays are much better at reducing peak loads in climates with air-conditioning driven peak demand, such as Austin.

According to the study, a equal sized west facing system would have produced 49% more electricity during the peak demand hours of the summer months than a south facing system.  Only 58% of electricity from south facing systems was used in the home, with 42 percent being sent back to the utility grid.  Fully 75% of electricity from west facing systems was used in the home, with only 25% sent back to the grid (see charts.)

Because they help more to reduce peak load, and put less strain on electricity distribution systems, west-facing PV systems may have more value to the grid than do south-facing systems, despite producing less total energy over the course of a year.


More solar arrays should be pointed west, but not because they produce more power that way.  They should be pointed west because, in many cases, the power they produce is more valuable.  Utilities and governments should structure their incentives accordingly.

McCracken told me that some of the utilities in his area don’t even offer incentives for west facing solar arrays because “they don’t produce enough energy.”  Those utilities are just as confused as the media lemmings who think you get more energy by pointing solar panels west.

This article was first published on the author's blog, Green Stocks on November 22nd.

December 02, 2013

Solar Christmas: Coal for LDK, JV for Trina

Doug Young 

Warren Christmas.jpg
Photo by Tom Konrad

I thought I’d get into the Christmas spirit in this first work day after Thanksgiving in the US, so let’s take a look at what solar panel makers LDK (NYSE: LDK) and Trina (NYSE: TSL) are getting in their holiday stockings with the latest company news reports. It seems the struggling LDK won’t be getting much, with word that a Chinese court has added further delays to a case where it is owed $40 million in a business dispute with rival Canadian Solar (Nasdaq: CSIQ). The news looks a bit better for Trina, whose Christmas stocking is filled with another smaller solar company that it is acquiring as the industry consolidates.

Let’s start with LDK, which I previously said is in real danger of being forced into bankruptcy next week when a deadline will come for it to reach agreement with bondholders who are waiting for an interest payment that was due in August. (previous post) Now Canadian Solar has announced that a court has agreed to a new hearing in a dispute between itself and LDK that was ruled in LDK’s favor last year. (company announcement)

The dispute centers on Canadian Solar’s termination of an agreement to buy materials from LDK after the industry entered its current downturn. An arbitrator ruled a year ago that Canadian Solar owed LDK about 250 million yuan ($40 million) as a result of the contract termination. A court in Canadian Solar’s home province of Jiangsu refused LDK’s request to force Canadian Solar to pay the award in May, but now a higher court is ordering that case be re-heard.

It’s hard to comment too definitively in this matter without knowing more detail; but at least some level of local politics seems to be involved in this case. Chinese courts often favor companies in their home areas, reflecting the high degree of politic influence in China’s judiciary. Thus I wouldn’t be surprised if the court’s May decision to refuse to enforce the $40 million award for LDK came after Canadian Solar applied pressure on the judicial system through its local political connections. So perhaps this latest decision by a higher court represents a slightly positive development for LDK.

But whatever the case, the most obvious outcome in all this is that LDK won’t be getting its $40 million anytime soon, if it ever gets it at all. That’s quite a negative piece of news, as LDK was probably hoping to collect the funds sooner rather than later to help it through its financial difficulties. LDK shares didn’t react much to the news in light trade after Thanksgiving, but I suspect the stock could come under pressure as people return to work this week.

Meantime, let’s take a quick look at the news from Trina, which has announced it is forming a joint venture with smaller player Yabang Group. (company announcement) The joint venture’s main production assets will consist of Changzhou NESL Solartech, a Yabang unit that makes solar modules. Trina will hold 51 percent of the venture, which has a modest investment of $45 million and production capacity of 500 megawatts of solar modules.

Anyone reading between the lines will see that this is simply a case of Trina buying out Yabang’s assets, as part of a much needed broader industry consolidation. PC maker Lenovo (HKEx: 992) formed a similar joint venture with Japan’s NEC (Tokyo: 6701) in 2011, allowing the former to take over the latter’s PC assets. The news looks positive for Trina, indicating it will become one of the main consolidators in the ongoing overhaul of China’s solar panel sector. Look for more similar deals in 2014, as the sector slowly rebounds and the strongest players return to profitability after 2 years of losses.

Bottom line: LDK won’t be able to collect $40 million owed by Canadian Solar for at least 6 months, while Trina’s new joint venture indicates it will be a consolidator in the China’s solar sector overhaul.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 28, 2013

Lights Dim At LDK As Deadline Looms

Doug Young 

dim lightbulb.jpg
Dim lightbulb photo via BigStock

I haven’t written about LDK Solar (NYSE: LDK) for a while, so it seems like the release of its latest quarterly results might be a good chance for a final look before the lights go off permanently at this struggling solar panel maker. Somewhat appropriately, LDK announced its results on the same day it also said it continues to negotiate with international investors who are still waiting for an overdue payment on their bonds. (company announcement) The bondholders have just agreed to extend their talks for another 2 weeks, but there’s always the very real danger that they could force LDK into bankruptcy when this new deadline expires on December 10.

I’ll return to the possibility of bankruptcy shortly, but first let’s take a look at the latest results that show just how much LDK has shrunk over the last 2 years. LDK and the higher-profile Suntech (NYSE: STPFQ) have been the biggest victims of the painful restructuring taking place in China’s solar panel sector. But while Suntech’s slow dismantling in a Chinese bankruptcy court has received lots of media attention, LDK’s overhaul has received much less scrutiny because it was never a very strong company even when the industry was booming.

The most notable element in LDK’s latest results is its shrinking top line. The company reported just $157 million in third-quarter sales, and a net loss of $127 million. (results announcement) Anyone looking at those latest figures would probably be most alarmed by the fact that the company’s net loss was nearly as big as its total sales, which is reflected in the fact that LDK’s operating margin for the quarter was negative 50 percent.

A look at the company’s quarterly results just 2 years earlier provides plenty more reason for alarm. LDK’s sales in the third quarter of 2011 totaled $472 million, meaning its sales have shrunk by about two-thirds over the last 2 years. The company’s customers are undoubtedly flocking to more stable rivals like Trina (NYSE: TSL) and Canadian Solar (Nasdaq: CSIQ), which are more likely to still be in business a year or two from now.

LDK has managed to avoid bankruptcy over the last year by selling off assets and taking on new investors, resulting in a painfully slow downward spiral that has resulted in the huge sales drop. That strategy has worked to placate the company’s state-run stakeholders, many of which are connected to government entities in LDK’s home province of Jiangxi. But international bondholders aren’t really interested in such face-saving moves, and simply want their money back.

Those bondholders were supposed to receive an interest payment on August 28, meaning the money is now 3 months overdue. I suspect this latest extension of talks could be one of the last, and that the bondholders will finally tire of playing games with LDK and force the company into a foreign bankruptcy court as early as next month. Some holders of defaulted Suntech bonds used a similar strategy last month, forcing the company into bankruptcy in a New York court, potentially delaying its overall restructuring. (previous post)

One thing I find amusing in all this is that LDK’s New York-listed shares have managed to stay at about the $1.60 level through this entire period of turbulence. Suntech’s stock also stayed relatively high throughout most of its bankruptcy, but suddenly tanked when shareholders finally realized they would lose all their money after the company announced its formal liquidation and its stock was de-listed. I suspect the same fate will come soon for LDK, with shares likely to tumble when bondholders finally tire of playing games and force the company into bankruptcy.

Bottom line: LDK bondholders are likely to force the company into bankruptcy as early as next month, in the first step before a final liquidation and share de-listing.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 22, 2013

SunTech's Sunset Illuminates State Ties

Doug Young 

Sunset for Suntech. Photo by Tom Konrad

As the sun rapidly sets on former solar pioneer Suntech (OTC: STPFQ), I thought I’d take a look at the latest reports that show just how closely the company relied on state support. At the same time, another major development has seen Suntech’s shares finally de-list from New York, where they have traded since its 2005 IPO. The de-listing is something that should have happened long ago, even though investors continued to bet that Beijing would rescue Suntech ever since the company was forced into bankruptcy back in March.

I’m suddenly feeling a bit nostalgic while writing this, as I suspect it will be one of the last chances I have to write about Suntech before the company officially ceases to exist. But I also suspect we’ll probably see at least 1 or 2 more flare-ups before the curtain drops, providing an appropriate final burst for this former solar pioneer that later became a poster child for creative accounting that is relatively common among US-listed Chinese companies.

Let’s start with a look at a new report that shows just how closely Suntech was tied to state support. Such strong support was one of the main factors for the sector’s build-up over the last decade, which resulted in massive oversupply that sparked a downturn that began more than 2 years ago and is only finally starting to subside now. That downturn claimed numerous victims in the US and Europe, and Suntech is the biggest victim in China.

According to the latest report, Suntech’s 2 largest creditors were both big state-run lenders, which often make their decisions based on orders from the central and local governments and provide loans at rates well below market levels. The largest of Suntech’s creditors was China Development Bank, one of Beijing’s main policy lenders, which held about 2.4 billion yuan ($393 million) in Suntech debt, or about a quarter of the company’s total debt of 9.5 billion yuan. (English article) The second biggest creditor was the Bank of China’s (HKEx: 3988; Shanghai: 601988) branch in the city of Wuxi, Suntech’s hometown, with nearly 2 billion yuan in debt.

Some quick math will show that these 2 banks alone account for nearly half of Suntech’s debt, though it’s unclear to me if the 9.5 billion yuan figure also includes the company’s international bonds. But regardless, the fact that 2 big state-owned banks lent $720 million to Suntech looks like strong evidence to support foreign competitors’ claims that Beijing provides unfair support to its solar panel makers. Those claims led to anti-dumping investigations by the US and EU, both of which found that China did indeed provide unfair support to its solar panel makers.

From there, let’s look quickly at the other major development, which saw Suntech’s shares officially moved to the over-the-counter market earlier this week from their former listing on the New York Stock Exchange. The NYSE officially cited uncertainty over Suntech’s ability to file its annual report on time for the de-listing. (English article) But I suspect that stock exchange officials also felt guilty for not pressing harder to de-list Suntech shares earlier, as most companies are usually instantly de-listed when they enter bankruptcy reorganization.

Investors continued to value Suntech at more than $100 million throughout the bankruptcy process, with its shares trading above the minimum required $1 level for most of that time. They finally began to sink last week after it became clear the company was being liquidated, though they suddenly rallied 40 percent in over-the-counter trade in the latest session. Personally speaking, I’ll be happy when the shares finally stop trading completely, formally ending Suntech’s life as a listed company.

Bottom line: The latest reports on Suntech’s debt highlight its strong government support, even as its New York-listed shares loom closer to becoming worthless.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 20, 2013

SolarCity – Crisis or Opportunity?

By Harris Roen

The latest earnings numbers released by SolarCity (NASD:SCTY) show a mixed bag of results. Total revenues have been rising for the past 4 quarters, and the number of customers SolarCity is signing up continues to soar. All is not rosy, though, as operating expenses relative to net loss continue to increase. This article dives into the reported numbers, looks at important customer trends, and asks whether SolarCity is still a stock worth investing in.


Revenues: Not a record, but steady growth

Revenues for the third quarter came in strong for SolarCity, at $48.6 million. This is a 52% increase in revenues over the same quarter last year, though it is still far below the record set in June 2012. Still, income has been rising in a straight-line direction for the past four quarters, and fourth quarter revenues are projected to be steady or rising.

Net income, on the other hand, has not fared so well. The first three quarters of 2013 have shown large losses. SolarCity reveals that in the most recent quarter it hemorrhaged $34.6 million. Total current assets have remained steady for the company since the last quarter at around $312 million. However, the cash portion of those assets dropped 17% to $133 million. So while it looks like SolarCity can sustain losses for a few more years on its current tack, this trend of negative net income must turn around in order for the company to remain viable for the long-term.

Revenues projected to rise

Revenues are projected to continue a steady increase for SolarCity on an annual basis. According to the company’s latest guidance, money coming in from leases and sales are expected to grow to between $157 million to $163 million for all of 2013. That means about a 25% increase over 2012 revenues, and about five times the revenues of just three years ago.
  SCTY Revs

Expenses continue to increase

Since the revenue side of the equation is solid for SolarCity, high expenses are the cause of continued losses for the company. Total operating expenses deepened for each quarter of 2013, now at $46.2 million. So far for 2013, expenses are greater than for all of 2012.

SCTY losses 30123q3

Know your customer

In order to understand when a mass-market company like SolarCity is likely to become profitable, one must understand the nature of its customer base. Questions to be answered include how fast is the customer base growing, how much does it cost to get a new customer, and how much money does each customer generate.

SCTY Clients

Customers have been added at a steady clip the past three quarters. In fact, the third quarter of 2013 added almost twice as many clients as were added in the first quarter of the year. Already year-to-date, SolarCity has added almost as many customers as it did in the banner year of 2012.

Revenues per customer, however, have remained flat, at around $600 per customer per quarter. (Note that revenues per customer look much larger for the annual data on the chart, but those numbers account for a full four quarters of income. When revenues per customer are projected out for all of 2013, it lands in the $2,500 range).

It is a bit hard to tell from the chart, but net loss per customer has been shrinking in 2013. It is down 30% since the first quarter, from a loss of $601 per customer to a loss of $421 in the third quarter. Likewise the acquisition cost per customer is dropping, down 29% from the first quarter to just under $2,000. These are both positive trends, and if they continue, will play an important role in bringing about profitability.

Is SolarCity still a good investment?

Though it is in the solar business, SolarCity is essentially a finance company. It uses billions of dollars of variable interest entity (VIE) investments, long and short-term debt, tax credits and stockholder equity to create leases, notes and other equities to generate income. As I have stated before, SolarCity as an energy stock is a speculative investment any way you slice it. It has yet to turn a profit, and consensus estimates are betting that it will still have negative earnings in 2014 and 2015. Because earnings results were good but not stellar, the stock has given up about 15% of its value from its high a week ago.

Having said that, there is no doubt that SolarCity is a well-positioned company in the growing field of solar installs. Last quarter alone it deployed 78 megawatts of photovoltaics. That is greater than what was installed in all of 2011, and about 70% of all megawatts SolarCity installed in 2012. If acquisition cost per customer drops below the $1,000 range, and if the company continues to grow its bottom line to swing net revenues per customer in a positive direction, then current prices for SolarCity will likely be justified. As such, I see SolarCity as a long-term hold for the investor that can stomach volatility, rather than a traders stock.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC owned or controlled shares of TSL. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

November 18, 2013

Solar Rooftop Lease Securitization A Ground-Breaking Success

SCTY residential solar.pngSean Kidney

Last week we blogged that  SolarCity (SCTY) and Credit Suisse were about to issue a new $54.4 million, climate bond – a rooftop solar lease securitization. It’s out: BBB+, 4.8%, 13 years. The long tenor is interesting – and great. And S&P’s BBB+ rating suggest those credit analysts may be beginning to understand solar.

This bond has been long-awaited by the green finance sector, who are hoping it’s the harbinger of things to come.

I did get the chance to look at the S&P opinion. Their rating reflected, as they put it, their views on over-collateralization (62% leverage; that’s how companies do credit enhancement), SolarCity's track record and the credit quality of the household borrowers.

They also noted that “because this asset class has a limited operating history, we expect the rating to be constrained to low investment-grade for the near future”. Presumably that means we can expect better ratings five years away.

The asset-backed securities will be paid for with the cash flow from the SolarCity‘s rooftop solar leases. This allows SolarCity to raise fresh cash to do the next wave of deals; we think of this as supporting velocity in working capital.

I’m mentioning this because folks from the policy and carbon world sometimes feel a bit queasy about climate bonds backed by existing assets. “Shouldn’t we be focusing on new project finance”, they ask. No.

In the project space, as Citi’s Mike Eckhart is fond of reminding us, bonds only make up 5% of debt financing globally. Banks provide the rest – and that’s unlikely to change much.

The critical task for climate bonds is to re-finance – to provide an exit strategy for those folks who best understand project development risk: equity investors, energy corporates, and bank lenders. Once that project development risk has gone, climate bonds become the means to re-finance among the pension and insurance fund sector, whose risk appetite is much lower.

This is important for energy companies, allowing them to effectively offload “mature” assets (solar panels in place, leases signed, revenue flowing) and so quickly recycling capital into new projects.

It’s also vital for banks, struggling with recapitalisation pressures post-crash. If they can securitize their loan portfolios it will allow them to do more with their now reduced allocations to project lending.

It opens up a critical new financing option for companies, helping them grow faster. And boy do we need them to grow: if we’re to have a chance of avoiding climate change tipping points we need every low-carbon industry to grow at maximum rates.

SolarCity installs rooftop solar panels, typically at little or no cost to customers. The company owns the systems and its residential and commercial clients sign long-term agreements to buy the power.

Interestingly SolarCity‘s share price jumped 4.3% when the bond came out, making the largest US solar company by market cap. Confidence building? [Ed. Note: It should not be surprising that when a company gets access to a cheap new form of finance, it helps the stock.]

——— Sean Kidney is Chair of the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

November 15, 2013

Is The Largest Solar Manufacturer a Bargain?

by Debra Fiakas CFA
Yingli logoIn the previous post on Canadian Solar (CSIQ:  Nasdaq) I suggested a multiple of 10 times the consensus estimate for earnings in 2014 might be a compelling value for the solar module producer.  Putting a value on is competitor Yingli Green Energy Holding (YGE:  NYSE) is not so easy given the string of losses reported by Yingli.  The usual price to earnings multiple cannot be used to value a company swimming in red ink.  That leaves the multiple of price to sales.  Yingli trades at 0.5 times sales compared to the one-to-one multiple that is the average for the solar industry. Call that difference the ‘red ink’ discount.

Yingli should have profits.  It lays claim to being the world’s largest producer of photovoltaic cells and modules.  The company shipped 2,300 megawatts of solar modules in the year 2012.  First Solar (FSLR:  Nasdaq) was a distance second.   The installed base of Yingli solar panels exceeds seven gigawatts and has spread over forty countries around the world.  Sales in the most recently reported twelve months were $1.8 billion, down from $2.3 billion in the year 2011, when prices were higher.

As depressing as are continued reported losses, the really bad news for Yingli is its spotty record in generating cash flow from operations.  There is an unsteady flow of inventory levels and collections on accounts receivable appear to run in fits and starts.  The results are a dwindling supply of cash resources, mushrooming current liabilities and rising long-term debt.

All this gloom and doom took its toll on the YGE price, with the stock setting a long-term low of $1.25 a year ago.  Since then the stock has been a dramatic ascent, rising by five times over in the last year.  As the solar industry re-establishes itself at a lower, more cost-efficient production capacity, more than just a few competitors are likely to wash out.  Indeed, there have been a number of acquisitions and bankruptcies in the sector over the past three years.  Suntech Power Holdings (STP:  NYSE) is the most recent casualty to a Chapter 7 bankruptcy filing by bond holders and the assets of Twin Creeks Technologies have now been tucked into GT Advanced Technologies (GTAT:  Nasdaq).

Nonetheless, Yingli is expected to be among the survivors.  That makes the stock worth looking at even though it is no longer trading at a bargain basement price.  Indeed, a review of historic trading patterns in YGE suggests the pullback in recent weeks might have left the stock in oversold territory  -  at least in the near-term.  It is a compelling opportunity for investors with long-term investment horizons and a bullish interest in the solar sector.
Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

November 12, 2013

SolarCity Rooftop Solar Lease Securitization Advances

by Sean Kidney
SolarCity logo

US firm SolarCity (SCTY) announced last week that it was seeking to make a private placement of a $54.4 million, 13 year bond backed by cash flows from rooftop solar leases. SolarCity is the second-largest U.S. solar company by market capitalization.

Lead manager Credit Suisse (CS) has been working on this deal for some time now, which will now only be eligible to be sold to big, qualified investors. It’s been a race this year between them and a US bank to get the first solar rooftop loan securitization our the door. Looks like the Swiss may win; we’re hoping they will start a trend (these are dinky-di climate bonds, after all).

The Financial Times is calling it the world’s first “sunshine-backed bond”. Very amusing, although not quite correct; SunPower’s (SPWR) 2010 Italian Andromeda bond has that tag.

According to the Financial Times story, Credit Suisse had a tough time convincing rating agencies to evaluate the bonds because of the lack of historical data; Standard & Poor’s have apparently given it a reasonable rating in the end – details still to be released.

Sean Kidney is Chair of the Climate Bonds Initiative, an "investor-focused" not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. 

November 08, 2013

Sunset for Suntech as China Solar Target Rises

Doug Young 

Sunset for Suntech. Photo by Tom Konrad

More good news is coming for the rebounding solar sector with word that Beijing is accelerating its build-up of solar power plants in a bid to help the industry and also improve China’s dismal air quality. But that news is coming too late for rapidly disappearing sector pioneer Suntech (NYSE: STP), which has just announced it has formally launched a liquidation process that will end its life as an independent company. Suntech’s downbeat news isn’t really unexpected, and comes amid a much broader flurry of positive signs for a solar panel sector that is finally emerging from a downturn that has lasted nearly 3 years.

The latest piece of upbeat news from the corporate sector came just a day ago, when Trina (NYSE: TSL), one of the largest players, raised its shipment guidance for the third quarter by 20 percent, and said margins would also be significantly better than previously forecast. (company announcement) Trina’s news came after Canadian Solar (Nasdaq: CSIQ) gave a similarly upbeat update on its third-quarter results, including a return to profitability for the period. (previous post)

The latest good news for the sector comes from Beijing, which has raised an already aggressive target for new solar power plant construction even higher to help the industry. According to the latest reports, Beijing has raised the target by 20 percent, with an aim for 12 gigawatts of solar power capacity nationwide by 2014, up from a previous target of 10 gigawatts. (English article)

Beijing was always an aggressive supporter of the solar panel sector, offering generous incentives that led to a huge build up in manufacturing capacity. That resulted in massive oversupply that sparked the recent downturn. But while it supported a build up of manufacturing capacity, Beijing didn’t support a parallel build-up of domestic solar power plants, with the result that manufacturers like Trina, Canadian Solar and Suntech relied completely on Europe and the US for most of their sales.

Now Beijing is trying to rectify that imbalance with an aggressive build-up of solar plants, with an aim of 35 megawatts of capacity by 2015. That target looks a bit unrealistic to me based on the 12 megawatt target for 2014. But then again, perhaps we’ll see a sudden massive construction binge in response to Beijing’s recent calls to clean up China’s highly polluted air, and also the government’s determination to support solar panel makers.

That rapid domestic build-up may be good news for relatively healthy companies like Trina, Canadian Solar and Yingli (NYSE: YGE), but it comes too late for bankrupt Suntech, which has just filed an application for provisional liquidation in the Caymen Islands where it is technically based. (company announcement) This application looks like sunset may be imminent for the company, whose main manufacturing assets are being purchased by Hong Kong-listed Shunfeng (HKEx: 1165) for 3 billion yuan. ($500 million) (previous post)

There’s not much new to say about this latest development, except that it’s coming a bit faster than I had expected. I had previously said that Suntech’s bankruptcy reorganization could be delayed by litigation in New York and Italy; but now it appears the Chinese court hearing the case wants to go ahead and liquidate Suntech sooner rather than later.

One interesting footnote as the end draws near is what’s happened to Suntech’s stock. This kind of bankruptcy filing usually causes a company’s stock to become nearly worthless, since shareholders seldom recovery anything from such reorganizations. But in this case Suntech’s stock held its value, and was trading as high as $1.58 just 2 days ago. Now that the end is finally near, shareholders finally seem to realize they may not get anything. Suntech’s shares plunged 16 percent in Wednesday trade, and were down another 11 percent at $1.12 after hours. Look for the downward plunge to continue, until the shares hit the nearly worthless level where they should have been throughout the bankruptcy process.

Bottom line: Newly raised power plant targets will help China’s rebounding solar panel sector, but Suntech shares are likely to soon become worthless as the company liquidates.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 06, 2013

Canadian Solar Bags Another Module Sale

by Debra Fiakas CFA
Canadian Solar Logo
Last week Canadian Solar (CSIQ:  Nasdaq) bagged another solar module supply agreement  -  this time on the home turf of some of its staunches competitors.  Of course, the company has its own manufacturing foothold in China.  Canadian Solar is to supply its solar modules to China Three Gorges New Energy Company to a 100 megawatt solar power project in Guazhou County in Gansu Province.  The modules shipments will be complete by the end of the December 2013, suggesting all the sales will end up recorded yet in the current fiscal year.

The Three Gorges sales is not an isolated good news story.  Last month Canadian Solar started work on a 100 megawatt utility-scale solar farm in Ontario for Samsung RenewableEnergy.  The company also won a contract to supply solar modules for a solar power project in Saudi Arabia being built by Saudi ARAMCO, one of the world’s largest crude oil producers.

The trio of analysts who have published estimates for Canadian Solar already through the company could deliver $2.0 billion in sales and $0.47 in non-GAAP earnings per share in the current fiscal year.  This represents a bit over 50% growth over the prior year.  This not a bad feat in a sector that was at one point nearly written off as competition from low-price photovoltaic modules from China threatened to put North American and European producers out of business.

To be sure, Canadian Solar experienced a sharp drop in sales in the last year and even the first quarter of 2013.  However, this year beginning in the June quarter the company turned things around, registering the first year-over-year increase in quarterly sales in three years.  It now appears possible for the company to get back to set a record in sales value.

Profits have been improving as well  -  at least the net loss has been getting smaller with each reported quarter.  The company has reported strong cash generation in the past as well as net profits.  Investments in new solar projects are reported in operating cash flows.  Because of the size and long-term nature of some solar development projects, operating cash flow can be dramatically impacted.  In 2012, a solar project under development took a $300.7 million bite out of cash flow from operations.

Even if profits spark investor interest in CSIQ, they will need to temper their enthusiasm, at least in the short-term.  A review of historic trading patterns in CSIQ suggests the stock has recently risen to over-bought territory.  It would be prudent to wait for a period of trading weakness to take on long positions in the stock.  Still at the current price level the stock is trading at 10.0 times the 2014 consensus estimate.  While this is above the company’s current growth rate it is still an attractive valuation.  For an investor with a long-term investment horizon the current price level justifiable.
Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

Clouds Lift For Canadian Solar And Suntech

Doug Young 

sunset breaking
through clouds.jpg
Sun breaking through clouds photo by Tom Konrad

Spring is most definitely in the air this week for embattled solar panel makers, with Canadian Solar (Nasdaq: CSIQ) and Shunfeng Photovoltaic (HKEx: 1165) emerging as new sector leaders with different pieces of upbeat news. From my perspective the Canadian Solar news is the most exciting, even though some may say it doesn’t come as a big surprise. The company announced it will post a net profit for the third quarter, becoming the first major solar firm to return to the black after 2 years of losses. Meantime, Shunfeng has announced details of its highly anticipated deal to buy the main assets of bankrupt former solar pioneer Suntech (NYSE: STP), marking a major step forward in the industry’s restructuring.

Investors welcomed both pieces of news, sharply bidding up shares of all 3 companies. Canadian Solar’s American Depositary Shares (ADSs) jumped 12 percent to $28.65, taking them to levels not seen for 3 years. Anyone smart enough to buy the stock a year ago at its low of about $2 would be getting quite a nice return on that gamble. Shunfeng shares shot up 20 percent on its news, as trading in the stock resumed after a one week suspension. Suntech shares also rallied 17 percent, indicating its stockholders believe their shares will still be worth something when the company finally emerges from its bankruptcy.

Let’s start off with Canadian Solar, which issued a third-quarter results preview that looked quite sharp all around. (company announcement) The company raised its outlook for shipments by about 18 percent, saying it now expects to ship 460-480 megawatts of panels during the quarter. But more impressive was a huge upward revision to its gross margins, which are now expected to come in at 18-20 percent, up sharply from previous outlook for 10-12 percent.

That sudden surge in margins was likely a major factor behind the company’s forecast that it would post not only a net profit for the third quarter, but also for the first 9 months of the year. Canadian Solar had posted losses in this year’s first 2 quarters, but repeatedly stuck by its forecast to be profitable for the year. I’ve said before that Canadian Solar’s model of constructing and then selling solar plants looks like a good one, and its emergence as the first major company to return to profitability also looks like a strong sign that it will emerge as a future sector leader.

From Canadian Solar let’s move on to Shunfeng, which announced it will pay 3 billion yuan, or nearly $500 million, to acquire most of Suntech’s main assets in its hometown of Wuxi. (company announcement) Upon completion of the investment, Suntech’s main manufacturing unit will become a wholly owned Shunfeng subsidiary. It looks like a big chunk of Shunfeng’s new investment will go to repay some of Suntech’s many creditors, including ones holding more than $500 million in bonds that Suntech defaulted on earlier this year, forcing it into bankruptcy.

This new cash infusion follows Suntech’s announcement of another $150 million investment last week from Wuxi Guolian, a fund linked to Suntech’s hometown government. (previous post) It’s interesting to note that this combined cash infusion of some $650 million is significantly larger than Suntech’s current market value, which still only stands at $280 million even after the strong rally on news of the Shunfeng investment.

I previously predicted Suntech’s emergence from bankruptcy could still be 7 or 8 months away, due to a seizure of company assets in Italy and an involuntary bankruptcy against the company in New York. But this latest rally in Suntech’s stock seems to imply that its shareholders believe they will get at least some money for their stock, which could either be allowed to continue trading on Wall Street or possibly swapped for Shunfeng shares later.

Bottom line: Canadian Solar’s return to profitability and Shunfeng’s $500 million investment in Suntech indicate an overhaul of the solar sector is accelerating, as some producers start to return to profits.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

November 03, 2013

Suntech Has A Friend In Wuxi But Foes In NY

Doug YoungSuntech logo]

Former solar energy pioneer Suntech (NYSE: STP) is getting caught in an increasingly complex web of global forces as it tries to emerge from bankruptcy, with the latest coming from its hometown of Wuxi and from a bankruptcy court in New York. While such tugs-of-war probably aren’t uncommon in such a complex case, Suntech’s strong international connections mean its reorganization could take longer than many previously expected. The case also highlights the unusual risks associated with companies that do so much trans-border business. The latest developments have seen Suntech’s hometown of Wuxi emerge as a major new investor in the company, and a group of debtors force it into a US bankruptcy court.

Company watchers will know that Suntech has many international connections. Its headquarters is in China, while its shares trade on the New York Stock Exchange. Its largest market is Europe, where it controls the Global Solar Fund that builds solar energy plants. Finally, the company also has billions of dollars in debt held by institutional investors from around the world, and billions more in outstanding loans from major banks in China.

Given that complex background, it’s not too surprising to see everyone trying to get a piece of Suntech as the company struggles to get back on its feet after being forced into bankruptcy earlier this year in a court in its hometown of Wuxi. At least some of Suntech’s overseas bond holders don’t seem to think they will get a good deal from the Wuxi court, which could be true since the judge may favor the company’s China-based stakeholders over foreign investors.

Those concerns have led a group of foreign bondholders to petition to have Suntech forced into a US bankruptcy court in the state of New York, a move that Suntech strongly opposes. (company announcement) I’m no expert on bankruptcy law, but the investors behind this move most likely believe the New York court will accept the case because Suntech’s shares are traded in New York. Suntech points out that the bond holders behind this move are a very small group, though I doubt that fact will persuade the New York judge to dismiss the case.

Meantime, Suntech has also announced that Wuxi Guolian, a fund presumably controlled by its hometown government, has signed a letter of intent to invest $150 million or more in the company as part of its reorganization. Wuxi Guolian is making the commitment even though the bankruptcy court hearing the case has already selected another firm, Shunfeng Photovoltaic (HKEx: 1165), to become Suntech’s strategic investor going forward. (previous post)

This new investment by Wuxi Guolian, if it happens, looks like a power play by the Wuxi government to ensure that Shunfeng doesn’t take control of Suntech and then close down all of its Wuxi operations. Such a limitation could seriously hamper Shunfeng’s efforts to reorganize Suntech’s main operations in Wuxi, forcing Shunfeng to keep operating facilities that it might otherwise want to close or relocate.

At the same time, Suntech is also grappling with some of its European assets, which were built by Global Solar Fund and have now been seized by a court in Italy for possible regulatory and other violations. On the whole, this story is certainly getting quite messy due to Suntech’s complex web of global connections. I do think the China-based groups will ultimately win the battle for control of the company, but it could be another 7 or 8 months now before Suntech can finally complete its reorganization and emerge from bankruptcy.

Bottom line: Suntech’s reorganization will take longer than expected due to a growing number of international claims against the firm, including a new bankruptcy petition in New York.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 20, 2013

SolarCity: The Amazon of Solar?

By Harris Roen

SolarCity (NASD:SCTY) has become a sort of proxy for the future of solar in this country. This tremendously successful company is coming up on a one year anniversary of its IPO in December. Several developments at SolarCity warrant a closer look into this dynamic company trying to stay ahead of the curve in a growing, competitive solar installation environment.


Despite skeptics, SolarCity’s stock is strong

There was much skepticism among investors when SolarCity was preparing for its IPO in 2012. Solar stocks had been badly beaten up in recent years – the Ardour Solar Energy Index (SOLRX) had fallen fully 97% from its highs at the beginning of 2008 to its lows in November 2012. The reality for SolarCity, though, turned out to be much different.

Since SolarCity issued its stock on December 13, 2012, it has gained 466%! For the month of October alone SolarCity is up over 50%. Volume has steadily increased also. The one-month rolling average is at its highest level ever, and is double what it was just this past September.

 Solid third-quarter numbers, even better guidance

Last Friday SolarCity announced that it had deployed 78 megawatts of photovoltaics in the third quarter of 2013. That is greater than what was installed in all of 2011, and about 70% of all megawatts SolarCity installed in 2012. As well, the number of customers has more than doubled, from about 40,000 in 2012 to over 82,000 as of September 30. Not surprisingly, the stock jumped 23% in one day on the news.

SolarCity expects the number of megawatts installed to be 278 for 2013, and almost doubling to between 475 and 525 megawatts for 2014. Third quarter revenues will be announced on November 6, so look for my report on SolarCity’s financial results around that time.

 $345 million to be raised through stock offering and convertible note

On Tuesday, SolarCity rolled out a plan to raise hundreds of millions of dollars in new capital. Four large investment firms will be underwriting 3.4 million shares of common stock at $46.54/share. Additionally, SolarCity will offer over $200 million in convertible senior notes. The net proceeds from both are expected to reach $344.8 million, which is about 8% of its current market cap. If SolarCity can continue to use this capital to efficiently grow the company through marketing and finance options, then I see this as a very positive development.

Corporate acquisitions

Since September, SolarCity has made two large, strategic acquisitions. Earlier this month it acquired Zep Solar, a California-based photovoltaic mounting company. Zep Solar has been a component supplier to SolarCity, and its innovative “rail-free” panels makes for affordable and adaptable installs. This $158 million deal should add efficiencies to SolarCity’s bottom line.

In September, SolarCity closed on another significant deal, acquiring Paramount Solar for $120 million. Paramount Solar, formerly part of a highly regarded sales and marketing firm, should help put a professional edge on SolarCity’s public face. Since SolarCity is essentially trying to sell a complex material and financial product to a mass market, this will be a critical step to their ultimate success.

scty_cust_20131018[1].jpg What does it all mean?

There is no doubt that SolarCity is a speculative investment any way you slice it. It has yet to turn a profit, and consensus estimates are betting that it will still have negative earnings in 2014 and 2015. Given that, some of the most important numbers to watch are revenue per customer, and acquisition costs per customer.

Revenue per customer have become somewhat compressed since 2012, though are holding steady from the last quarter. Acquisition costs per customer, on the other hand, keep improving. It will be important to see at year’s end how the annual numbers compare with 2012 and 2011. This will say much about when SolarCity will hit scale and become a profitable company. In the mean time, the third quarter earnings report should be very revealing as to how these trends are starting to play out.

I feel SolarCity is in a similar position that Amazon was in about 10 years ago (despite the fact that they are extremely different companies at their core). Amazon had a CEO that frequently made the press, negative earnings as far as the eye could see, and a strange business model that seemed to only be interested in market share at any cost. Many skeptics (including myself at the time) could not justify Amazon as a viable investment. Those who did invest 10 years ago, though, made a handsome 18% annualized return on Amazon stock. I would not be surprised at all if 10 years from now SolarCity skeptics will also be proven wrong.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC owned or controlled shares of TSL. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
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October 19, 2013

Price Pressure Will Squeeze Solar Inverter Revenues

James Montgomery

SMA Solar inverter photo by Claus Ableiter

In a new report, IHS says worldwide solar inverter unit shipments will rise 7 percent this year, but PV inverter revenues are heading the opposite way, a 9 percent decline this year to $6.4 billion, worse than the firm's earlier prediction of a 5 percent drop. (2014 will see a 9 percent rebound in revenues back to around $7.0 billion, while shipments will surge 19 percent to more than 41 GW.) That's because overall inverter prices are sinking fast, sliding to $0.18/W this year vs. $0.22/W in 2012. It's especially painful for big utility-scale projects; IHS says these will make up a third of global demand this year, up from 29 percent last year, but global prices for large central inverters will decrease 16 percent to $0.12/W.

One reason for the divergence is that solar PV technologies further up the supply chain — silicon, cells, and modules — have been bearing the brunt of the market's relentless cost-cutting demands, but now those pressures are moving further down the chain into the balance-of-system technologies, explained Cormac Gilligan, senior PV market analyst at IHS. Meanwhile, some of the larger established solar markets, especially in Europe, are slowing down dramatically, so an increasingly crowded market of inverter suppliers is fighting for less business. Favorite markets such as Germany and Italy also are reducing or eliminating subsidies, he pointed out, so project developers are submitting tenders at rock-bottom prices to win the business, which means they'll have to squeeze out even more costs.

Ironically, some of the emerging global solar markets are also ones where utility-scale solar is taking off, such as China, India, South America, and South Africa — and it's in these markets where pricing pressure can be most severe, with inverter prices as low as $0.06/W in China, India, and Thailand, IHS noted.

Gilligan said that makers of central inverters are trying to answer the market pressures by offering features that translate to some savings on the operations and maintenance side, such as higher input voltages (>1,000 V) and liquid cooling. Some inverter companies also are broadening their portfolios to include smaller three-phase inverters targeting more commercial-scale opportunities. China's still a relatively unique case where several domestic utility-scale inverter companies have held their turf, and western inverter suppliers are trying to get into the market, creating massive price pressure.

However, price pressures also are being felt for smaller three-phase inverters (20-35 kW) in utility and commercial applications, Gilligan pointed out. Some European markets will see prices for those lower-power inverters sinking 20 percent to $0.14/W. This is a growing sector in the U.S. for these types of inverters, he noted, predicting more than 200 MW of shipments this year, and pricing is still relatively higher than in Europe. But there's increasing competition too (he pointed to SMA Solar (SMTGF) and Power-One (PWER)) so look for prices to start declining as they have in Europe.

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

October 17, 2013

Shunfeng Could Be China's New Major Solar Player

Doug Young

China’s solar retrenchment has taken a big step forward with word that a bankruptcy court has chosen Hong Kong-listed Shunfeng Photovoltaic (HKEx: 1165) from a field of bidders vying to invest in reorganizing former solar pioneer Suntech (NYSE: STP). The decision is interesting both because of who the bankruptcy court selected, and also because of who lost the bidding. The selection of Shunfeng looks particularly significant, as it could mark the emergence of a new major player as the battered solar panel sector finally starts to emerge from its 2-year-old downturn.

The latest reports don’t contain too much information beyond the fact that Shunfeng was formally selected earlier this week to provide Suntech some of the key funding it will need to emerge from bankruptcy. (English article) Others who made it to the final round of bidding included GCL Poly-Energy (HKEx: 3800) and Wuxi Guolian, according to the reports. Earlier reports had indicated that 2 New York-listed Chinese manufacturers, Yingli (NYSE: YGE) and Trina (NYSE: TSL), were also interested in the bidding at one point..

Shunfeng’s Hong Kong-listed shares rallied nearly 50 percent in the 2 trading days this week after rumors first emerged that it was named as Suntech’s investor, though they gave back some of those gains in the latest session. Even after the rally, the company’s market value remains relatively small, at just under $1 billion. Rivals like Trina and Yingli were once worth much more at the height of enthusiasm about the future of solar power 3 years ago, but most are now valued at similar levels.

Shungfeng’s selection looks particularly noteworthy because the company is also part of a group that previously purchased 20 percent of LDK (NYSE: LDK), China’s other major struggling solar player, according to one of my sources. Whereas Suntech was formally forced into bankruptcy earlier this year after defaulting on more than $500 million in bonds, LDK has been slowly reorganizing outside bankruptcy court by selling off assets and selling shares to new investors.

Many solar shares have started to rally in the last few months as the sector’s outlook starts to improve, but Suntech and LDK shares have performed less well due to uncertainty surrounding the pair. A strong possibility is that shares for both companies could become worthless, or more likely that existing shareholders will be strongly diluted when each company issues more stock to new investors.

Shunfeng’s selection to invest in Suntech, combined with its existing investments in LDK, certainly make the company an interesting one to watch as the sector reorganizes. Prior to the downturn, Suntech was once China’s leading solar panel maker. Creative accounting and overly aggressive debt issuing ultimately led to its downfall, but the company still holds good manufacturing assets that could be quite valuable to a buyer. LDK faced similar issues with an overly heavy debt load, and is currently in talks with some of its bond holders after missing a recent interest payment. (company announcement)

All that said, this latest development looks potentially positive for Shunfeng, which could emerge as quite a strong player if it can take control of Suntech’s and LDK’s assets without the huge debt load held by each of those companies. Shunfeng could also face integration issues, as local governments would almost certainly resist any more major layoffs or facility closures at Suntech’s and LDK’s main facilities. At the end of the day, I would probably give Shunfeng a 50-50 chance of success if it can successfully take control of Suntech’s and LDK’s assets, producing a new big name to watch in the recovering sector.

Bottom line: Shunfeng could emerge as a major new player in China’s solar sector if it can successfully take control of and turn around assets from Suntech and LDK.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 15, 2013

The Ghost of Solyndra Haunts Chinese Solar Stocks

Doug Young

The solar sector’s slow recovery is receiving some new setbacks in the form of lawsuits by 2 bankrupt US companies against Yingli (NYSE: YGE), Trina (NYSE: TSL) and Suntech (NYSE: STP), the last of which is also in bankruptcy reorganization. Adding to the mess, Suntech has just disclosed that more of its European assets have been seized by the Italian courts, throwing yet another new complication into its ongoing reorganization. This growing tide of litigation is somewhat expected, as investors try to recover whatever money they can following the sector’s spectacular crash over the last two years. But such actions will only slow the sector’s broader recovery, and in some cases could remain as troublesome liabilities for companies for years to come.

Let’s start off this solar litigation roundup with a look at a series of lawsuits filed against Trina, Suntech and Yingli by 2 US companies, Solyndra and Energy Conversion Devices. (English article) Both Solyndra and Energy Conversion went bust during the sector’s 2-year-old downturn, and these new lawsuits are attempts by their creditors to recover whatever money they can. Both Trina and Yingli issued statements saying they believe the claims are groundless, and that the suits represent attempts by Solyndra and Energy Conversion Devices to to blame others for their own failures. (Yingli statement; Trina statement)

It’s impossible for me to give an informed view about the merit of the lawsuits since I’m unfamiliar with the technology involved. But I can say with certainty that these lawsuits will add unwanted legal costs and pose the threat of penalties over the next few years for Yingli, Trina and Suntech. That’s the last thing these companies need as they try to return to profitability after 2 years of big losses.

This isn’t the first time that Solyndra has caused headaches for the Chinese manufacturers. Industry watchers will recall that the US company’s original bankruptcy was the first event in a chain that ultimately ended with Washington slapping anti-dumping tariffs on Chinese-made solar panels earlier this year. So perhaps it’s appropriate that the ghost of Solyndra is coming back just one more time to cause headaches for these firms.

From these new lawsuits, let’s look quickly at the latest news from Suntech, which says courts in Italy have seized another 10 solar power plants owned by Global Solar Fund (GSF), a solar power plant builder controller by Suntech. Suntech reported last month that the Italian courts had seized 37 of GSF’s solar plants (previous post), and now the number has grown to 47. (company announcement) These new seizures mean GSF has now lost control of 27 percent of its assets, which prosecutors suspect of violating various environmental and authorization rules.

GSF was once one of the biggest buyers of Suntech’s panels, and has an enterprise value of about $800 million. Suntech creditors were hoping to sell GSF’s assets as part of Suntech’s reorganization, in a bid to get back some of their money. But the seizure of so many GSF assets, combined with the potential threat of additional seizures, means that GSF may be a difficult asset to liquidate anytime soon.

I’d previously guessed that a sale of all of GSF’s assets could have generated around $200 million in cash, far less than the company’s enterprise value, since many of its plants were built at the height of the solar boom when panels were still quite expensive. But these latest seizures mean that Suntech’s creditors won’t be able to recover any money from the sale of GSF assets anytime soon. That means negotiations for Suntech’s reorganization may have to be re-opened, further delaying its emergence from bankruptcy.

Bottom line: New US lawsuits against Chinese solar panel makers and the Italian court’s seizure of more Suntech assets reflect growing solar litigation likely to delay the sector’s recovery.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 13, 2013

Canadian Solar Sells Four Plants, Looks Set to Return to Profitability

Doug Young

As the solar panel sector continues its painful overhaul, signals are emerging about who will survive the downturn and thrive when the industry returns to health. Canadian Solar (Nasdaq: CSIQ) certainly seems to be one of the strongest players coming out of the retrenchment, with word that the company has sold 4 more plants that it constructed to private buyers. Canadian Solar is quickly emerging as a strong executor of this particular strategy, which sees it construct power plants using its own solar cells and then eventually selling those plants to private sector buyers. Rival Suntech (NYSE: STP) also tried such a strategy, but poor execution made it backfire and dragged the company into bankruptcy.

All that said, we still do need to be slightly skeptical of Canadian Solar, which is showing a tendency to make multiple announcements that sometimes repeat previously disclosed information. Canadian Solar’s success in the build-and-sell strategy does also seem to be limited so far to plant construction in Canada, so we’ll have to see if it can replicate the model in other markets where it may not have such strong connections.

According to the first of 2 separate announcements issued by the company last week, Canadian Solar sold 2 plants with a combined 16 megawatts of capacity and valued at about $100 million to TransCanada (Toronto: TRP). (company announcement) Canadian Solar doesn’t say how much TransCanada actually paid for the plants, which seems to imply it may have sold them at a discount to their actual value. The deal was part of a previously announced plan to sell 9 plants to TransCanada for nearly $500 million, and marks the second and third sales in that bigger deal.

The second of the announcements looks similar, but is more interesting because it involves the sale of 2 other self-built plants to a fund managed by BlackRock (NYSE: BLK), a top US fund house. (company announcement) No price was given, but the announcement says the plants with combined capacity of 20 megawatts in the Ontario area were sold at a price comparable to similar recent sales in the area. From my perspective, the most encouraging element of this piece of news is the fact that BlackRock was the buyer, as this demonstrates that Canadian Solar knows how to build plants that will appeal to true financial-sector investors.

Stock buyers seem to like the Canadian Solar story, bidding up the company’s shares sharply in recent weeks. The company’s stock is up more than 50 percent since the beginning of September, and has risen nearly 6-fold for anyone who was foresighted enough to buy the shares at the beginning of the year. Canadian Solar has also been notable as one of the only major players to forecast a return to profitability this year, with the company recently reiterating its aim to be profitable for the full year 2013.

Other players that look set to survive the nearly 3-year-old downturn have also rallied sharply this year, with shares of Trina (NYSE: TSL) and Yingli (NYSE: YGE) both more than tripling since the start of the year. Both companies have reportedly been bidding to buy major assets from Suntech, which is hoping to soon emerge from a bankruptcy reorganization that will most likely mark the end of its life as an independent company.

All of these latest developments, combined with China’s recent pledges to strictly limit construction of new panel plants, look like they could finally lift the industry out of its doldrums. If the current trends continue we could see Canadian Solar become the first of the major players to return to profitability in its upcoming third quarter report, with other major players gradually returning to the black over the next few quarters.

Bottom line: Canadian Solar’s sale of 2 power plants to a BlackRock managed fund reflect strong prospects for its business model, boosting its chances to return to profitability this year.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

October 11, 2013

SolarCity Buys Zep: Behold The Power of Vertical Integration

To win the U.S. solar installation game, SolarCity (SCTY) continues to go vertical and thin its margin stack... so what'll be next?

James Montgomery

SolarCity (SCTY) is acquiring Zep Solar and its rackless mounting design in a $158 million stock deal, illustrating the growing importance of improving costs and complexity in residential solar.

Much of the cost-cutting in solar PV has been shouldered by the upstream manufacturing side, but half the costs or more in a residential solar PV system come from the softer side, and they'll have to keep coming down dramatically to support widespread deployment of distributed solar PV. For its part, Zep Solar has planted its flag in the installation innovation field with interlocking frames and specialized components that simplify solar array installations, and its licensees include more than a dozen prominent PV module manufacturers and component/inverter makers.

Last November SolarCity signed up too, and since then the company's crews have doubled their daily pace of residential installations, averaging 4-5 hours instead of a day or two, according to Tanguy Serra, SolarCity's executive VP of operations. That means lower costs, and better service because of less tromping around on customer's roofs. Today "the overwhelming majority of our systems use Zep," he said. And so, as the old story goes, they liked it so much they decided to buy the company.

It's likely no accident that the two largest U.S. solar installers, SolarCity and Vivint, have vertically integrated business models. To get scale and costs down in the U.S. market "you need to be vertically integrated," explained Serra. That means "we want to avoid margin stacking; we take it out everywhere we can." To that end, barely a month ago the company acquired sales channel partner Paramount Solar, underscoring the importance of solar customer acquisition. Snapping up Zep similarly will take a slice out of SolarCity's cost structure for components.

Owning Zep also gives SolarCity access to future technology in the pipeline. Serra was particularly enthusiastic about Zep's development in two areas: non-penetrating commercial roofs, which he emphasized "is a big, big deal for us" as they go after large-scale commercial retail clients like Wal-Mart and BJ's; and carports, which for retailers provide a guaranteed cost of power and shade for customers. Current carport products on the market are too expensive and complicated, he said, and cracking this market is "a phenomenal opportunity."

SolarCity will honor all existing Zep customer contracts to their end, and then will manage partnership requests on a case-by-case basis, Serra explained. (Vivint's also a Zep customer, at least for now.) Ultimately "the vast majority of resources" will be directed to international growth, he said, from Germany to Australia to Japan to the U.K. Residential solar is picking up in Japan, where there's a strong emphasis on aesthetics for any product, and that's Zep's forte -- Zep's sleek black skirt "looks great on Japanese slate," the most common roofing material there, Serra noted. The idea is that Zep also can help pull SolarCity into these markets, but SolarCity won't sell power in international markets "just yet," he said, so it won't compete directly with those regional installers.

So where else in this vertically-integrated solar installation cost stack is ripe for trimming? " If you've got to pay margins to a marketing company, an installation company, a financing company -- that's three or four layers of margin, that ultimately gets borne by the end consumer," not to mention a complex coordination of partners, Serra said. He wouldn't say, of course, citing corporate quiet-period rules, whether that means SolarCity's next M&A target is a financing company, only hinting that "as opportunities come up we will consider them."

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

October 05, 2013

First Solar Keeps Buying Solar Projects To Keep Pipeline Full

James Montgomery

First solar logoFirst Solar (FSLR) has added another mega-scale project to its pipeline, helping ensure there's enough to feed its thin-film solar PV manufacturing machine.
Rock formations in Clark County, NV. Photo by John Fowler

The 250-MW Moapa project being developed by K Road in Clark County, Nevada, about 30 miles north of Las Vegas, was given a green light last summer, making it the first major U.S. solar project approved on tribal land. Construction has been pushed back roughly a year from the original timeline, with First Solar now saying it could start by the end of this year and be finished by the end of 2015. Swinerton is the EPC contractor. The project has a 25-year PPA with the Los Angeles Department of Water and Power (LADWP), at an average price of $0.094 per kWh (tied together with a PPA with Sempra's Copper Mountain 3).

The Moapa Band of Paiutes has very big plans for renewable energy. Weeks ago they announced plans to develop up to 1.5 GW of renewable energy across their 70,000 acres of tribal lands. They are particularly keen on renewables since a nearby 550-MW coal-fired plant is slated to shut down over the next couple of years.

First Solar has consistently had to restuff its pipeline to feed its PV manufacturing machine, as it finishes projects in record numbers. As of its most recent quarter the company's project pipeline was roughly 1.5-GW of mid- to late-stage projects and about 6.6 GW of projects in a 1-2 year development cycle. The need to keep feeding that pipeline is increasingly important as projects become scarcer, competition for them ratchets up, and their economics continue to compress. In August the company bought a 1.5-GW portfolio of solar projects from Element Power, and inked a partnership with Belectric to target smaller sub-20-MW projects in the U.S.

K Road, on the other hand, recently abandoned its ~300-MW Calico Solar Project after many changes and resubmissions, from scaling it down to switching from concentrating solar to PV. Its sole solar power project now appears to be the 25.8-MW (AC), McHenry Solar Project, in Stanislaus County, CA's Modesto Irrigation District, which it acquired from SunPower (SPWR) last spring.

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

October 02, 2013

Italian Courts Seize GSF Solar Plants Complicating Suntech Bankruptcy

Doug Young

Asset seizure casts new clouds over Suntech retrench

Someone should write a book about solar panel superstar Suntech (NYSE: STP), whose the incredible rise and spectacular fall has taken yet another intriguing twist with word that some of its major assets have been seized by a court in Italy. The Italian angle is just the latest turn in this international story of a company founded by an Australian-educated Chinese engineer, which once look set to revolutionize the solar energy sector, only to be forced into bankruptcy when the sector plunged into a massive downturn. From a more practical perspective, I suspect this latest development will prolong Suntech’s bankruptcy reorganization, since its creditors may have been hoping to liquidate these Italian assets to repay some of the company’s massive debt.

The assets in question are all owned by Global Solar Fund (GSF), a company that was building solar plants in Europe, including Italy. In many ways, GSF has been one of Suntech’s biggest Achilles heels and continues to haunt the company with this latest development. The fund was set up by Suntech founder and former CEO Shi Zhengrong, who wanted to use the company to build and operate solar power plants in Europe using solar panels supplied by Suntech.

The only problem was that Shi declined to disclose the close financial relationship between his firm and GSF, even as Suntech sold millions of dollars worth of solar panels to GSF and recorded those sales as revenue. Such sales were technically legal, though many would later argue this kind of relationship was questionable because Suntech was basically selling its panels to a company it controlled. Suntech was finally forced to disclose the relationship last summer due to an issue involving a loan guarantee, kicking off a downward spiral that ultimately ended with its bankruptcy declaration in March.

Reports shortly after the bankruptcy declaration said that Suntech was looking to sell its stake in GSF to repay investors and recapitalize as part of its reorganization. (previous post) Those reports said GSF had an enterprise value of $800 million, though its real value was probably far less since many of its plants were built before the industry’s current downturn that has seen panel prices tumble by more than half over the last 2 years.

Suntech’s latest disclosure indicates that a sale of its GSF stake may be difficult or impossible in the near term, since many of GSF’s assets now remain in limbo following their seizure by Italy’s courts. (company announcement) According to the announcement, Italian courts have now seized some 37 solar plants owned by GSF, accounting for about one-fifth of GSF’s total power-generation capacity.

The reasons for seizure look largely unrelated to Suntech’s own woes, and are more due to local issues including improper authorizations and pollution. Still, the seizure of these assets is the last thing that Suntech needs as it tries to reorganize and emerge from bankruptcy. Creditors who were hoping to get any money from a GSF sale will now have to probably put those plans on hold, potentially for years, as GSF’s case plays out in the Italian courts.

Reports earlier this month indicated that Suntech was nearing the end of its bankruptcy reorganization, as it reached deals with its major bondholders and worked to find new investors for its major China-based assets. (previous post) I suspect the creditors were counting on at least some funds from a sale of GSF, perhaps hoping to get $200 million or more. This latest seizure of GSF assets could slow the reorganization process, meaning we may have to wait until next year to see Suntech finally emerge from bankruptcy.

Bottom line: The seizure of Suntech-controlled assets by an Italian court could set back its bankruptcy reorganization by several months.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

September 23, 2013

China Boosts Solar With Construction Ban

Doug Young

China halts
construction of new solar manufacturing plants

Beijing took an important step towards rejuvenating the global solar panel sector last week when it announced new steps that will strictly limit new plant construction. This kind of government-led approach is a good short-term solution, as it will halt the introduction of new supply, which in turn will allow prices to stabilize after more than 2 years of steep declines caused by massive overcapacity.

But over the longer term, China needs to address the problem at its root by changing the mindset of state-owned enterprises that own many smaller plants which contributed to the current crisis. It can do that by teaching them to make their decisions based on commercial factors and not simply in blind response to government objectives.

The rapid build-up of China’s solar panel-making sector is a typical pattern seen in China during the reform era, when government objectives often lead to massive build-ups in areas targeted for growth. Previous cycles have seen the addition of massive new capacity in a wide range of sectors, ranging from steel to cars, televisions and microchips.

Such build-ups often end with big-scale closures due to major excess capacity, wreaking havoc on not only Chinese but also global markets and resulting in billions of dollars in lost investment.

The solar sector was one such typical case, taking off after Beijing provided incentives such as cheap loans and favorable tax policies. As a result, Chinese solar panel makers came to dominate the sector over the last 5 years, overtaking western rivals to currently control up to 80 percent of the world market.

At the height of the boom, China boasted some 400 companies engaged in various aspects of panel production, as the nation’s capacity rose 10-fold over the last 5 years, according to various estimates. That rapid build-up caused prices to plunge by more than half since the downturn began in 2011, including a 20 percent decline in the last year alone.

Many western firms became insolvent in the crisis, and former Chinese leader Suntech (NYSE: STP) joined the group earlier this year when it was forced into bankruptcy. While the big names have grabbed headlines, many more smaller firms have also left the market, with one executive estimating the number of Chinese players has now fallen to 150 from the former 400.

To set the sector on a longer-term track for sustainable growth, the Ministry of Industry and Information Technology (MIIT) late last week published rules that will halt any new construction based on current technologies. (English article) This kind of restriction would never be necessary in market-oriented countries, since no company would ever enter a field where the fundamentals were still quite weak.

But in China such commercial factors are often a secondary to politics, with state-owned enterprises often building new factories with little or no chance for success in response to government priorities and directives. Beijing should be commended for issuing its latest order, which will halt new factory construction and allow the sector to finally stabilize. But over the longer term, the central government needs to teach these state-owned enterprises to only join government programs when doing so makes commercial sense, and to leave political factors out of their decisions.

Bottom line: China’s ban on new solar panel plant construction is a good first step to rejuvinating the sector, and should be followed by a re-education campaign for state-run plant owners.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

September 18, 2013

Solar Stocks Will Continue to Outperform But Remain Volatile

By Harris Roen

The market is starting to notice that solar investing has been extremely profitable in 2013. As of the middle of September, the average solar stock is up over 50% in the past year, and over 15% in three months (that’s over 60% annualized!).solar returns

These returns are taken from a broad list of about 60 publically traded companies in the solar industry (see chart above). Though all are involved in solar, solar may not be the primary business of many of these companies. For example, Panasonic (PCRFY) produces photovoltaics, but it is only a small part of the company’s much larger consumer product focus.

To get a better sense of what is occurring in the mainstay of solar stocks, 16 companies whose primary business is solar were analyzed. In order to weed out the most speculative players, only companies with over $50 million in annual sales were included.

soalr returns 20130918
As can be seen in the chart above, these pure play solar stocks have performed spectacularly. On average they are up 164% for the year, and 41% for the past three months (SolarCity (SCTY) has only been trading since December 2012, so annual gains are shown from that time). JinkoSolar (JKS), SunPower (SPWR) and Canadian Solar Inc. (CSIQ) have by far outperformed the rest. STR Holdings (STRI), a Connecticut-based company that provides encapsulants used in the production of solar panels, is the one down stock in the group.

By comparison, the S&P 500 is up 16% over the same annual period, and gained only 3% in the past three months. The tech heavy NASDAQ did a bit better, up 18% for the year and 8% in three months. These returns still pale in comparison to solar.

Why the outsized solar stock gains? The chart below shows net income for the top three solar stock performers, and the average for all solar pure play stocks. Clearly, net income improved markedly over the past four quarters. The three companies had extremely negative earnings at the end of 2012, but all have rebounded nicely, with JKS and SPWR solidly in positive territory. When all solar companies are graphed, as shown by the blue line, it clearly shows that the carnage in the solar started to correct itself in late 2012.

net income

This next chart gets a bit complicated, but is instructive in telling the story of recent solar gains. The chart below shows earnings per share (EPS) estimates for solar companies for the next three years. These are the consensus assessments, averaging projections from firms who cover these companies. The dark blue shows estimates for fiscal year 2014, the medium blue FY 2015, and the light blue FY 2016.

eps est

The company with the most consistent, and most promising earnings estimates, is First Solar (FSLR). EPS are projected to remain high for FSLR over the next three years. CSIQ shows the greatest improvement, much of the reason why the forward-looking stock market has generated huge gains for this China-based solar cell and module company.

Even the companies that have negative earnings show marked improvement in their EPS projections. While some of these may be good long-term investments, companies projected to have negative consensus earnings three years out look quite speculative.

Overall, I believe solar as a sector will continue to outperform in the medium to long term. Positive developments include:

The sector will probably remain volatile, though, due to the following limitations:

I believe the best strategy moving forward is to vary investments through the sector in as many ways as possible. The mix should be done through a range of company sizes, locations, technologies employed and the like. Diversified investors who are in solar for the long haul will should benefit greatly from their patience.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC owned or controlled shares of TSL. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

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September 16, 2013

Five Pioneers Mining the Sun for Income

by Jared Wiedmeyer

For the past few years, solar industry stakeholders have imagined a future where the general public has the ability to invest in pure-play renewable energy real estate investment trusts (REITs) that finance and construct both utility-scale and distributed photovoltaic (PV) projects in the United States. While these stakeholders wait for this reality to come to fruition, existing REITs already have several options to own or develop solar projects that still allow them to comply with the IRS's asset and income tests.  This past May, Chadbourne & Park's Kelly Kogan and Scott Bank moderated a roundtable with representatives from several REITs who discussed the options available to REITs to invest in PV systems [1]. I've summarized these options here and provided some additional background information on how these strategies comply with existing IRS regulations.

Option 1 — Utilize a taxable REIT subsidiary (TRS) to own PV projects

A TRS is a subsidiary of an existing REIT that provides services (anything in addition to customary real estate services) to the REIT's tenants without jeopardizing its status as a REIT [2]. Unlike its parent REIT, a TRS pays corporate income tax because the income derived from these services is not considered "good" income by the IRS. Generally speaking, good income is income derived in some way from real property [3]. According to Will Teichman from Kimco Realty, a REIT can utilize its TRS to develop, secure financing for, and own rooftop PV systems [1]. The TRS can pass the benefits from the ITC or 1603 cash grant to the project's investors. The TRS can also sell the power generated to the building's tenants, and it can manage all aspects of the project, including systems operations, customer billing, and securing contracts for the sale of solar renewable energy certificates. The TRS must pay taxes on this income, but it can potentially distribute some of its after-tax income to the REIT in the form of a dividend.

  • Example: Kimco Realty (KIM) owns and operates 874 neighborhood and community shopping centers in 44 states with 128 million ft2 of rooftop space [4].
  • Results: Kimco's TRS has developed and assumed ownership of 3 MW of PV projects, mostly located in New Jersey.

Option 2 — Utilize a TRS to develop and construct PV projects

A REIT can utilize a TRS to develop and construct PV projects, but instead of owning the project after construction, the TRS can sell its ownership interest to an investor or utility. Electricity generated by the project is retained by the utility or is sold to an offtaker under the conditions of a long-term power purchase agreement (PPA). In this case, the TRS only acts as a construction contractor, and the parent REIT collects rent for leasing the rooftop space to the project owner, which is considered good income by the IRS [1].

  • Example: Prologis (PLD) — One of the largest industrial REITs in the world, Prologis owns and operates industrial warehouses and distribution centers around the world with 550 million square feet of rooftop space [5].
  • Results: Prologis hosts about 100 MW of solar that its TRS developed and sold. These systems are mostly located in southern California, but it has also developed systems in Europe and Japan [1].

Option 3 — Lease space to solar developers and project owners

In this case, a REIT owns rooftop space or land but does not form a TRS to construct or develop the PV project. Instead, the REIT will lease the rooftop or land to a PV project developer, which will pay the REIT monthly rent. This rental income is considered good income by the IRS [1].

  • Example: Power REIT (PW) is an infrastructure REIT whose primary asset is its ownership of the land under the Pittsburgh and West Virginia Railroad.
  • Results: PW has recently expanded its scope to owning and renting land under PV projects and has purchased the land under a 5.7-MW PV facility in Massachusetts and rented it to the project owner. The company has also entered into a term sheet to acquire 100 acres of land in California that will host 20 MW of PV projects currently in development [6].

Option 4 — Implement a diversified approach to sustainability/energy efficiency/renewable energy financing

In this case, a mortgage REIT utilizes a diversified approach to "green" investing but focuses most of its efforts on lending for energy efficiency (EE) investments and other building structural improvements, such as efficient HVAC systems. These improvements are permanently affixed to buildings and integrated into its systems so they are classified as good assets, and any interest income on loans secured by these systems is considered good income by the IRS [7]. When such a REIT builds up a large enough portfolio of these EE assets, it can choose to diversify its lending practices into other sectors that may not qualify as good assets or good income—such as utility-scale renewable energy projects—as long as the characteristics of these loans do not exceed the IRS's asset and income tests, which are discussed on [8].

  • Example: Hannon Armstrong Infrastructure Capital (HASI) is a project finance firm with more than 30 years of experience in EE and renewable energy finance with $1.6 billion of assets under management.
  • Results: HASI raised over $150 million in an April initial public offering and plans to invest in additional EE and renewable energy projects. The company holds many EE-related assets on its balance sheet, allowing it to make a significant amount of loans to renewable energy projects and still meet the asset and income test thresholds [9].

Option 5 (potential) — Form a Canadian income trust

Instead of pursuing a private-letter ruling to classify renewable energy as "real property," or conforming to existing U.S. limitations, a company could choose to form a Canadian income trust. This entity is a pass-through entity, similar to a REIT, and it trades on the Canadian stock exchange. Unlike IRS regulations, Canadian tax laws do not prohibit the types of assets this company can own, but the trust's property cannot be used to conduct business in Canada [1]. This stipulation makes such a trust a potential option for owning PV projects in the United States. At the time of this writing, this option was actively being pursued, but to my knowledge there is not yet a Canadian income trust specializing in renewable energy projects on the Canadian stock exchange.

  • Example: CleanREIT is an early-stage REIT engaged with investment bankers whose goal is to issue an initial public offering on the Canadian stock exchange.
  • Results: To be determined, but it should be noted that non-Canadian investors face an additional 15% tax to repatriate any dividend income they receive [10].

Table 1 below presents some selected market characteristics of the companies discussed earlier. As you can see, the types of REITs actively investing in PV projects vary widely, suggesting that investing in PV is more dependent on a REIT's corporate mission rather than its organizational structure. For example, Prologis is a large-cap REIT with $45 billion of assets under management, while PW is a small-cap REIT with only $10 million of assets under management, yet both have made significant investments in PV projects.

Table 1 — REITs Investing in Solar: Facts & Figures
Name Share Price 9/16/13 52-week range Market Cap Total AUM Gross Leasable Area Location MW of PV Developed
Sector Focus Renewable Energy Investment Vehicle
Kimco (KIM) 20.65 18.11-25.09 $9.13 billion $8.46billion 131.3 million ft2 North and South America 3 MW
Retail and shopping centers TRS develops, owns, and operates PV system
Prologis (PLD)
37.59 32.31 - 45.52 $18.74 billion $45 billion 554 million ft2 Global 100 MW
Industrial warehouses and distribution centers TRS develops and constructs project, but sells project to third party once operational and collects rooftop rent payments from new owner
Power REIT (PW)
8.36 6.98-11.41 $14.01 million $12.3 million 2.35 million ft2 (4.36 million ft2 pending) United States 25.7 MW
Railroads, renewable energy projects Owns land under PV project
Hannon Armstrong Infrastructure Capital (HASI) 11.85 9.15 – 12.51 $187.11 million $1.6 billion N/A (mortgage REIT) United States N/A
EE, renewable energy, sustainable infrastructure Provides loan syndication services for renewable energy projects, lends to building owners that construct renewable energy systems that are integrated into the buildings they own
  • CleanREIT's IPO is currently in the planning stages, and no market data is available for the company.
  • All stock price information gathered from Yahoo! Finance on September 16, 2013.

Despite the many obstacles standing in the way of pure-play solar REITs, the REIT pioneers discussed here have found ways to work within the existing IRS rules to develop a significant amount of PV projects. Each company offers a unique way to mine good income from the sun, and the efforts of each REIT have worked to bring more clarification as to what the future of solar REITs could look like.

Jared Wiedmeyer is a Research Program Participant with the National Renewable Energy Lab’s Project Finance Team. His work at NREL includes studies in geothermal permitting and its effects on levelized cost of energy, community solar finance, and capital markets-based risk management strategies for renewable energy projects. Jared holds a B.S. in Cartography and Geographic Information Systems from the University of Wisconsin, and an MBA in Finance from the Leeds School of Business at the University of Colorado at Boulder.

This article wasfirst published on NREL's Renewable Energy Project Finance blog, and is reprinted with permission.


[1] Bank, S.; Kogan, K. (June 2013). "How REITs Are Already Investing in Renewables." Project Finance NewsWire. New York, NY: Chadbourne & Parke LLP. Accessed August 12, 2013:

[2] Matheson, T. (2001). "Taxable REIT Subsidiaries: Analysis of the First Year's Returns, Tax Year 2001."Internal Revenue Service. Accessed August 12, 2013:

[3] (2013). "The Basics of REITs."Accessed June 19,2013:

[4] Kimco Realty. (August 2013). "Current Investor Presentation." Accessed August 12, 2013:

[5] Prologis. (2012). 2012 Annual Report. Accessed August 12, 2013:

[6] Power REIT. (2013). "Power REIT Securities and Exchange Commission Form 10-Q." Accessed August 12, 2013:

[7] Kogan, K. (2013). "Is the IRS Considering Solar REITs?" Renewable Energy World.  Accessed June 18, 2013:

[8] (2013). "Forming a Real Estate Investment Trust." Accessed June 19, 2013:

[9] Hannon Armstrong. (2013). "Investor Relations Presentation: June 2013." Accessed August 12, 2013:

[10] Investopedia. (2009). "An Introduction to Canadian Income Trusts." Accessed June 18, 2013:

September 11, 2013

Coupled Solar and Energy Storage Market to Grow

David Appleyard

The symbiotic match between the solar and energy storage sectors shows significant market promise and could see the sector yielding a US $2.8 billion market over the next five years,

Combined market for intergrated solar and storage

Assessing the emerging market for combined solar and energy storage, Lux Research analysts found that residential applications dominate through 2018. As lithium-ion (Li-ion) batteries and overall storage arrays fall in price, residential systems will gain the most, growing to 382 MW in 2018, the report suggests. Meanwhile, the light commercial segment will increase to 220 MW although heavy commercial/industrial systems will lag, growing only to 73.3 MW.

The off-grid market enjoys higher profit margins, but the much larger market for grid-tied systems means they dominate the solar and energy storage market. Grid-tied solar installations will comprise 675 MW, or nearly 95 percent of the combined 711 MW market, while off-grid applications including telecom power claim the remaining 5 percent, the report, ‘Batteries Included: Guarging Near-Term Prospect for Solar/Energy Storage Systems’, states.

Dominated by grid installations, this market segment will be a boon to energy storage producers but have only a modest impact on the solar market, Lux Research says.

“Developers are pushing packaged solar and storage systems in order to stand out as value-adding leaders, but not all benefit equally,” said Steven Minnihan, Lux Research Senior Analyst and a co-author of the report.

He added: “Residential energy storage will see a boost [in] adoption due to solar, but the addition of storage will barely move the needle for solar players, driving a paltry 1 percent increase in global PV sales.”

Considering geographical differences, Lux consider Japan as the worldwide market leader. Hit by high electricity prices and seeking alternative energy after the nuclear woes, Japan will install 381 MW of solar coupled with storage by 2018, leading all other markets by a wide margin, the analysis suggests. Germany will come in second at 94 MW, while the U.S. will be third at 75 MW.

In addition, Lux argues that policies may dramatically increase the market for energy storage technologies. This year, Germany set aside $67 million to subsidize solar-tied energy storage and the U.S. Senate introduced a program that could fund $7.5 billion worth of new storage projects, or about 7.5 GWh of capacity, the analysis notes.

Image: The combined maket for integrated solar and storage, via Lux Research
This article was first published at Renewable Energy World, and is reprinted with permission.

David Appleyard is Chief Editor of Renewable Energy World. He also currently holds the position of Chief Editor for sister publication Hydro Review Worldwide. A journalist and photographer, he graduated with a degree in Applied Environmental Science.

September 09, 2013

Residential Solar in the Ontario microFIT Project: Three Families' Experiences

Michael Smele

Solar Home with sunflower photo via Bigstock
The Ontario microFIT program was launched in 2009 as part of Ontario’s provincial government’s efforts to increase the production of renewable energy. The program provides participants with the opportunity to develop a “micro” renewable electricity generation project on their privately owned property that uses solar photovoltaic (PV), wind, waterpower, or bioenergy (biogas, biomass, landfill gas). I have asked three families who navigated the process of microFIT solar installations to share their experience by answering some questions.

Industry has seized the opportunity to capitalize on the revenue generated by the fixed return of twenty year contracts with the government’s power regulator. Individuals have also participated although the hurdle of coming up with thirty to forty thousand for purchase and finding the right service provider for the components and installation has created some unique challenges and opportunities.

The efforts put forth by individual investors in these projects have a story all their own. Those who have had success utilized several methods with varying degrees of difficulty. The questions posed to the three Ontario families who used solar installations to participate in the MicroFIT program were as follows:

1) What attracted you to the Ontario microFIT program?

Family 1: Our initial interest was environmental and quickly turned to see if it there was a reasonable profitability and if the math/projections would prove true.

Family 2: It started years ago with alternative energy awareness. When the MicroFIT program started a friend had participated and our interest was piqued. Then the project itself caught our attention and we became quite excited about the potential.

Family 3: To save the environment – any financial considerations were secondary. If the project were revenue neutral I would have still moved ahead.

2) What was your capital investment for the project? What was your expected payback period of the investment? Did your actual payback period match your expected payback?

Family 1: Thirty Three Thousand however it is notable that the provincial taxes are rebated within the first year. Our expected payback period was five to six years however with the adjusted annualized distributions from the power authority – it will be well below the five year mark.

Family 2: Forty Thousand. The expected payback period is six to seven years. We believe we are on track to meet that timeline.

Family 3: Thirty Three Thousand. From my calculations, the expected payback period is going to be seven years however with the directional placement of the panels and the winter months it may take between seven to eight years to recoup our initial outlay.

3) How did you finance the project?

Family 1: A personal line of credit that carries at a very low interest rate as it is secured against the property on which the MicroFIT project is operating on. The interest charged on the capital that was borrowed to invest is a tax write off as well.

Family 2: We cashed in some non-registered liquid assets to finance our project.

Family 3: We secured a home equity line of credit.

4) Are there any cautions to be made aware of or advice/tips to make the process smoother?

Family 1: In hindsight – the greatest concern would be to make sure you are comfortable with the service provider whether a full service company that provides the components and installation or otherwise. Another tip would be to ensure if you are completing a rooftop installation – that you consider the quality and duration of the roofing that will lie under the panels as the cost to replace doubles with a remounting of the system already installed.

Family 2: My best advice is to beware of the misinformation that is being shared. I have heard some tall tales from not being able to get insurance on your home to the fire department not being able to service the home in an emergency. Doing your own homework and getting a lot of questions answered will make the process much smoother.

Family 3: I would have to say that involvement in every aspect of the project is key. Work with your service provider/installer to ensure that they are completing the work to your satisfaction. Also, gathering as much information as possible beforehand was very helpful so as to understand what will happen once you commit to your project.

5) Would you suggest this method to others looking at this avenue and why?

Family 1: Yes, I am an advocate and have suggested the program to neighbor and family. The benefits are many fold from gaining a positive revenue stream, the tax write offs, to getting paid as an energy producer. I like to think of it like have the income of a tenant that doesn’t exist.

Family 2: Absolutely, this is a great investment in your home, your future, and your finances.

Family 3: Yes, we have a responsibility to those who will come after us to ensure that there is a healthy environment and everyone should be doing their part to help out.


As the Ontario MicroFIT program evolves over time, what will remain the same is that there are those who are committed to making a contribution to the future health of the planet by becoming part of the answer to our energy needs. From profitability to being a good steward of the planet – these families have clearly shown that there are many great reasons to investigate and participate in initiatives that will lead to a better future for everyone.

Michael Smele is an Ontario resident who provides finance and mortgage options for those looking to participate in the MicroFIT program. You can find him at Mortgage Truth.

September 08, 2013

Which Chinese Solar Companies Will Survive The Coming Shakeout?

Tildy Bayar

Lux Research’s report, The Great Shakeout: China’s Path to a Rational Solar Industry, outlines the challenges Chinese solar companies will face during the anticipated consolidation, and suggests likely strategies for survival and success in a post-shakeout solar market. While many smaller companies will go under, the nation’s top-tier companies will survive and thrive in an eventual balanced global solar landscape, the report predicts.

Policy Measures

China’s government will continue to support its solar sector, upping its domestic capacity target in order to boost local demand and reduce its dependence on foreign markets. But Zhun Ma, Lux Research analyst and the report’s lead author, said the government’s plan to install 35 GW of new solar capacity by 2015 is the upper limit rather than a fixed target. “The 35 GW target is what the government wants to achieve, but it may not be compulsory,” he said. “If the government wants to reach this target, then in the following three years each year’s installation should be about 10 GW, and this is really too high. So the most likely conservative target will be about 25-30 GW.”

In addition to boosting domestic demand, the government is also taking steps to reduce overcapacity by setting module efficiency standards; below-standard solar products will not be able to secure bank loans or government support, thus eliminating a large amount of current capacity. And the government aims to expand the range of solar technologies on the domestic market, currently dominated by crystalline silicon (c-Si), by promoting technology innovation and boosting the growth of thin-film technologies such as cadmium telluride (CdTe) and copper indium gallium selenide (CIGs).

Survival Strategies

New technologies throughout the value chain like metal wrap-through, selective emitters, fluid bed reactors and diamond wire saws will be adopted in newly built Chinese facilities, the report predicted.

“Because the government is promoting and supporting technology innovation,” Ma said, “Chinese manufacturers are actively looking for innovative technologies, not only from local research projects but also from PV technology developers globally.” This represents an opportunity for global technology developers, who can license their technology to Chinese companies.

Since Tier One Chinese companies have already built strong research collaborations with local and foreign research organisations, they can leverage these existing networks to further improve technologies and production processes, Ma said, “but relatively small companies are also interested in innovative technology development outside China.” For a smaller company, winning government support through technology innovation may be crucial to survival.

According to Ma, the likelihood of survival and success differs depending on the scale of the company. Most Tier One companies will survive and thrive, he said, while more than 90 percent of Tier Three companies will go under. Around 40-50 percent of Tier Two companies with several MW of capacity and innovative technologies can potentially survive, he said, depending on their sector. “Only 45 leading Chinese solar manufacturers are still manufacturing; all the rest are already quitting the market,” he said.

Expansion will be an important strategy, Ma said, with two key approaches to making a solar company viable in the new landscape: either building new capacity or acquiring a Tier Two company with advanced technology. And the government is encouraging Tier One companies to acquire or merge with Tier Twos in an effort to spread solar development more evenly across the country. “In Jiangsu province most players are Tier One,” he said, “while in Jiashan province only Renesola is Tier One; the others are Tier Three.” Spreading development more evenly will benefit the realisation of the domestic target.

Distributed solar, which is projected to gain a 30 percent share of the Chinese solar market in the next two to three years, will present opportunities for smaller solar companies. Because energy consumption on China’s east coast is much higher than in the west, said Ma, but there is less free land in the east, the best solution for east-coast China is distributed solar systems, while utility-scale solar farms will dominate in the west.

“The manufacturing side of the solar value chain will still be dominated by large companies,” he said, “but system developers can be small and medium-sized.” The current profit margin for engineering, procurement and construction (EPC) firms is around 10 percent higher than for upstream manufacturing, the report noted, projecting that the majority of Chinese companies will grow their project development business.

Another survival strategy will be expansion into new foreign markets. In the coming years, Chinese companies will become major players in the Southeast Asian and African solar markets — Southeast Asia because of its proximity to China, and African nations because of their good bilateral relationships with the Chinese government, Ma said. Chinese manufacturers will continue to export solar products to Europe, but as its quota for Chinese products is now limited  to 7 GW per year these companies will maintain rather than grow their market share in the region, he said.

New Investment

Ma predicts that new investment in the Chinese market will be a mix of local and foreign. Companies that aren't doing well but have advanced technology are selling themselves at very low prices, meaning local investors "can acquire solar assets at fire sale prices,” he said, while foreign investors aiming at China’s huge solar market are required to partner with local companies, either through taking shares or direct acquisition, “a good market penetration approach,” Ma said. The report predicts that foreign heavyweights such as First Solar (FSLR), GE (GE) and Sunpower (SPWR) will find local partners in order to target the Chinese market.

The ability of foreign companies to penetrate the Chinese market also depends on sector. “There is no space for foreign companies to engage in the Chinese market” in the module arena, Ma said, due to China’s strength in the sector, while for balance of system (BOS) suppliers such as inverters, back sheet materials and silver metallisation, he said Chinese companies “cannot supply products with good quality, so in these areas there are some opportunities for foreign companies” — but they will need to collaborate with the right local partners, as domestic material and BOS suppliers have home market advantages such as low cost logistics.  

Foreign solar companies who collaborate with Chinese manufacturers can also gain advantages in markets outside China, Ma said, since Chinese manufacturers are considering moving some facilities outside the country in order to beat the new EU and U.S. import duties. Outside China, he said, global materials giants have the advantage. He pointed to Canadian Solar’s (CSIQ) manufacturing plant in Canada and Trina (TSL) and Yingli’s (YGE) plans to build plants in Europe. “Only these big companies have sufficient capital and ability” to expand in this way, he said.

Tildy Bayar is Associate Editor of Renewable Energy World magazine.
This article was first published on, and is reprinted with permission.

September 03, 2013

Suntech Reorganizes While Sector Stabilizes

Doug Young

Several solar panel companies are in the headlines once again, led by an news that bankrupt former superstar Suntech (NYSE: STP) is nearing a reorganization that will cost its stockholders most of their money. While that may sound bad, I personally don’t have much sympathy for anyone who continued to hold Suntech stock after the company started experiencing major problems about a year ago. Meantime, the news is a bit more positive for rivals Yingli (NYSE: YGE) and Renesola (NYSE: SOL), which both reported narrowing losses as outlook for the sector continues to improve with stabilizing and even rising prices for solar panels.

Let’s start off with Suntech, as that’s the most salient of the latest news, involving a former solar pioneer whose rapid fall ended with its bankruptcy back in March. Suntech’s latest developments could be quite good, as it will most likely lead to the emergence of a smaller, more focused company. Its new leadership will also most likely consist of a more professional management team that doesn’t include its founder Shi Zhengrong, a former engineer who in many ways was responsible for some of the financial shenanigans that got the company into trouble.

Suntech’s latest update on its ongoing reorganization doesn’t contain too many specifics, except to say that it is nearing a reorganization agreement with a group of its major creditors. That deal will see the creditor group, which includes private equity firms Clearwater Capital and Spinnaker Capital, get equity in the newly reorganized company in exchange for their debt. (company announcement) The deal would also see “significant dilution” for Suntech’s existing shareholders, which is quite expected.

The announcement makes no mention of separate recent media reports that say Suntech was auctioning off major parts of its core operations to raise cash, with Yingli and Trina (NYSE: TSL) both cited as interested bidders. (previous post) My guess is that we’ll see a major asset sale to another solar company, and then the remaining Suntech assets will probably be folded into a new, significantly smaller company with a market value in the $200-$400 million range. I would expect Suntech’s current shareholders to get a maximum of 10 percent of the reorganized company, meaning their shares could sink another 80 percent or more from their current levels by the time a deal is finalized.

From Suntech, let’s move quickly to Yingli and Renesola, which have both posted relatively straightforward results that show stabilizing revenues and narrowing losses. Investors were most encouraged by the Renesola results, bidding up the company’s shares by more than 8 percent after the figures came out. Yingli shares also rose, but by a more modest 2.4 percent after it announced its results.

Renesola said it expects both revenue and margins to stay stable in the next few months. (company announcement) It forecast third-quarter revenue in the $360-$380 million range, roughly in line with its second quarter revenue of $377 million. It also forecast third-quarter gross margins in the 7-9 percent range, again in line with its second quarter figure of 7.3 percent. Investors must also have been encouraged by a second-quarter loss that narrowed to $21 million, 40 percent smaller than the $35 million loss a year earlier.

Yingli didn’t give any third-quarter outlook, but its second-quarter results also showed similar trends. Its loss for the quarter narrowed sharply to $52 million from $92 million a year earlier, while revenue grew about 10 percent to $550 million. Neither company looks set to return to the profit column by the end of this year, even though rival Canadian Solar (Nasdaq: CSIQ) has said it’s on track to return to profitability for all of 2013. (previous post) Look for more steady improvement from everyone in the second half of 2013, even as company finances remain tenuous due to the massive losses incurred by everyone over the last 2 years.

Bottom line: Suntech will soon announce a reorganization that will largely wipe out existing shareholders, while other solar players should see stability for the rest of this year.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

August 25, 2013

First Solar Won the Race; The Environment Lost

Joseph McCabe, PE

First solar logoIn 2011, I wrote about the CdTe Horse Race in which the three US companies making cadmium telluride (CdTe) photovoltaic (PV) modules, First Solar (FSLR), Abound Solar and General Electric (GE Solar, stock ticker GE) jostled for position.  Abound and GE were challenging the reigning champion First Solar to build the largest PV manufacturing facility in the world.

The official results of that race are in, and First Solar has beaten the competition by many lengths. Within about a year of each other both Abound and GE Solar announced they had stopped any hopes of solar panel manufacturing. On July 2 2012 Abound Solar announced they were closing (See The End of Abound Solar, What Have We Learned?).  On the August 6th, 2013 First Solar earnings call they announced the purchase of all the GE Solar intellectual property, along with a relationship to purchase GE inverters thus ending the Primestar/GE Solar story in manufacturing their own product. Our trifecta ticket wasn’t in the money because we had the win right with First Solar, but reversed the second place and third show order. GE Solar came in second place because they obtained 1.75 million shares of First Solar stock. On the day of the announcement FSLR was trading around $47 or $82.25 million for GE to exit (today’s FSLR stock quote, you do the math on what it means to GE).

Those who invested in Abound ended up with nothing, in fact the Department of Energy (DOE) is financially liable for Abound PV modules that are not fit for sale and reportably have poured concrete onto them at a cost of $2.2 M and The story will not end there, concrete encapsulated cadmium isn’t environmental stewardship. Anyone owning Abound Solar modules is now responsible for both warranty and end-of-life disposal/recycling costs.

First Solar’s February 2013 earnings call described their $1.39/watt system installed costs, which is a low cost milestone for the PV industry. GE Solar must have realized they cannot compete with this experience and pricing; in a way GE got off their own horse and got on First Solar’s during the race for dominance. GE is now one of the top ten shareholders of First Solar.

April Analyst Day

At the time of that February earnings call, First Solar wasn’t answering analysts’ questions, deferring to a April analyst day for answers. My perspective at that time was negative, having seen delay tactics resulting in bankruptcy, but my concerns were wrong. The analyst day was well received and the stock shot up from where it was around $26 at the end of February to over $39 after the analyst meeting.  First Solar announced the purchase of high efficiency crystalline silicon PV company Tetrasun at that analyst meeting, now blurring the lines between it and the other high efficiency crystalline silicon module manufacturer SunPower (SPWR).   First Solar also predicted its module cost would fall to $0.40/watt by 2017. Cost of production would be between $0.34/watt and $0.37/watt , plus $0.04/watt cost of sales. $0.04/watt is also what they eliminated with their end-of-life recycling program, now that responsibility is on the system owner.

No Environmental Stewardship

First Solar’s eliminating the prefunding for end-of-life recycling did not get much attention after the February earnings call, but it should have.  Recycling and environmental stewardship was once a cultural touchstone for First Solar during Bruce Sohn’s tenure as President, from 2007 to 2011. Asbestos manufacturing can be used as a guidepost for First Solar in that owning the recycling might be the best long term approach to reduced liability from manufacturing.

From the transcript of the February 2013 earnings call:

Note, regarding our module end-of-life program, beginning in the fourth quarter of 2012, we made prospective changes to our solar module collection and recycling program outside of the EU. For new contracted sales, customers as part of their overall power plant decommissioning obligation will now be responsible for ensuring modules that are either recycled or responsibly disposed at the end of their life.

As noted with the Abound experience,  the decommissioning and recycling costs will likely far exceed what First Solar was previously prefunding.  CdTe can be an expensive material to throw away.  It cost the DOE at the very least $0.20/watt to encapsulate the modules in concrete (as many as 140,000 modules and $2.2M cost). The right and not very difficult approach is for these thin film PV materials to be recycled and reused to produce new higher efficiency modules; a cradle to cradle philosophy (See Clean & Green). Maybe General Electric can do the right thing with their unused modules now that GE Solar is finished.


Photo 1: Crates full of broken unusable Abound Solar modules during their October 2012 auction. Photo by author.

End-of-Life Costs for PV

An example of the cost for decommissioning PV systems was recently revealed by a public bid at the Sacramento Municipal Utility District in Sacramento California (SMUD). Financial experts should take note that the 1.6 MW of retiring PV systems cost $1M to decommission or $0.61/watt. Albeit this included all ground work and removal of materials to make the land like nature intended. This kind of activity and bid is something that hasn’t been seen previously for the PV industry because systems are just now coming into retirement. PV is much less expensive than a nuclear power plant to decommission which SMUD also has experience in decommissioning. Interestingly the decommissioned Rancho Seco nuclear power plant is the exact same place the decommissioned PV systems were located.

There is currently very little knowledge base or experience in the salvage, decommissioning and recycling of PV systems. The SMUD cost experience can become less expensive if the industry can develop mechanism for decommissioning and recycling for both crystalline silicon and thin film PV technologies. We have several data points: First Solar will no longer prefund $0.04/watt; SMUD spent $0.61/watt for full site rehabilitation including recycling, and DOE’s reported disposal of Abound Solar modules with concrete cost at least $0.20/watt.

The lesson from these experiences is to be conscious of cost reductions from module and system installers that have now become the responsibility of governments and the system/landowners.


First Solar continues to be a dominant player in the PV industry, winning the thin film solar factory race against Abound Solar and GE Solar, and it has now teamed with the latter on intellectual property and inverter sales. First Solar dominates the industry with low costs for installed systems, and now joins the race for dominance in the crystalline silicon space with the purchase of Tetrasun.

Environmental stewardship will need to be addressed, if not by the manufacturer then by the communities installing these systems. There is a new race, the race to avoid paying for end-of-life costs. The loser of that race is becoming clear: the public, because we don't even know we're in the race. If only the race were for dominance in environmental responsibility.

Disclosure: No positions.

Joseph McCabe is a solar industry expert with over 20 years in the business. He is an American Solar Energy Society Fellow, a Professional Engineer, and is internationally recognized as an expert in thin film PV, smart grid and new business models for the solar industry. McCabe has a Masters Degree in Nuclear and Energy Engineering and a Masters Degree of Business Administration.

Joe is a Contributing Editor to Alt Energy Stocks and can be reached at energy [no space] ideas at gmail dotcom.

August 23, 2013

Microinverters Make a Move on Multi-MW Solar Power Installations

Tildy Bayar

EnPhase Microinverter
A microinverter from iEnergy
Photovoltaic (PV) microinverters, traditionally used in smaller rooftop solar installations, are being used in a 2.3-MW commercial rooftop installation in Ontario, Canada, supplier Enphase Energy (ENPH) has announced. The installation is the largest commercial rooftop project under the province’s feed-in tariff (FiT).

Analysis firm IHS Research has called the announcement a milestone in the microinverter segment’s progress towards establishing itself outside its biggest market, the U.S., and outside the residential solar segment. 

According to IHS’s analysis, PV microinverter shipments are forecast to exceed 2 GW in 2017 — and penetration into larger installations, along with success in new markets, will be the key driver for this growth. IHS inverter analyst Cormac Gilligan cautioned that if microinverters are unable to move into new markets and lower their dependence on the residential sector, their success will be tested.

The U.S. accounted for nearly 75 percent of the shipments IHS recorded prior to 2013, but in many states the residential market for microinverters is approaching saturation. It will be increasingly important, said Gilligan, that microinverters are used by the third-party/solar lease companies which are very active in the country. While solar lease companies such as Vivint Solar and Sunrun have used microinverters in limited numbers, other large companies like SolarCity (SCTY) have preferred to stick with string inverters as the more proven technology, he said. IHS does forecast that microinverters will be used in greater numbers by solar lease suppliers in the coming years as the technology improves and new models are released.

Microinverter use in commercial installations will grow by more than 20 times 2012’s amount to over 700 MW in 2017, said IHS, with revenues of more than US$200 million and commercial installations accounting for over one third of total inverter shipments in that year.

In 2012 the world’s second-largest microinverter market was France, largely due to market leader Enphase’s penetration, said Gilligan. In addition to the U.S. and France, the company currently focuses on Canada, Italy and the UK. In future, IHS projects Australia, Japan and the UK as very attractive markets for microinverters, as all have large residential markets and smaller commercial ones.   

Although microinverters are currently more expensive than traditional string inverters, IHS forecasts that prices will decrease by 10 percent per year, on average, which will contribute to increased commercial adoption.

What’s Driving Microinverters’ Success?

Features such as embedded module-level monitoring, increased energy yield and improved safety have enabled microinverters to successfully penetrate the MW-scale installation space in 2013, said IHS, and these factors are expected to drive the projected growth in commercial uptake. All are currently important considerations when choosing an inverter for a solar project, Gilligan said, but they will also grow in importance.

For example, he explained, safety features are particularly important on a rooftop commercial solar installation in case of fire, so that fire personnel are protected. Indeed, safety was a key concern mentioned by the owners of the Ontario MW-scale system.

On larger projects, costs such as installation and servicing can add up. With microinverters’ module-level monitoring an installer or electrician can quickly discover which module is underperforming and replace it, saving on labour costs. And, Gilligan pointed out, in commercial locations such as cities and car parks it’s likely that there will be shading from buildings or trees, in which case the microinverter for each module can carry out its own diagnostic, optimising energy harvesting and helping to pay for the extra investment.  

Gilligan said microinverters will be used less in larger (2 MW and above) installations because for these projects it may not be economical, as installing a microinverter for each module may become challenging or time-consuming. “There’s no particular limit,” he said, “but I’d say up to around 250 kW is where microinverters become attractive. Thereafter, for 101 KW — medium-sized commercial installations — and above, there would have to be unique circumstances or customer demand.”

In the case of very large PV projects, he said, the customer or installer usually needs to be familiar with microinverter technology and have used it in the past — for example, in the U.S. and Canada where customers are already knowledgable and comfortable with it.

Key Players

Enphase, which has dominated the market to date, holds a 15 percent share of the total U.S. inverter market, and the company has grown that share year-on-year over the past few years, said Gilligan. Other key microinverter suppliers are Enecsys, SolarBridge and two traditional inverter suppliers, SMA (S92.DE) and Power-One (PWER), who have now entered the microinverter space. These larger companies are likely to have the bankability and resources to promote and offer a microinverter solution, said Gilligan, with the U.S. currently their biggest target market.

The traditional string inverter suppliers, he continued, don’t seem to be running scared just yet — although they have realised that it is important to offer a microinverter solution as part of their portfolio. “So if they have a particular customer or installer or integrator who’s comfortable using microinverters, they will offer one to them,” he said. “But equally, if they have an electrician or installer who’s very comfortable with the string solution, they’ll offer that. Different customers have different requirements and if there’s a unique situation — for example, a lot of shading, or angled roofs, or space issues where a larger inverter is impractical — it makes sense to use microinverters.”

Tildy Bayar is Associate Editor of Renewable Energy World magazine.
This article was first published on, and is reprinted with permission.

August 20, 2013

SunEdison's Impressive Customers Not Yet Impressing Investors

by Debra Fiakas CFA

Sunedison Logo.png A series of acquisitions have put SunEdison, Inc. (SUNE:  Nasdaq) in the business of solar energy systems.  Until recently called MEMC Electronics Materials, the company had been a provider of silicon wafers to semiconductor producers and fabricators.  In 2009 and 2010, MEMC acquired SunEdison and Solaicx, respectively.   Besides the foundation for a new name, the SunEdison deal gave the company a line of photovoltaic energy solutions to sell to solar system developers and major end users.  Solaicx acquisition gave the company access to a proprietary continuous crystal growth manufacturing technology which yields high-efficiency monocrystalline silicon wafers.  Conveniently, Solaicx came with a manufacturing facility in Oregon.

SunEdison reported $2.0 billion in total revenue in the most recently reported twelve-month period ending June 2013.  Historically, about two-thirds of revenue has been from the sale of solar systems and the remaining one-third from semiconductor materials sales.  However, in the June 2013 quarter the value of solar systems sales slipped to just 40% of total sales, elevating semiconductors materials to the leading segment with 60% of total sales even though sales in that segment were only slightly higher than the same quarter last year.  Selling prices have been pressured downward by aggressive pricing on the part of Chinese solar components companies.

What is more the company has not reported a profit since 2010. At the operating level, the semiconductor segment has been profitable most of the time.  However, the solar segment has been floundering in operating losses for the past few years.

The board of directors decided last May that a name change from MEMC Electronics Materials to “SunEdison” would give the company better branding success.  The name change and emphasis on better branding for the solar segment is part of an overall plan to boost sales and profits.  The company refers to it as the 2011 Global Plan.  Other elements include streamlining the semiconductor materials operation and improving cash flows.  We note that in the June 2013 that segment was cash flow positive.  The company is also taken a more protectionist stance on solar project, limiting exposure until customers have committed project financing.

What may be a bigger problem for SunEdison than the branding qualities of its name is the selling qualities of product line.  Frankly, there is little that stands out in a crowded market.  Acquisitions have served as the company’s ticket to the solar market.  It is doing very little in-house to added nuance to its technology.  Research and development spending total only 3% of sales over the last three years.  It is important to consider that in the solar system design and installation business, financing can be an even bigger obstacle to getting a sale completed than being able to differentiate yourself from the next solar system peddler. 

That said, we note SunEdison has been able to land solar system contracts with some of the most visible leaders in the move to solar power:  Staples, Kohls, Walgreens, Albertsons and Whole Foods, among others.  SunEdison claims over 550 different customers in its solar segment.

For now investors have not been impressed by the customer list.  Recent trading sessions in the stock has shown clear bearish sentiment prevails.  That does not prevent us from including SUNE in the Solar Group in The Atomics Index for companies in the alternative energy business.

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  SUNE is included in the Solar Group of Crystal Equity Research’s The Atomics Index, composed of companies using the atom to create alternative energy sources.

August 18, 2013

Suntech Shares May Be Worthless; Canadian Solar Sells More

Doug Young

Suntech logo]The latest news from Canadian Solar (Nasdaq: CSIQ) and Suntech (NYSE: STP) is casting a shadow over a nascent recovery for the embattled solar sector, as each company struggles to fix its broken finances pummeled by a two-year downturn. Canadian  Solar has announced a plan to raise up to $50 million through a stock sale, while domestic media are reporting that bidding for bankrupt Suntech is moving ahead quickly, indicating the end may be near as an independent company for this former solar high-flyer. All this shows that investors shouldn’t get too bullish on solar companies just yet, even as Canadian Solar says it is still on target to post a profit for all of 2013.

Let’s start off with Suntech, which is in the process of a painful reorganization in bankruptcy court. The steady stream of signals coming from the courtroom in the city of Wuxi seem to indicate that Suntech won’t emerge as an independent company after the reorganization, though its brand and operations are likely to survive. That means Suntech shareholders could ultimately find themselves holding worthless stock, which is often the case for companies that undergo this kind of bankruptcy reorganization.

The latest report indicates that rival solar panel maker Yingli (NYSE: YGE) has looked at Suntech’s books and decided to bid for the company’s main manufacturing assets. (Chinese article) According to the report, Yingli is seen as the most likely winner in the current round of bidding, where it is competing with 3 other firms including Trina Solar (NYSE: TSL). Previous reports had indicated that the companies would each bid to become a strategic investor in Suntech’s main assets, which would probably see them take a controlling stake in those assets.

Investors seem to sense that their shares could soon become worth very little or nothing, and are quickly dumping the stock to recoup some money while they can. Suntech’s shares are down 33 percent this month alone, including a 14.3 percent plunge in the latest trading session. They now trade at $1.08 a share, and could soon fall below the $1 level that would put them in violation of continued listing requirements. Still, I doubt the company is too worried about being de-listed, since it’s shares are likely to become worthless before that happens. Look for a winning bidder to be named by October, and for the shares to lose most of their value by that time.

From Suntech, let’s move quickly to Canadian Solar, which has announced a plan to sell shares to raise up to $50 million. With a current market value of about $500 million, that would translate to issuing about 10 percent of company stock in this fund raising exercise. Investors weren’t too excited about the plan, with Canadian Solar shares tumbling 11 percent after the news came out. But even after a recent pull-back, the shares are still 5 times higher than their lows from late last year.

Frankly speaking, I was a bit surprised to read about this new capital raising effort, as previous signals from Canadian Solar had indicated the company was boosting its finances by selling some of the solar plants it constructed with its own money. This $50 million also doesn’t seem like a very big number, which hints that the company may simply need the cash to keep funding its daily operations in the present. Regardless of the reason, this latest news doesn’t seem too encouraging, and we could well see Canadian Solar shares continue their recent pull-back over the next month or two.

Bottom line: Suntech’s main assets could be auctioned off in the next month, leaving its shares worthless, while Canadian Solar’s stock may also come under pressure.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

August 12, 2013

Yingli or Trina May Bid For Suntech

Doug Young

August 9th was “Solar Friday”, as we were bombarded with a flurry of news that showing the sector is rebounding and could also see its first major merger. In the former category, earnings updates from Yingli (NYSE: YGE) and Trina (NYSE: TSL) are showing steady improvement for the embattled panel-making sector, while a quarterly report from Canadian Solar (Nasdaq: CSIQ) is showing the sudden improvements may already be starting to plateau. In the latter category, Chinese media are reporting that both Yingli and Trina are also showing interest in investing in Suntech (NYSE: STP), the former solar panel pioneer that is now in bankruptcy reorganization.

All the reports point to an industry that is still very much in a state of flux, as it rebounds from its worst-ever downturn and seeks to return to profitability following a painful downsizing. Let’s start with the latest M&A news, which comes just a day after I wrote about another media report that said 5 potential investors are interested in buying strategic stakes in the main operating unit of Suntech as part of its bankruptcy reorganization. (previous post)

That earlier report said at least one of the 5 potential suitors was a major solar panel maker, and now a new report says that both Yingli and Trina are among the interested parties. (Chinese article) Other potential bidders include Beijing Putian New Energy, and an unspecified company from Xi’an. The report points out that the suitors are being very cautious due to Suntech’s huge debt, which stands at about $1.75 billion.

It says that Trina executives in particular are divided about the a bid for Suntech due to the company’s shaky finances and heavy debt. I would expect that Yingli, Trina or any other suitor will also move very cautiously in the matter, but that we could see one of these big names ultimately purchase most of Suntech’s assets and a limited amount of its debt.

From Suntech, let’s take a look at the bigger solar picture coming from the new earnings reports and updates from Trina, Yingli and Canadian Solar. The Trina and Yingli updates look remarkably similar, with both companies providing upward revisions to their previous shipment and margin forecasts. Trina said its second-quarter shipments will now come in about 20 percent higher than its previous forecast, while Yingli doubled its expected growth rate for the quarter. (Trina announcement; Yingli announcement)

Both companies also said they expect their second-quarter gross margins to come in around 11-12 percent, again higher than previous forecasts. Trina shares rose 9.4 percent after its announcement, while Yingli shares rose 6.3 percent. Both stocks are now trading at about double the levels from their April lows.

By comparison, Canadian Solar shares tumbled 8 percent after it announced its latest quarterly results, though its shares are still more than triple the levels of their lows from March. Canadian Solar also reported relatively solid numbers, including shipments and margins that beat its previous guidance. Its bottom line wasn’t as attractive, widening to a net loss of $12.6 million from a $4.4 million loss in the first quarter. (company announcement)

The company also wasn’t very upbeat about the rest of the year, indicating its sudden jump in performance could already be starting to plateau. It predicted its shipments and gross margins would both actually fall slightly in the current quarter, and left its shipment forecast for the full year unchanged from previous guidance. In a more upbeat sign, it reiterated its view that it could meet its previously stated target of returning to profitability for all 2013.

After the huge run-up in solar stocks so far this year, these latest results could indicate the shares may be due for a rest or even a pull-back as investors take some profits. Still, on an operational basis the results do seem to indicate the sector is returning to health, albeit slowly.

Bottom line: Either Yingli or Trina is likely to make a serious bid for Suntech, as the sector’s recent rebound slows and consolidation continues.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

August 09, 2013

First Solar Buys GE's Tech: A Defensive Move?

James Montgomery

First solar logoFlexing its muscles yet again, thin-film solar PV leader First Solar (FSLR) has quietly acquired GE's (GE) similar solar intellectual property portfolio, but questions linger about whether and when the company will see the benefits.

The deal includes both a specific module purchase commitment plus a longer-term commitment with agreed-upon pricing "over an extended period of years," according to First Solar CEO Jim Hughes during the company's 2Q13 earnings results. GE, meanwhile, will supply inverters for First Solar's global deployments, technology acquired through French firm Converteam, and it will seek to sell solar PV into power plants alongside wind and thermal assets. (Such an example already exists, with GE helping Invenergy outfit adjacent solar and wind farms at its Grand Ridge projects in Illinois, a GE spokesperson pointed out.) Financially, GE also receives 1.75 million shares of First Solar common stock, making them one of FSLR's top-10 shareholders -- a roughly $82 million value at yesterday's market close, but currently down to about $70 million as First Solar's stock slumped in reaction to its other financial and project announcements (more about that on the next page).

GE and First Solar had been trading CdTe efficiency records lately. Both agree that thin-film solar PV and especially cadmium telluride (CdTe) have lots of room to improve conversion efficiency and better compete with silicon PV.

GE's CdTe technology is "distinctly different" from First Solar's CdTe process but nonetheless it is "consistent with our manufacturing platform," Hughes said in the call. Both sides, though, have yet to "fully determine how we best integrate their technology into our roadmap, determine the proper sequencing in terms of upgrading of equipment and what it means in terms of our profits," he said. An update on that evaluation likely won't come until First Solar's Analyst Day next spring, but he confidently stated that within two years some of GE's CdTe technology would be incorporated into First Solar's modules. GE currently has 19.6 percent cell efficiency in a research cell, beating FSLR's best lab cell mark by nearly a full percentage point, he noted, and GE's >450 issued patents and pending applications in CdTe effectively doubles FSLR's portfolio.

We asked First Solar for further clarification about the companies' CdTe methodologies and how they might be combined, but the company declined to comment.

First Solar has long been one of the bellwethers in the solar PV sector, and certainly the far-and-away leader in CdTe, with technology specifically geared toward large-scale solar deployments. (Solar Frontier holds a similar position on the CIGS side of thin-film PV). First Solar also was one of the first solar upstream manufacturers to extend further downstream into project development, creating a captive pipeline for its products.

But not everyone agrees this was a good deal for First Solar. "[It] appears defensive," writes Credit Suisse analyst Patrick Jobin in a research note. It's the second recent acquisition by First Solar (following Tetrasun and its C-Si technology) for solar PV technology that's "relatively early-stage," he points out, which perhaps suggests that the company's "core technology is not cost-competitive in today's low-poly environment." Deutsche Bank analyst Vishal Shah agrees, writing that GE's CdTe IP likely won't materially help First Solar's efficiency marks until 2017, and that the rest of the partnership likely will amount to merely "a few 100MWs of negotiated volume contracts."

With this deal, GE effectively bows out of the CdTe segment that it joined in 2011, with dreams to scale it up into a multibillion-dollar business alongside its wind business. Its planned $300 million, 400-MW factory in Aurora, Colorado was put on ice last summer, though, and now GE will "discontinue the build-out" of the plant entirely and seek to lease the space, according to a company rep. The original operation in Arvada is going away as well, with 50 employees affected, and future research going through GE's operations in New York.

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

August 08, 2013

Chinese Solar Sector Overhaul Goes Local

Doug Young

The latest signs coming from bankrupt solar panel maker Suntech (NYSE: STP) indicate a Beijing-led overhaul for the struggling sector may not be coming after all, and that local governments and other stakeholders may instead become the main rescue agents for these companies. Reports last year had hinted that Beijing was working on a broad plan to retrench the sector, which was suffering from massive overcapacity. But since then most of the problems at the weakest major player LDK (NYSE: LDK), have been handled by the local government and other stakeholders in its home province of Jiangxi. Now the same appears to be happening at Suntech, which was forced into bankruptcy in March.

While this approach is a bit unexpected, it does seem more practical than a single massive restructuring from Beijing, which would have been difficult to execute since each company has its own individual issues and stakeholders. This kind of approach also looks better because it’s more market oriented, with major stakeholders taking the lead in the restructuring rather than planners in Beijing. Those stakeholders are more likely to make the difficult decisions that ultimately return these companies to health, since all would like to get back some of their investment.

All that said, let’s take a look at the latest news from Suntech, the former solar pioneer that later collapsed under a pile of debt that ultimately forced it into bankruptcy. Suntech has been working closely with its bondholders and other creditors to restructure the company since the bankruptcy filing. We saw one sign of progress in late June, when the a group of bondholders named 2 directors to Suntech’s board, both with strong experience in reviving distressed companies. (company announcement)

The latest report this week indicate the process is moving steadily forward, with media saying that Suntech is talking with 5 potential investors about taking a strategic stake in its main operating unit. (English article) The report doesn’t say much about the actual potential investors, except that 3 are private sector and 2 are state-run entities. It notes that one is another major solar panel maker, which could lead to an interesting mega-merger if that buyer ultimately gets control of Suntech The report also notes that Suntech’s liabilities now total $1.75 billion.

This relatively methodical reorganization contrasts sharply with the turbulence that gripped Suntech before the bankruptcy, when founder Shi Zhengrong and the other stakeholders were fighting for control of the company. We haven’t heard Shi’s name mentioned much since the bankruptcy, while leads me to believe he no longer has much of a voice in the reorganization process. In another minor positive development for the company, Suntech also announced it had regained compliance with listing rules of the New York Stock Exchange, meaning its shares would continue to trade. (company announcement)

This orderly reorganization looks similar to what’s happening at LDK, which has been slowly selling off assets and also taking in new money from state-owned and private investors in its own bid to avoid bankruptcy. Other panel makers are also looking increasingly upbeat, after a retrenchment over the last year that saw many cut back their capacity by shuttering older facilities and laying off staff.

This kind of piecemeal restructuring looks quite market oriented, with Beijing playing a hands-off role and letting each company work out its own issues separately. The one drawback to this approach is that we may see few or no mergers, which Beijing could have engineered and would really help to bring the industry back to health more quickly. Still, this kind of approach will stand a better long-term chance of success, as it will force the companies and their stakeholders to craft solutions that are acceptable to everyone.

Bottom line: Beijing may be using a localized, more market-oriented approach to overhauling its solar sector, giving the retrenchment a better chance of success.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 29, 2013

The Sun Breaks Through Stormy Skies of China/EU Trade

sunset breaking
through clouds.jpg
Sun breaks through trade war clouds
China and the West broke a decades-old pattern of troubled trade relations over the weekend with a landmark deal to settle a trade dispute between China and the EU involving Chinese manufactured solar panels. Leaders in China and the West should use this breakthrough agreement as a template for resolving future trade disputes, turning to compromise rather than destructive accusations and punitive tariffs to end their disagreements.

Trade between China and the West has grown rapidly over the last two decades following China’s economic reforms to create a more market-oriented economy. The EU and the US are now China’s two biggest trading partners, with combined exports to both markets totaling more than $700 billion last year – greater than China’s entire exports a decade ago. Disputes are almost inevitable with such rapid growth, and many of those are related to China’s policies of State support for many big companies and key industries.

The solar panel dispute began two years ago when the sector suddenly plunged into a downward spiral after nearly a decade of explosive growth. A major cause of that downturn was a rapid buildup of capacity in China, as China rolled out favorable policies like tax incentives and cheap loans to promote development of a cutting-edge sector with big growth potential. As prices tumbled, a growing number of companies in the US and Europe went bankrupt, with many blaming cheap imports from China for their woes. Washington opened an investigation into the matter, which ended with the imposition of antidumping tariffs against Chinese manufacturers last year. The EU followed with its own investigation, and announced its own tariffs this spring.

China responded with its own countermoves, opening an antidumping investigation into polysilicon, the main ingredient used to make solar cells. It also opened a separate probe into unfair state support for European wines, which many saw as retaliation for the EU solar probe. Meanwhile, the EU has also opened its own separate probe into State support for Chinese telecoms equipment.

Worried that the trade wars were spiraling out of control, several EU leaders finally sought to end the negative cycle by pressuring both sides to negotiate a settlement to the solar dispute. High-level talks began last month, resulting in the new agreement that will see Chinese manufacturers charge a minimum price roughly equivalent to the spot market price for their solar panels. (English article) That price is up to 50 percent more than what some Chinese producers had been charging.

This kind of negotiated settlement is far more constructive than trade wars, which only reduce trade and end up hurting both companies and local economies. The damage is even greater when trade wars involve cutting-edge products like solar cells, which are seen as key to the world’s future energy security. China and the EU should be commended for finally breaking the destructive cycle of trade wars by compromising to end their dispute rather than resorting to punitive measures. They and the US should take advantage of the positive momentum and look for more similar negotiated settlements to their other trade disputes, and relegate the previous cycle of destructive trade wars to the history books.

Bottom line: China and the west need to seize momentum from a new solar panel deal to reach more compromises in their trade disputes.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 21, 2013

China Levies Tariffs on US and South Korean Polysilicon

James Montgomery

The Chinese Ministry of Commerce has formally decided to levy antidumping duties on imported solar-grade polysilicon from U.S. and Korean suppliers, turning up the heat yet again in the broader trade disputes simmering between several key markets for solar energy.

The antidumping tariffs, which are said to be effective starting July 24, range from 54-57 percent targeting nine U.S. suppliers and from 2-49 percent for 11 South Korean suppliers. (Here's a roughly Googlized translation of the China MOC announcement.) Here's how the antidumping tariffs lay out:

Not included in these polysilicon tariffs is any mention of European suppliers, which China had hinted at last fall. Reports had suggested China likely will avoid any such sanctions on European polysilicon as the two sides negotiate through the recently imposed penalties on Chinese solar imports. In a statement earlier this week, Chinese commerce ministry spokesperson Yao Jian reiterated that the MOC has laid the groundwork to pursue just such a case, but that "we’ve never changed our position that [the] solar PV trade dispute should be settled through negotiations," and that all sides "are actively endeavoring to consult with each other in hope of properly settling this case through price undertaking negotiations."

These new solar tariffs on U.S. polysilicon, though, were more anticipated as retaliation against last year's decision to impose antidumping and countervailing duties on Chinese solar cells and modules. China's GCL is the world's largest polysilicon supplier with strong government support -- even as rafts of other domestic producers are being quietly shuttered-- and these tariffs will likely deepen its domestic dominance to fuel China's massive solar energy goals.

Still, raising prices anywhere in the supply chain run counter to the solar sector's relentless march to lower costs. "There's no way that module manufacturers can tolerate a 57 percent increase in polysilicon price," emphasized Michael Parker, a Hong Kong-based analyst at Sanford C. Bernstein & Co.," quoted by Bloomberg.

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

Credit: Chinese Ministry of Commerce

July 20, 2013

Bright Forecasts from Renesola

Doug Young

Renesola logo
ReneSola (NYSE:SOL) boosts revenue and margin forecasts
More good news is coming from the battered solar panel sector, with mid-sized player ReneSola (NYSE: SOL) sharply boosting its revenue and margin forecasts for the current quarter in the latest sign of a sector rebound. ReneSola isn’t forecasting a return to profitability just yet, but the latest signs do seem to indicate the sector’s strongest players could return to the black by the end of this year if current trends continue. Some could also interpret this upbeat news as reflecting growing confidence that the EU and China could soon reach an important compromise that would prevent the former from imposing anti-dumping tariffs on Chinese solar panels.

ReneSola’s upbeat forecast sparked a rally for its shares, which soared nearly 20 percent on the news to levels not seen in more than a year. Still, at $3.44 per share, the stock trades at less than a quarter of highs seen before the current downturn. On another interesting note, ReneSola’s upbeat news didn’t help other solar shares, which were unaffected by the news. That could mean that despite a recent broader rally for solar shares, investors may become more selective about their purchasing in the months ahead, rewarding the companies that can return to profitability the quickest.

Let’s look at the details in ReneSola’s latest forecast, which have it sharply raising both its revenue and margin outlooks for the current quarter. The company said it now expects to ship 760-770 megawatts worth of products in the second quarter, up about 8 percent from its previous forecast. (company announcement) It boosted its revenue forecast by an even stronger 15 percent to $365-$370 million, reflecting improving margins as prices finally stabilize and after 2 years of steady declines. It estimated gross margins for the quarter will come in at 5-6 percent, again a strong improvement over its previous guidance for 3-5 percent.

As an interesting footnote, ReneSola was more conservative in revisions to its full-year forecasts, raising its shipment estimates by just 3.5 percent. That seems to indicate it’s far from certain that the unexpected strength in the current quarter will last for the rest of the year. While some of the uncertainty is based on whether or not prices will remain stable, I suspect a bigger part is based on the uncertainty in the EU that is the industry’s largest export market.

ReneSola’s upbeat forecast is just the latest piece of positive news for a sector that had become far more used to negative reports as prices plummeted and profits evaporated in the current downturn. Canadian Solar (Nasdaq: CSIQ) predicted earlier this month that it would report a profit for all of 2013, and Trina Solar (NYSE: TSL) said around the same time it had sufficient resources to pay off $138 million in bonds coming due this year. (previous post) Those upbeat reports followed news in May that the industry was seeing some of its first sustained price increases in more than 2 years. (previous post)

The positive news follows a recent downsizing that saw former industry superstar Suntech (NYSE: STP) sharply reduce its operations following a bankruptcy filing earlier this year. Struggling LDK (NYSE: LDK) has also sharply cut back operations, as it slowly sells off assets and stock to avoid a similar fate. Beijing has also stepped in by encouraging construction of new solar plants, providing an important new source of demand for these export-dependent companies.

I’ve wrongly predicted an end to the current downturn at least a couple of times over the past 2 years, mostly based on overly optimistic remarks by industry executives. Accordingly, I think it’s still too early to predict the industry is poised for a rebound just yet. But the signs do look increasingly encouraging, and I do expect we’ll see some of the big names finally return to profits as soon as the third quarter.

Bottom line: ReneSola’s raised guidance reflects an improving market for solar firms, but major risk remains due to an EU anti-dumping probe.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 10, 2013

China Won't Impose Tariffs on EU Polysilicon: Solar Trade Tensions Cool

Doug Young

After months of heated rhetoric, the voice of reason is growing between Europe and China as they seek to end their dispute over Beijing’s state support for its solar panel sector. In the latest sign that a potential agreement to resolve the dispute could be near, Beijing has decided not to levy punitive tariffs against European polysilicon, the main ingredient used in making solar panels. (English article) Many had seen China’s launch of an anti-dumping investigation into European and US polycilicon imports last year as a retaliatory move for similar US and European investigations into Chinese solar panels.

Of course the big question now is whether this positive move by Beijing will be followed by the more important step that will see an agreement to end EU punitive tariffs that took effect in June. The signing of such an agreement could also pave the way for talks between the US and China, which could reach their own deal to end similar punitive tariffs.

The latest media reports cite a German government official saying that China won’t impose punitive tariffs on European polysilicon, at least not for now. (English article) China had opened the investigation into European polysilicon last October. The wording used by the official from Germany’s Economy Ministry seems a bit unusual, since she doesn’t say the polysilicon dispute has actually been resolved permanently. That seems to imply that if the 2 sides don’t reach a deal on the broader solar panel issue, then perhaps China could reopen its investigation into European polysilicon.

This latest move by Beijing comes as media have reported that China and the EU are close to such a broader deal that would end the dispute. (English article) According to those reports, such a deal would see Chinese solar panel makers agree to a minimum price for their products above their production costs. The 2 sides opened their negotiations 2 weeks ago, following more than a year of acrimony between China and both the US and Europe. Western governments accuse China of unfairly supporting its solar panel makers through measures like tax rebates and cheap loans, which has undercut many of their North American and European rivals.

Beijing denies providing such unfair support, and has launched a number of its own retaliatory probes in response to the US and European tariffs. In addition the probe against polysilicon makers, China has also recently launched an investigation into unfair support for European wine makers (previous post), and is reportedly considering another investigation into European luxury cars.

These latest reports indicate that after the months of angry rhetoric, both sides are finally realizing that the developing series of trade wars would benefit nobody and could deal a serious blow to the important alternative energy sector. It appears that both sides agree that the solution for now is for Chinese panel makers like Trina Solar (NYSE: TSL) and Canadian Solar (NYSE: CSIQ) to raise their prices to levels that would be more comparable with rivals in Europe and North America.

More long-term, Beijing should work with local governments to try to end strong state support policies that are common in China and often result in this kind of global trade dispute. I do expect that we’ll probably see a resolution to the current conflict in the next few weeks, and that China could quickly drop its wine investigation after that. If Beijing is smart, it will take advantage of momentum from such positive developments to open similar negotiations with Washington to try and end the US punitive tariffs. If all goes well, perhaps we could see all of these solar disputes resolved by the end of the year, allowing everyone to return to the more important business of developing alternate energy sources to traditional fossil fuels.

Bottom line: Beijing’s dropping of a probe against European polysilicon is the latest sign of progress in the 2 sides’ talks to end their solar panel dispute.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

July 06, 2013

China Solar Companies: "We Can Survive"

Doug Young

ldk logoA mini flurry of news from embattled solar panel makers seems to have the same singular message, designed to tell investors that they can survive an industry crisis now entering its third year. Of course the companies that emerge when the crisis finally subsidies could be far different from the ones that went into the crisis, which seems to be the message from LDK (NYSE: LDK) in its latest announcement involving its slow takeover by a Chinese investor. At the other end of the spectrum, the message from Canadian Solar (Nasdaq: CSIQ) is a more upbeat, with the company forecasting a return to profit for all of 2013 as it rolls out a new business model. Finally in the middle there’s Trina (NYSE: TSL), which is simply trying to show investors it’s capable of repaying its debt.

Investors responded to this flurry of news by continuing to treat solar stocks as mostly gambling toys rather than real investment instruments, as everyone waits to see what kind of industry will emerge from the ongoing sector retrenchment. Only Trina’s shares managed to rally on its relatively upbeat news, rising 3.5 percent after it said it would repay its debt coming due later this month.

Canadian Solar shares actually fell 2 percent after it forecast that it would turn a profit for all of 2013. But I should also note that the company’s shares have staged an incredible rally over the last few months, nearly quadrupling since late March, So perhaps the stock was due for a break on this latest good news. Lastly, LDK shares fell 5 percent on the latest news that the company is being slowly taken over by another Chinese investor.

Let’s start with a closer look first at Canadian Solar, whose forecast of a return to profits for all of 2013 is part of a larger announcement about the sale of a solar power plant that it built. (company announcement) In this case, Canadian Solar sold the 10 megawatt plant in Canada to TransCanada Corp (NYSE: TRP). The plant is the first in a bigger deal by Canadian Solar to sell a total of 9 similar-sized plants to TransCanada. Solar companies have turned to this kind of deal, in which they build plants for operators, in a bid to generate new business during the ongoing crisis.

This kind of model does indeed look like a good source of new business, assuming buyers like TransCanada actually end up paying for all the new plants they promised to buy.  Canadian Solar says the sale is part of its goal to obtain half of its revenue from building such plants for operators, which is a key part of its strategy for posting a profit for the full-year 2013.

From Canadian Solar, let’s look quickly at Trina, which said it expects to finish paying off $138 million worth of 5-year bonds by their due date later this month. (company announcement) In this case most of the notes have already been redeemed, and Trina still needs to repay $57 million. But the message is clear. Trina is saying it has the money to repay its obligations and will continue to honor its debt, at least for now.

Finally there’s LDK, the weakest of China’s major solar players, which announced it has issued 25 million new shares to Fulai Investments for $1.03 per share. (company announcement) Based on its latest share price, the sale would account for about 12 percent of LDK’s market value. Fulai had previously purchased 19 million shares of LDK (previous post), meaning it should now own about 20 percent of the struggling company. Look for Fulai to keep boosting its stake, most likely at the expense of existing shareholders, as it slowly takes over LDK.

Bottom line: Canadian Solar looks set to survive the solar industry’s ongoing crisis using its new business model, while LDK is slowly being taken over by an opportunistic buyer.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

June 22, 2013

Two Exciting Alternative Energy Themes For Summer

By Harris Roen

Summer is here, and the sun has been shining on alternative energy.

Two investment themes in the changing alternative energy landscape have emerged as potential profit centers for investors. To take advantage of these trends, the Roen Financial Report has added in four new companies to the list of about 250 alternative energy companies that we track for our readers.

solar energy iconInvestment Theme #1: The growing domestic Japanese solar market

In the wake of the Fukushima nuclear disaster, Japan has committed to growing renewables as a domestic energy source. According to Mercom Capital Group, Japan has already had a 73% quarter-over-quarter growth rate in solar cell shipments, and a massive 343% year-over-year growth. The two companies below are promising plays in this area.

Kyocera Corp. ADR (KYO)

Kyocera is a Japanese electronics company with a wide range of products, including solar and energy management systems. This profitable company is likely set to benefit from the acceleration in domestic Japanese solar installations.

Sharp Corp. ADR (SHCAY)

Sharp is a large Japanese consumer electronics company that has been in the solar business for over 50 years. Its stock price has been struggling as a result of poor earnings reports, but like Kyocera, Sharp should benefit from growth in domestic Japanese solar.

alt fuels iconInvestment Theme #2: Alternative Fuel Engines.

Engineers have been developing and building the next generation of engines that decrease U.S. dependency on foreign oil while reducing greenhouse gas emissions. These latest alternative fuel engines are far more efficient and far less polluting. Importantly, they also cut back on transportation costs. The two companies below are key players in this area.

Cummins Inc. (CMI)

Cummins is a large Indiana-based engine manufacturer whose products include energy efficient diesel engines and low emission natural gas engines. It has a reasonable PE, but its stock looks overpriced at these levels.

Power Solutions International (PSIX)

Power Solutions is a “pure play” company that produces power systems that run on alternative fuels such as natural gas, propane biogas and electric, as well as hybrid technologies. Despite the fact that its stock has doubled in price in the last year, Power Solutions shows excellent sales growth and is likely to continue its uptrend from here.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article, but it is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

Remember to always consult with your investment professional before making important financial decisions.

June 20, 2013

China, EU Solar Talks Less Cloudy

Doug Young

After a disastrous round of talks last month that broke down almost as soon as they began, China and Europe look set to try again with a new round of negotiations to resolve their dispute over the EU’s claims of unfair state-support for Chinese solar panel makers. Much has changed since the failed round of talks in late May, including a growing number of individual European leaders who want to resolve this dispute through negotiations rather than trade wars. As a result, this new round of negotiations will take place between top-level government officials, an important change for both practical and symbolic reasons that I’ll explain shortly.

While it’s obviously still too early to say what the result of these new talks will be, the latest signs of a growing desire to solve this crisis through dialogue should give these new negotiations a good chance of success, perhaps around 70 percent. The sudden change to a more positive approach marks a distinct break with the past, when similar disputes most often saw western countries take unilateral punitive actions, evoking angry responses from Beijing. Accordingly, I’m cautiously optimistic that this new formula could emerge as a template for helping the west solve some of its larger trade disputes with China without having to resort to the usual trade wars.

Let’s take a look at the latest headlines, which have media reporting that the EU’s top trade official will travel to Beijing on Friday to discuss the dispute. At the heart of the matter is China’s strong state support for its solar panel sector, which it provides through means such as cheap loans and low-cost land use rights. The talks will be attended by the EU’s top trade official, Karl DeGucht, and Gao Hucheng, the top official at China’s Ministry of Commerce. (English article)

The location for and participants in these latest talks contrasts sharply with what we saw in the failed negotiations last month. Those talks took place in Europe, and involved lower-level EU trade officials and the top official from China’s main solar panel industry association. (previous post) I previously said that China made a big mistake by sending such a low level, inexperienced negotiator to those earlier talks, and I also faulted the EU team with failing to explain the process properly to its Chinese counterparts.

After those talks broke down, the Chinese negotiator returned to Beijing and held an angry press conference blaming the Europeans. The EU negotiators defended their position by saying the talks were only informal preliminary discussions. Afterwards, first Germany and then a number of other European leaders stepped up and said the matter needs to be resolved through negotiations, rather than through punitive tariffs that Europe is proposing.

This time I wouldn’t expect to see any of the angry rhetoric, since both De Gucht and Gao are experienced negotiators with strong diplomatic skills. The moving of talks to Beijing is also important both practically and symbolically. On the practical level, it means that Gao can easily consult with other government agencies and industry groups as he tries to address some of the EU’s concerns about ending unfair state support. Symbolically, the move to Beijing also helps China to save face, as it shows the Europeans are coming to China this time rather than forcing the Chinese to come to Europe.

I do have to stress that all of these positive developments are largely procedural, and that any deal could still be difficult for the simple reason that many of Chinese government’s state-support policies may be hard to dismantle. But at least this shows that both sides want to try negotiations, marking an important shift in tone to a more positive approach to reach an amicable agreement.

Bottom line: New talks between top EU and Chinese officials to end their solar dispute reflect a new positive approach, and could stand a 70 percent chance of success.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

June 18, 2013

Japanese Solar Manufacturers Get Their Groove Back

Junko Movellan

The Skies are Brightening as Manufacturers Resume Spending to Improve Efficiency

Almost one decade ago, Japanese PV makers dominated global PV production — Sharp (SHCAY), Kyocera (KYO), Sanyo (now part of Panasonic) and Mitsubishi Electric represented about 50 percent of global production in 2005. When German and other European markets expanded quickly, a great number of companies in Europe and Asia, specifically China, jumped into the “potentially” profitable PV industry. They rapidly ramped up their production and brought down costs, leaving Japanese companies behind.

When the Japanese government decided to pump life into the lagging domestic PV market, it created a generous feed-in tariff (FIT) program. Japanese manufacturers began enjoying full access to the lucrative domestic market and started to see the improvements in their bottom lines.

Taking advantage of the uptick in business, Japanese manufacturers have put all of their resources into the domestic market. They have increased shipment and production, improved cost structure, and moved beyond the “module only provider” phase through horizontal and vertical expansion into the downstream solar value chain.

Domestic Market Focus

Japanese manufacturers were export-oriented due to the better profit margin they could earn in German and other European markets. However, that trend is now over. At 1Q’13, Japanese PV makers kept 90 percent of what they produced in the domestic market, compared to just about 30 percent at 1Q’09 (Figure 1).

Figure 1: Japan PV Domestic Production: Exports vs. Domestic Shipment

Jqpan PV Production and export

Japanese solar manufacturers have taken a “Japan shift,” said Nobuyuki Nakajima, Solar Frontier’s manager of communications.  A few years back, Solar Frontier was export-focused, but since 2012 its domestic shipments have exceeded exports — about 80 percent of its modules will serve the growing domestic market in 2013, explained Nakajima.

Solar Frontier, a CIS (copper, indium, selenium) thin-film PV manufacturer, made its first-ever operating profit in the first quarter of 2013, two quarters ahead of plan. The company successfully reduced its material costs by 25 percent through the first half of 2012, bumped up its production capacity utilization to 100 percent at its 900-megawatt (MW) Kunitomi plant in January, and will resume production at its previously suspended 60-MW Miyazaki No. 2 PV plant in July to keep up with demand.

Kyocera, a vertically integrated poly-crystalline silicon PV manufacturer, has also been improving sales and profits by shifting its focus largely to Japan. According to Ichiro Ikeda, Kyocera’s general manager of solar energy marketing division, its domestic shipment accounted for about 80 percent of the company’s global shipment in FY2013 (April 2012 – March 2013), compared to about 50 percent in FY2010. It has been meeting the growing domestic demand by re-importing modules from its overseas production facilities in Czech Republic, China and Mexico. Ikeda said that Kyocera is planning to boost its shipment to over 1 gigawatt (GW) for this fiscal year (April 2013 – March 2014), up from 800 MW in FY2013.

PV Module Technology

The PV technology mix in Japan has also been changing. Domestic manufacturers largely produced poly-crystalline silicon (poly-si) technology, so it dominated the market. However, the Net FIT for the residential market revitalized the domestic market. Since then, the demand for high-efficiency or mono-crystalline silicon (mono-si) modules has gained popularity among homeowners who want to maximize energy production on their space-limited roofs.

SunPower (SPWR) and Panasonic, providers of world-leading, high-efficiency modules, are currently neck and neck, chasing the largest market share in the residential segment in Japan. Sharp and Mitsubishi Electric, previously poly-si module focused producers, started offering mono-si modules specifically for residential customers. Last year, Mitsubishi Electric announced the termination of poly-si modules production to focus on mono-si sales. Sharp, Japan’s largest PV producer, but deeply financially troubled, announced its very first outsourcing contract deal with SunPower to sell SunPower’s high efficiency modules under Sharp’s brand (“Black Solar”) for the domestic residential segment.

Although demand for mono-si modules is expected to grow, the launch of the full FIT program has ignited the large-scale, non-residential system market. Since its launch, the demand on more price-competitive poly-si modules has started to pick up again.

Sharp’s sales manager stated that Sharp’s current tactic is to ship mono-si modules to the efficiency-focused residential segment, and ship poly-si to the cost-conscious, non-residential segment.

The residential segment has been bread-and-butter for the Japanese module makers, providing a steady market with good profit margins; however, the module makers cannot ignore the potential growth of the non-residential segment, which is expected to grow much larger by volume than the residential segment in the next few years.

According to the Japan Photovoltaic Energy Association (JPEA), the non-residential segment grew by close to 900 percent in FY2012 (April 2012 – March 2013) from FY2011 (April 2011 – March 2012) while the residential segment grew by 55 percent. For the first-time ever, the non-residential segment exceeded the size of the residential segment.

Panasonic, a long-time producer of HIT (premium, high-efficiency modules) has even started offering OEM poly-si modules to capture the piece of the growing non-residential segment. In April, the company shipped 8,784 240-W poly-si modules, 2 MW in capacity, to a FIT non-residential project in Tokushima Prefecture – its biggest poly-si project in Japan.

The thin-film market is also making headway in Japan against silicon counterparts. A recent report states that thin-film PV lost more ground globally to silicon PV in 2012; however, the thin-film share in Japan is, in fact, increasing (Figure 2).  Data released by JPEA shows that thin-film took 21 percent of Japanese PV technology market share in Q4’12, up from a 4 percent share in Q1’10. Solar Frontier is the biggest contributor to the growth of this segment.

Figure 2: Japan Domestic PV Market by Module Technology

Vertical and Horizontal Expansion

To protect its turf and profitability, Japan PV manufacturers are expanding their product and service offerings and strengthening their domestic networks against foreign PV markets, which now accounts for more than 30 percent of the domestic market.

Kyocera, Sharp and Solar Frontier have moved beyond “module only provider,” by vertically expanding into the downstream solar value chain, as an EPC contractor, project developer and independent power producer.

Solar Frontier has created an investment company, SF Solar Power, with the Development Bank of Japan (DBJ) to fund around 100 MW worth of medium-scale PV in Japan. These projects serve as a “sweet spot” since they are easier to acquire and interconnect than projects over 2 MW.

Last year, Kyocera joined forces with IHI Corp. and Mizuho Corporate Bank to construct one of a 70-MW PV project, the nation’s largest, in Kagoshima Prefecture. Kyocera will not only supply its modules but also undertake part of its construction, operation, and maintenance. The project is expected to be completed by this fall.

In terms of the horizontal integration, Kyocera, Sharp and Panasonic all have starting selling lithium-ion storage batteries with PV systems for the residential segment in order to offer the complete packaged solution to “create, store and control energy.” Kyocera will also add Home Energy Management System (HEMS) to its PV and lithium-ion battery system offerings.

To the World

The Fukushima Disasters in March 2011 certainly created a keen interest and demand for safe and clean renewable energy sources, including solar, but a solar revitalization plan had already been in the works.

In 2010, JPEA released “JPEA PV Outlook 2030,” which spells out JPEA’s vision to create ¥10-trillion (about $100 billion) Japanese PV industry and increase the share of Japanese PV makers or “Japan Brand” to 33 percent of the world PV supply by 2030, up from 8.5 percent in 2011. “Japan Brand” means modules marketed and produced by Japanese companies not only in Japan but also in other parts of world.

According to the Outlook, the domestic market will be saturated by 2020.

After that period, the survival of Japanese PV manufacturers will depend on how much they can expand outside the domestic market. The current revitalization of the domestic market is providing them with a chance to regain the strength required — technology, innovation, and production capacity — to last in this turbulent PV industry.

Junko Movellan is a Solar Industry journalist who writes and analyzes the US and Japan PV downstream markets. She has more than 10 years of experience in the PV industry, analyzing and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.

This article was first published on, and is reprinted with permission.

June 12, 2013

These Solar Panels Do NOT Work!

By Jeff Siegel

Solar Failures Rising

Those who wish death upon the solar industry are about to be given a gift.

According to a New York Times investigation, reports of defective solar panels are starting to rise — just as the industry is on the cusp of significant adoption and expansion.

Energy analyst Todd Woody points out that no one is exactly certain how pervasive the problem is, writing:

There are no industry-wide figures about defective solar panels. And when defects are discovered, confidentiality agreements often keep the manufacturer's identity secret, making accountability in the industry all the more difficult.

Here's the problem...

In an effort to cut costs, solar cell and panel manufacturers — as well as chemical companies that provide specialized materials for the industry — have been cutting corners. As a result, quality control may have been suffering.

And unfortunately, the extent of these cost-cutting measures may not be fully realized for another year or two, as the lion's share of new solar installations were rolled out in 2012.

In other words, any potential defects tend to take a few years to be noticed.

For instance, a solar power system on a warehouse in California has recently been discovered to have faulty coatings on its panels. This has resulted in hundreds of thousands of dollars in lost revenues. Certainly not the kind of PR the solar industry is looking for...

But because of confidentiality agreements, the public has no idea as to who provided these coatings.

Of course, I would actually argue that the coatings found on solar panels today will be as relevant as the typewriter in another year or two...

The truth is while conventional coatings have been used primarily as a protective measure, new coatings coming out of U.S. labs are now also providing increases in efficiency.

Certainly you've read about those new “black solar” coatings that actually boost the amount of power generated by solar power systems. Black solar is actually the next generation in coating technology.

Quality Control

While faulty coatings have been to blame on some projects, overall, it looks like cell and panel manufacturers have been skimping on quality control, too.

But due to confidentiality agreements and the dozens of panel and cell manufacturers that supply the industry, it's hard to pin down the responsible parties.

Most analysts with whom I have spoken believe the lion's share of defective cells and panels are coming from China, as China isn't particularly known for quality or transparency. But I'm not so certain you can cast that wide of a net.

I'm not saying that most of these defective materials aren't coming from China. After all, the odds alone favor such an argument. The majority of the world's cell and panel suppliers are based in China.

But I wouldn't be so quick to assume guilt by Chinese association on this one...

The Race to Grid Parity

SolarCity (NASDAQ: SCTY), a quality solar installer and leasing company, is not an organization that is likely to gloss over quality concerns. Run by the same guy who runs Tesla (NASDAQ: TSLA), Elon Musk, the company has proven to be a major force in the solar sector.

SolarCity actually uses a couple of Chinese manufacturers, including Yingli (NYSE: YGE), which has actually had a small number of defective modules returned. We're talking 15 of the nearly 3 million that now call the United States home. As well, YGE offers insurance policies to its customers and runs a separate testing facility in the United States, where quality control tends to be a bit more stringent than in China.

Of course, it should be noted that U.S. manufacturers have also had their fair share of defective modules. But for the sake of clarification, the major U.S. manufacturers don't actually manufacture everything domestically. For instance, SunPower (NASDAQ: SPWR) runs a manufacturing facility in the Philippines.

In any event, it'll be interesting to see how this plays out over the next year or two. I do believe we will see more defective systems, and this will likely be the final nail in the coffin for those manufacturers that are already teetering on the edge of the abyss.

You can cut costs all you want. But at the end of the day, you get what you pay for.

I believe it was Benjamin Franklin who once said, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

So, will defective solar panels hurt the industry? Absolutely. But it won't be enough to stop its amazing ride to grid parity.

As long as the problem doesn't persist, this bump in the road will be miles behind us in no time at all.

That being said, I wouldn't be too quick to jump on any solar manufacturers any time soon. If you want to play the solar sector, stick with SolarCity.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

June 11, 2013

What Makes Solar Energy a Good Investment?

by Billy Parish

Five years after the Great Recession, most Americans have yet to regain their faith in our country’s largest financial institutions. The Dow is up, but the latest Financial Trust Index shows that 58% of Americans expect the stock market to drop 30% or more this year. Meanwhile, a recent Harris Poll noted that only seven percent of the public trusts the leaders of Wall Street.

Strangely, the same poll which found that most Americans think stock prices will decline also found that 92% of Americans plan to hold or increase their investments in the stock market.

What’s going on here?

Why do we put our money in institutions that we don’t trust and investments that we think are going to decline in value?

The problem comes down to a lack of quality investment options. It’s hard to access a mix of investments that will provide reliable returns over the long run. Add in criteria about not investing in harmful or risky industries and the task of finding a good investment can start to look impossible.

Fortunately, solar energy is a good investment for Americans, particularly when paired with new kinds of investment marketplaces like Mosaic. Here is how we think about our investment product:

Financial Returns

Big banks are good at financing big projects. But for smaller projects, like commercial scale solar energy, big banks lend at exorbitant interest rates, if they lend at all. This fact makes it possible for Mosaic to make solar energy loans with interest rates that are lower than those charged by banks, but still high enough to provide competitive returns for investors.

To date, over 1,500 investors have used the Mosaic platform to provide more than $2.1 million in financing to projects in California, New Jersey, and Arizona. The expected annual returns on our most recent loans has been between 4.5% and 6.38%. With 10 year Treasuries at near historic lows (1.90%), CDs at 0.5% APY, bonds averaging 5.20% from 2003-2012 and stocks in the S&P 500 averaging 4.95% annualized returns from 2003-2012, Mosaic’s expected yields are competitive with the best investment products on the market.

Financial Risks

Like all investments, solar energy investments through Mosaic do not come without risks. Transparency is a core value, so we post the prospectus of each project on our website and encourage investors to read the prospectuses in order to understand the risks associated with our investments. Specifically, the broad categories of risk facing solar projects include credit risk (a borrower defaults), technology risk (solar panels fail), weather risk (a storm destroys solar panels), or operational risk (Mosaic goes out of business).

In the case of credit risk, Mosaic offers debt, rather than equity, financing for solar projects. if a project encounters a problem, our investors recoup their money first. We also employ rigorous underwriting procedures, which involve not only Mosaic’s project finance team, but also third party lawyers, engineers, and insurance experts to review every project. Finally, looking to the future, we recently helped found a solar industry consortium called truSolar, which aims to standardize the risk evaluation process for solar projects. Founding members of the group include 16 leading businesses and research groups, from DuPont and Standard and Poors to the Rocky Mountain Institute. By working with other thought leaders to establish best practices for risk evaluation, we aim to drive down financing costs across the solar industry.

In the case of technology risk, solar equipment is itself very reliable, to the point that manufacturers typically offer 25-year warranties for solar panels and solar inverters. Insurance for events like fires or hurricanes adds another layer of protection against weather risks.

Finally, in the event that Mosaic goes out business, we have entered into a backup servicing and successor agreement with Portfolio Financial Servicing Co. ( that would ensure the servicing of all issued loans. PFSC is one of the largest third party lease, loan and structured settlement servicers in the U.S., with $11 billion under management.

Where Does Distributed Solar Fit in a Balanced Portfolio?

For most investors, financial risk and return information doesn’t mean much outside the context of a broader portfolio. Most individuals and institutions invest in a portfolio of assets. We might invest in the stock market and in municipal bonds. Maybe we invest in ourselves, via payments for education, or in our homes, via expenditures on energy efficiency. So where do Mosaic’s investment products fit into this mix?

Our investment products function much like a bond. Debt generally lacks the significant upside potential of a stock (investors won’t earn more than the projected annual interest rate), but has less downside risk as well. Investors are repaid their loans, with interest, on a monthly basis. Investors could look at a Mosaic product to fulfill the same role in a portfolio as Treasuries or other kinds of fixed income investments.

More broadly, we see our products offering a hedge against two types of market risk.

First, because our investments are in tangible, localized assets, they are “uncorrelated” and offer a hedge against dramatic shifts in global markets. If you’re heavily invested in major corporations or commodities, investing in community-based assets could make good sense.

Second, our investments hedge against the increasingly systemic risks facing fossil fuels. Energy is the world’s largest industry, and so it should come as no surprise that energy investments make up a large chunk of the portfolios of institutional and individual investors alike. Global energy markets have experienced major swings for fossil fuel prices in recent years -- oil, for instance, running up two historic price peaks with a crash in between, or gas plummeting in cost, and now rapidly rising -- and it’s only going to get worse. In particular, we think it’s important for investors to understand that fossil fuel companies are betting against action on climate change. HSBC recently warned that the top 200 fossil fuel companies could see a 40-60% decline in their equity value if governments take action to curb climate change. Mosaic investments represent a way to start moving away from fossil fuels before the bubble bursts.

Compounded Good

If you invest in an index or mutual fund, or keep your savings in an account with a national bank, there’s a strong chance you are financing the operations of some of the world’s largest fossil fuel companies. As a father, I see this as illogical. What’s the point of making an investment that will pay for my childrens’ future if it also harms the world they inherit?

Mosaic investments run in the opposite direction. Our investors have so far financed enough solar energy to power 95 typical American homes every year. They’re creating societal gain, without compromising their personal gain.

But let’s break that down a bit further. The magic of investment is that it compounds. So what kind of compounded good could we create?

Well, our first fifteen hundred investors have put in $2.3 million. Assuming they all reinvested their money in new solar projects, and assuming they earn a rate of 4.5%, in ten years they would have a little over $3.6 million invested in solar energy. In twenty years, they’d be approaching $5.6 million invested, enough to power perhaps 600 American homes every year.  

At Mosaic we believe the fastest way to create a 100% clean energy economy is to let everyone benefit from it. That’s why we work every day to create a rock solid, accessible clean energy investment.

June 08, 2013

China Trys to Cork EU Solar Tariffs With Wine Probe

Doug Young

China is quickly learning how to play the game of tit-for-tat trade wars, with news that Beijing has launched a new anti-dumping probe against wines imported from the European Union. Anyone who has followed recent China-EU trade relations will know, of course, that announcement of this new probe by the Commerce Ministry comes the same day that the EU formally announced anti-dumping tariffs against imported Chinese solar panels.

While I certainly don’t condone this kind of trade war rhetoric, I have to say that China’s decision to target Europe’s wine industry looks like a very smart selection for this kind of probe. For starters, wine is one of Europe’s most famous products and is one of its biggest exports. At the same time, Chinese consumers are quickly discovering a fondness for imported wines, with European varieties fetching some of the highest prices.

All that said, let’s have a look at the actual news that saw the EU formally impose an 11.8 percent anti-dumping tariff on Chinese solar cells to take effect on Thursday. (English article) The tariffs were widely anticipated following a months-long investigation, and were actually quite a bit lower than most people had expected. But the rate could rise to 47.6 percent in August if China and the EU don’t reach a negotiated settlement in the matter before then.

Chinese solar panel makers were predictably dismayed, with Trina (NYSE: TSL) issuing a statement expressing its disappointment. (company statement) Yingli (NYSE: YGE) said it hopes the 2 sides will be able to negotiate a settlement, which is what some individual EU leaders have been pushing for to avoid a trade war. (company statement)

In addition to its usual angry statements of denial and condemnation, China this time has also responded by launching its own investigation into wines imported from the EU. (English article; Chinese article) This latest probe is similar to one that China previously launched against US makers of polysilicon, the main raw material used to make solar cells. China opened that investigation last year after the US imposed similar punitive tariffs on Chinese solar cells.

Media are pointing out that by targeting wine, China is looking to punish southern EU members like France and Italy that are big wine producers and were strong backers of the solar anti-dumping tariffs. At the same time, any Chinese anti-dumping tariffs on EU wines would have less impact on northern European nations, most notably Germany, which opposes the punitive tariffs on Chinese solar cells.

Personally speaking, I think this move targeting wine looks quite shrewd and is probably even justified. Europe is famous for providing extensive subsidies to its farmers, and the wine industry is one of the biggest recipients of the kind of state support that China gives to its solar panel makers. China’s growing thirst for wine means that anti-dumping tariffs against EU products could also have a major impact on some its major winemakers.

Of course the timing of China’s probe looks quite questionable, and anyone who doesn’t believe this particular investigation is linked to the solar trade war would be quite naive. The Chinese probe also looks dubious because most wines imported from Europe are already subject to relatively high taxes and are more expensive than domestic brands. That means any claims that EU subsidies are hurting the Chinese wine industry are most likely untrue.

I’m not a fan of trade wars, and I honestly don’t think this move by China will do much to help create a better atmosphere of trust if the 2 sides really want to mediate a solution. But at the same time, at least China’s wine probe may put some added pressure on the EU to try a bit harder to negotiate an acceptable solution to prevent the solar trade war from escalating.

Bottom line: China’s launch of an anti-dumping probe against EU wines will boost hostilities, but could also add pressure for the 2 sides to resolve their ongoing solar dispute.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

EU Moderates Tone in Solar Trade Clash with China

Doug Young

After more than a year of antagonism, I’m happy to see that the voice of reason finally seems to be coming to the ongoing clash between China and the west in their prolonged dispute over Beijing’s state support for solar panel sector. Germany seems to be the driving force behind this welcome change in tone, following German Chancellor Angela Merckel’s remarks last week that she opposed anti-dumping tariffs on Chinese solar cells being proposed by the EU’s trade office. Merkel correctly realized that a trade war over solar panels wouldn’t benefit anyone, and could potentially deal a crippling blow to a sector that will be critical to the world’s future energy security.

Following that behind-the-scenes pressure from Germany and perhaps 1 or 2 other European leaders, the EU’s trade commission has suddenly backed down in its previously aggressive stance towards China in the dispute. Media are reporting that the EU’s trade commissioner has decided to impose an 11.8 percent punitive tariff rate on imported Chinese solar cells from Thursday this week, far lower than the 47 percent rate that was initially planned. (English article) But the rate would rise to the original 47 percent in 2 months if China and the EU can’t reach a settlement before then to resolve the matter.

The dispute centers around western claims that China unfairly supports its solar panel makers by giving them numerous economic advantages, including cheap loans, low-cost land and tax incentives. Those incentives led to a huge build-up of China’s sector over the last decade, which resulted in a massive oversupply that has sent the global industry into a prolonged slump over the last 2 years. As a result, many of the western firms that pioneered the technology have gone out of business, and most of China’s big players are only continuing to operate with support from Beijing. (previous post)

Unhappiness about Beijing’s strong support for its solar sector led the US to impose anti-dumping tariffs on imported Chinese solar cells last year, and the EU is preparing to take similar steps following its own investigation. In both cases, Beijing did little or nothing to try and resolve the matter to avert a crisis, even though it had plenty of time to try to intervene while the months-long investigations were occurring.

Last week Beijing finally got a little more proactive by sending a delegation to Europe to try and negotiate a settlement. But those talks quickly broke down due to lack of experience by the Chinese negotiators. (previous post) Shortly after that happened, Merckel came out publicly and said Germany opposed the sanctions, which appears to be the main driver for this sudden softening of the EU’s stance in the matter.

So the big questions become: What will happen next, and will the 2 sides be able to reach a settlement before August? My guess is that we’ll see the Chinese side send a new delegation to Europe in the next week or two, and that this time we’ll finally see some serious negotiations take place. Since it’s unlikely that China can dismantle its extensive state support for the industry so quickly, we’re more likely to see the Chinese companies agree to simply raise their prices to a level that is comparable with products from their European and North American rivals.

I would give this latest round of negotiations a good chance of success, perhaps at around 70-80 percent, since I think that both sides truly want to settle this matter without a trade war. If they do reach an agreement, that could become a template for similar talks with Washington that could perhaps result in the rollback of US tariffs, providing another major boost for the embattled sector.

Bottom line: A softening of Europe’s stance in its solar panel dispute with China means the 2 sides now have a 70-80 percent chance of negotiating a settlement to the matter.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

June 06, 2013

Earnings Surprises Keep SunPower An Investor Favorite

By Harris Roen

The stock market has been paying attention to SunPower (SPWR) in a big way. At the end of May the stock hit an annual high of 23.76, a gain of 125% from where it was just a month earlier. That price is quadruple levels it was trading at in the beginning of the year.

Since May, the stock has seen about a 17% correction, and is trading sideways in the 18 to 20 price range. Volume at these high price levels have been impressive too—shares exchanging hands in the past 30 trading days exceeds that of the previous 64 trading days.

Investors have been impressed with the latest earnings report, and the company estimates that earnings per diluted share will turn positive next quarter, beating analyst estimates. Despite this recent jump in the stock price, is SPWR still a good investment?

SunPower is a small to medium sized California-based solar company with about 5,000 employees and $2.5 billion in annual sales. This vertically integrated solar company is involved in the manufacture, installation and service of photovoltaics. SunPower delivers solar to a huge array of customers around the globe, from rooftop residential systems to commercial, government and utility-scale power plant clients. SunPower claims to have the largest U.S. residential and commercial installed base, with over 100,000 residential systems installed.

A look at SunPower’s comparative financials paints a mixed picture of the company’s future prospects. The chart above measures SPWR against the average of 23 other solar companies in the same size range (those with annual sales between $1 billion and $10 billion).

When comparing debt and sales growth, SPWR beats out the competition. It posts numbers 50% above the other companies. It measures poorly, though, on earnings, profits and return on equity. Having said that, it should be noted that these three later measures are all negative on average for solar companies in the group, it’s just that SunPower’s numbers are more negative. So for example, the current EPS for SunPower is -2.8, compared to an average for the other solar companies of -1.3.

Solar installation as an investment theme is hot on analyst’s radar these days, and it is largely due to this part of SunPower’s business that the stock is getting so much attention. It is important, then, to compare SPWR against the other big players in solar installation.

The chart above shows SunPower compared to four other publically traded major players in solar installation: Real Goods Solar (RSOL), SolarCity (SCTY), Sunvalley Solar (SSOL) and Akeena Solar (WEST). This comparison, again, shows a mixed picture. SPWR compares well in market cap and price/book ratio, but measures up poorly on sales, net margin and return on equity.

I believe the main justification for investor interest in SunPower is its history of positive earnings surprises—this is a metric where SunPower shines. To illustrate, when earnings came in at $0.22/share for the first quarter of 2013, it handily beat consensus analyst estimates of $0.06/share. Similarly, earnings per share of $0.18/share for the fourth quarter of 2012 exceeded the average analyst estimate of $0.14/share. Once a trend like this is established, professional investors take notice.

So while SunPower may not rise to the top of comparable companies, it continues to be an investor favorite. As long as the company continues to perform well in the ultra-competitive solar sector, SunPower will remain one of the Roen Financial Report’s top picks.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

June 04, 2013

Canadian Solar's Chinese Loan

Doug Young

China’s struggling solar panel makers must are slowly transforming into de facto state-owned enterprises as they take increasing loans from Beijing, with Canadian Solar (Nasdaq: CSIQ) becoming the latest to take a handout from the policy lender China Development Bank (CDB). If Beijing is trying to convince Europe and the US that it’s not unfairly supporting its solar sector, then this certainly isn’t the way to do it. But that said, I doubt that Canadian Solar or many of its peers could get financing to maintain their operations from any true private sector banks right now, as the future remains unclear for most due to their precarious financial positions.

This latest deal looks at least slightly positive for Canadian Solar, as the 270 million yuan ($44 million) loan it has just received will be used to finance a specific project in western China rather than simply to fund day-to-day operations. (company announcement) But despite the loan’s stated use, I do suspect that Canadian Solar will actually use most of the funds immediately to fund its daily operations that are still losing big money. Just so everyone is clear that this loan is a gift from Beijing, the CDB is offering a one-year grace period where Canadian Solar presumably won’t have to pay any interest — a condition it would never be able to get from a commercial lender.

While this news hardly looks encouraging to me, investors seemed to think differently, bidding up Canadian Solar’s shares by 3.5 percent after the announcement came out. Perhaps the markets are taking this deal as a sign that Beijing will continue providing low-cost financing for Canadian Solar until the industry finally returns to profitability. Other solar shares also rallied on the news, with Yingli (NYSE: YGE) up 3.9 percent and Trina (NYSE: TSL) up 2.7 percent.

This kind of financing seems to be Beijing’s new approach to propping up its solar companies while they wait for a 2-year-old slump in their sector to ease. Rather than provide major funds, CDB seems to be giving mostly smaller loans in the $40-$150 million range to help companies fund their operations for a few months while they wait for the market to improve.

Yingli received its own largess from the CDB in April, when it announced 2 new loans worth a combined $165 million. (previous post) Mid-sized manufacturer ReneSola (NYSE: SOL) announced its own new 320 million yuan ($51 million) credit line from CDB in March, and LDK (NYSE: LDK) said a month earlier that it received a similar 440 million yuan in new CDB financing. CDB has also provided past financing for the now-bankrupt Suntech (NYSE: STP), and late last year provided major new funds for wind power equipment maker Ming Yang (NYSE: MY).

So, what’s the bottom line in all of this? As I’ve said above, this kind of preferential financing is unlikely to convince Europe or the US that Beijing is committed to ending state support for its solar sector. That could make negotiations difficult for China when it tries to stop the EU from imposing anti-dumping tariffs on solar panels imported from China in upcoming talks.

Over the more medium term, I would expect the CDB to keep making more similar loans to the solar panel makers for the next year or so, with each such loan providing enough money to fund operations for the next 2-4 months. Recipients of the loans do indeed look well positioned to emerge as sector leaders once the industry finally stabilizes, which is perhaps why investors are favoring many companies that receive CDB loans.

Bottom line: China Development Bank will provide loans to China’s solar panel makers to fund their operations over the next year until the sector stabilizes.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

May 31, 2013

Bluefield Solar Eyes £150 Million IPO

Bluefield IPO to Be the Second Green Energy Fund Flotation in London This Year

by Alice Young

KD501Bluefield Solar Income Fund Limited, an investment fund focussed on solar power, plans to raise £150 million in a London IPO. The Bluefield IPO will be the second flotation of a green energy find on the London Stock Exchange this year following the IPO of Greencoat UK Wind (LON:UKW).

Bluefield Solar Plans London IPO

On Wednesday, May 29, London-based Bluefield Solar announced that it intended to launch an initial public offering on the LSE’s main market. The fund, which is focussing on large-scale agricultural and industrial solar assets, said in a press release that it was seeking to raise £150 million by way of a placing and an offer for subscription of ordinary shares. Bluefield expects its shares to start trading in July.

One of the fund’s cornerstone investors will be Vestra Wealth LLP which has committed to subscribe for no less than 15 million ordinary shares. Numis Securities is acting as broker and financial adviser to Bluefield in relation to the London IPO. The fund will also be advised by Bluefield Partners.

The fund plans to invest the proceeds from the IPO in UK-based agricultural and industrial solar energy assets. “Solar energy should play an important part in the UK’s energy mix going forward,” John Rennocks, the proposed Non-Executive Chairman of the fund, said in the press release. On Wednesday, the Financial Times quoted James Armstrong, a managing partner in Bluefield Partners, as saying that large-scale solar energy was “poised to become a major investment theme in the UK”.

Bluefield Solar was founded by former partners of Foresight Group, a large renewable technology investor. Jon Moulton, the private equity tycoon and chairman of investment company Better Capital (LON:BCAP), sits on its investment committee.

Green Energy IPOs

The Bluefield IPO announcement came two months after the floatation of Greencoat UK Wind (LON:UKW), a wind energy investment fund managed by UK-based infrastructure fund Greencoat Capital, which raised £260 million in March through a London IPO. Greencoat owns stakes in onshore and offshore wind developments.

UK government support for clean energy has offered an incentive to renewable energy producers to seek London listing. Electricity suppliers have been encouraged to increase the share of renewables such as solar and wind power in the electricity mix they sell to customers.

The Renewables Infrastructure Group (TRIG) backed by Renewable Energy Systems is reportedly considering a flotation, hoping to raise £300 million for its portfolio of 18 wind farms and solar parks in Britain, Ireland and France.

This article first appeared on, an informational and educational resource for retail investors. The portal provides news, analyses, commentary on data on the markets and investment products available to private investors. It encourages engagement and contribution from all stake holders in the retail investment world, covering energy, equities, funds, forex, real estate and more.

May 29, 2013

Get Ready for a Revival in Solar Tech Investments

James Montgomery

The Skies are Brightening as Manufacturers Resume Spending to Improve Efficiency

Slumping solar PV equipment spending has finally bottomed out, and we're about to witness a "revival" in investments that will finally close the yawning gap between oversupply and demand, according to a pair of analysts reports.

Solar PV manufacturers spent nearly $13 billion in 2011, but then their investments plunged more than 70 percent to $3.6 billion in 2012, and will probably drop another 36 percent this year to $2.3 billion, the lowest level since 2006, says Jon-Frederick Campos, analyst with IHS Solar. But with prices showing signs of stabilizing, companies that idled manufacturing lines and lowered utilization, and put off expansions in the last 12-18 months, are adding new plants and production capacity in emerging markets where some of the best growth is happening: Middle East to Africa to Latin America, he said.

Two signs Campos has seen over the past six months that indicate reached the bottom of PV investments: "average selling prices, though still not completely favorable, have been stabilizing and have actually shown increases thus far in 2013," he said. And second, he points to improved forecasts and stronger financials from PV companies, thanks to improving market conditions. "The rest of 2013 and early 2014 will eliminate much of the overcapacity still out there."

Ed Cahill, research associate at Lux Research, isn't exactly so optimistic, saying we haven't actually reached the bottom yet: "It'll be worse next year, when a lot of consolidation will happen," starting with the vertically integrated manufacturers who are most exposed to price pressures across the board. But like Campos he sees demand going up and supplies going down over the next couple of years, with prices rising and profits reemerging. "When will those two match up? We see it in 2015," when capacity dips to 58 GW, and demand surges to 52 GW. (He clarifies that roughly a 12 percent overcapacity beyond demand is "a healthy amount" that provides a cushion for manufacturers; after 2015 that buffer could shrink down to 5 percent and create what he calls a "supply-constrained" environment in 2016.) Total demand is seen reaching 62 GW by 2018, led by China (12.4 GW of installations) and the U.S. (10.8 GW). Those numbers assume "multiple large movements within the market," from new financing models for distributed solar projects, to governments fast-tracking utility-scale project development in emerging markets, and shutting off government support for smaller and struggling manufacturers.

PV supply demand & overcapacity Lux
Increasing demand and decreasing capacity lead to the market's return to equilibrium in 2015. (Source: Lux Research)

Both Campos and Cahill think crystalline silicon (c-Si) will continue to dominate the solar PV market and that's where the real gains will be seen to further lower costs. Improvements continue to be made all over the module bill-of-materials, from the starting wafer material (direct solidification, epitaxial silicon, and quasi-mono silicon ingot) to structured saw wires, selective emitters, rear passivation, backside contacts, metal wrap-through, and anti-reflective coatings. Small improvements in specific areas can add up; just ramping utilization back up to 90 percent should save manufacturers $0.09/W, Cahill notes. "Capacity-boosting investment is what got the industry in trouble," Campos adds. "Technology and process step-up investments are the key to our industry's continued revival."

Jim Montgomery is Associate Editor for, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on, and is reprinted with permission.

May 28, 2013

EU, China Solar Talks Fall Apart: What's Next?

Doug Young

Trade War
Trade War. photo via Bigstock
It’s been interesting to watch all the different interpretations coming out of a brief flurry of talks in Europe late last week aimed at settling a trade dispute between the EU and China over Beijing’s support for its solar panel makers. About the only thing that everyone agrees on is that some talks did happen, and that China took the interesting step of letting an industry association rather than government officials handle its side of the negotiations. But after that, no one seems to agree on why exactly the talks fell apart or whether there’s hope that they might be restarted before the EU finalizes proposed punitive tariffs on imported Chinese solar panels. Adding further intrigue to the mix, German Chancellor Angela Merkel has come out during a meeting with visiting Chinese Premier Li Keqiang to say that Germany opposes punitive tariffs and wants to see the dispute resolved before a trade war begins.

I have to commend Merkel for breaking with the EU trade commission to try and find a constructive solution to the dispute, since a trade war isn’t in anyone’s interest and could deal a serious blow to this important sector. But that said, it’s far from clear that China’s inexperienced negotiator will be able to work constructively to find a solution to this impasse, which stems from western allegations that Chinese solar panel makers receive unfair state support.

The current state of confusion has its origins in remarks last week by an official from the Chinese Chamber of Commerce for Import and Export of Machinery and Electronic Products, a government-backed industry group that was chosen to represent Chinese solar panel makers in talks with the EU. After the talks broke down, the frustrated official returned to Beijing where he said his group had made an offer that had been rejected by the EU’s trade office. (English article)

That prompted an EU to quickly fire back to call the Chinese statement misleading because formal talks had yet to be launched. An EU spokesman further added that the meeting last week was only “technical preparatory talks”, and that formal negotiations could only begin after the EU commission considering the case publishes its preliminary findings.

Clearly there are some communication problems here, which I blame on both sides. For his part, the Chinese representative probably has little or no experience negotiating in this kind of major trade dispute, and simply thought he could make a quick offer and settle the matter. The EU, meanwhile, failed to realize the Chinese negotiators lacked understanding of the EU’s process for settling this kind of talks. If they wanted to handle the situation better, the EU negotiators should have realized they would be dealing with a relatively inexperienced Chinese team and made more effort to educate them about the EU’s dispute resolution process.

Merkel’s entry into the situation seems a bit unusual, since individual EU leaders seldom speak out on this kind of dispute and usually let the bloc’s trade representative handle such matters. (English article) As I said before, I’m happy to see such a major national leader finally speaking out on the need to negotiated solutions in these kinds of disputes rather than conducting investigations and unilaterally imposing punitive tariffs.

Merkel’s words and China’s willingness to finally admit there is a problem and seek a negotiated solution both look like good signs that both sides want to resolve the matter and perhaps a trade war can be averted; accordingly, I’d put the chances of success for a negotiated settlement relatively high, perhaps at about 70 percent.

Bottom line: Despite some confusion, talks to resolve the EU-China dispute over solar panels should have a good chance of success due to both sides’ desire to avert a trade war.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

May 15, 2013

SolarCity: Mixed Results But Good Prospects

By Harris Roen

SolarCity (SCTY) has been one of the hottest alternative energy stocks since its Initial Public Offering five short months ago. Yesterday it shot up 24% in one day, on the largest one-day volume since it opened, in anticipation of its quarterly earnings release. It is up 95% in the past three months, and has more than tripled from its initial trading price. As of this writing SCTY has given back about a third of yesterday’s stratospheric gains.

Now that earnings have been released, let’s take a grounded-in-reality look at this innovative solar company.

Scty Revenue and Income

SolarCity’s earnings results were mixed, showing steady revenues, but also a net loss for the first quarter of 2013 (chart above). It’s disconcerting that net income has been negative for the past four quarters, and on a per share basis, the most recent losses were 28% greater than analyst expectations. Revenues, on the other hand, came in ahead of analyst estimates, but just barely.

If SolarCity is to make it as a company, it needs to successfully implement a business plan that grows its customer base in a big way. It therefore makes sense to look at data relating to its clients. The chart below shows data for each of the past four years, and compares it to the most recent quarter.

SCTY Clients

Customer growth remains robust for the first quarter of 2013. 2012 was off the charts, with SolarCity adding on 30,950 new clients. The first three months of 2013 added close to a quarter of that number, which is good news for FY 2013 projections.

Total revenue per customer is declining steadily, but that is to be expected as the number of customers dramatically increases and the price of solar panels falls. What is occurring though (and what we want to see) is that the net loss per customer is steadily decreasing. It has changed from a low of around $5,000 in 2010 and 2011, to about $500 in the most recent quarter. If SolarCity can keep that trend going then the company will soon be in the black again. Another important metric is the acquisition cost per customer, which has remained steady at 2012 levels.

SCTY debt

I also find it encouraging that SolarCity’s debt levels remain reasonable, just about the same as 2012 levels. It is important to understand that in many ways SolarCity is a financial company, crafting and offering creative finance options to allow clients to get solar done with minimal up-front costs. As with other financial firms, debt is a big part of SolarCity’s business, so it must be analyzed under that spotlight.

Though I still view SolarCity as an investment for the speculative portion of a portfolio, the long-term prospects for this company are very compelling. For example, SolarCity recently announced its biggest project to date—a 24 megawatt, 6,500 Homes in Project at Navy and Marine Bases in Hawaii. Investors that are willing to ride the SCTY stock price rollercoaster are likely to be rewarded in the long term.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article, but it is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

Remember to always consult with your investment professional before making important financial decisions.

May 14, 2013

SunPower (NASDAQ: SPWR) and Graphene Investing

By Jeff Siegel

've said it before, and I'll say it again...

If you want to profit from solar, the money is in installation and technology.

Certainly SunPower (NASDAQ: SPWR) knows this to be true. One of the few U.S. solar plays still around, SunPower surprised analysts with a narrower Q1 loss and sales that exceeded estimates. This, by the way, was due to an increase in installations. No surprise there.

And certainly those of us who regularly monitor installation data, which is not hard to come by, have been quietly picking up shares since the start of the year.

The result? Take a look:


This isn't to say SunPower is in the free and clear; the solar business remains a tough one with nearly impossible margins.

But those still in the game are stronger today compared to where they were last year — and the year before that.

With global installations continuing to soar — especially here in the United States — installers are busier and more profitable than ever. Certainly the only publicly-traded solar installer and leasing company SolarCity (NASDAQ: SCTY) is proof of that. Just look at this chart:


Of course, you may want to wait for these to cool off a bit for jumping on for the ride.

But there are still other solar plays that you can get into now and turn a very nice profit over the next six months or so...

$8.6 Billion Worth of Product

As you saw, there's big money in solar installation these days. And investors who have taken advantage of this reality and invested accordingly have done quite well.

But the second opportunity for solar investors is actually much more impressive than installation...

I'm talking about solar technology. The top-notch solar tech plays of today will be the gatekeepers of the industry tomorrow. And that's why we're loading up the boat while they're still insanely cheap.

We're most impressed with two specific solar tech angles right now: The first is through a new solar material that's currently being perfected at the University of Manchester and the National University of Singapore. I won't dive too far into the particulars, as you'd need a few chemistry books to even attempt to understand it. (I even needed to run this one by my old chemistry professor to get a handle on this thing). But here's the basic idea...

As explained by research reps from the University of Manchester, this particular materials discovery could lead to entire buildings being completely powered by sunlight, which is absorbed by its exposed walls.

Antonio Castro Neto from the National University of Singapore said, "We were able to identify the ideal combination of materials: very photosensitive TMDC and optically transparent and conductive graphene, which collectively create a very efficient photovoltaic device."

While some of that may sound like scientific mumbo jumbo, the only thing you need to know here is that the key element is graphene.

Graphene is what makes this entire process possible.

As you know, we've been singing the praises of graphene for years. And nearly every week we discover a new use for this miracle material.

From advanced desalination systems and high-powered supercapacitors... to cellphone touchscreens and bulletproof vests... graphene will be found in nearly every commercial and industrial application in just a few short years.

And this is why it's so important that you load up on quality graphene plays NOW — before the herd rushes in and jacks the price up. That, by the way, will be when we cash out.

Solar in the Black

A more direct way to play the solar tech angle is through manufacturing systems and tools.

The interesting thing about solar is that over the years, it's been the suppliers of these “tools” that have benefited the most. Applied Materials (NASDAQ: AMAT) actually made a sizable chunk of change in this space back in 2006-2007.

But like most solar manufacturing processes, what's hot today is nearly useless tomorrow.

That being the case, we're always on the lookout for the next big thing in manufacturing technology. And right now, the next big thing coming around the bend is “black solar.”

You may have read about black solar before, as it's long been a sort of dream deferred for solar manufacturers. It's essentially a specialized chemical coating that allows solar panels to trap ten times more light than what's available today.

A great idea in theory, but in practice, hard to prove...

Well, those days are over. Not only has black solar been proven effective and completely doable on a commercial scale, but there's a conga line of solar manufacturers looking to license this technology right now. Because the end result of having this technology in place is a 50% cost reduction and a full doubling in efficiency.

To a new way of life and a new generation of wealth...


Jeff Siegel is Editor of Energy and Capital, where this article was first published.

May 10, 2013

Chinese Anger at EU Solar Tariffs

Doug Young

Majishan_angry_20090226 I’ve been trying to avoid writing about the latest punitive tariffs for Chinese solar panels that look set to come from the European Union this week, since the story has dragged on for more than a year now and the outcome was almost inevitable. But that said, it would be a bit remiss of me not to write at least something on this latest move, which is expected to see European Trade Commissioner Karel De Gucht formally recommend the introduction of anti-dumping tariffs for solar panels supplied from China. (English article) The latest reports say the recommended levies are likely to be set at 40 percent or higher, even though industry insiders say anything above 30 percent could seriously hurt China’s already struggling solar panel sector. [Ed. Note: Recommended Tariffs were release on Thursday, averaging 47.6% in a range from 37.3% to 67.9% More here.]  But instead of focusing on this tired old story, I’d like to move my attention to China’s predictable reaction, which was to lash out with a warning to the EU on the risks of levying such tariffs.

Personally speaking, I do believe that China regularly engages in the kinds of unfair support for its solar sector that prompted the initial US and EU investigations. That’s just the way that Beijing does things: it picks industries it wants to promote, especially in emerging high-tech areas, and then showers them with all kinds of benefits like tax rebates, free or cheap land and other forms of policy support.

But instead of acknowledging this problem, which gives Chinese firms an unfair advantage over companies in other markets, China simply continues to do nothing to address the source of the complaints. Instead, its approach is always reactionary, whereby it sits back and watches momentum slowly build against its solar panel makers, and then reacts angrily at each negative development.

China certainly can’t say it didn’t see this coming, as this clash has been building for nearly 2 years now. It all began with the bankruptcy of a US solar panel maker in 2011, which led to a congressional hearing because the failed company had received a government-backed loan. That hearing resulted in the launch of a formal investigation, which ended with the decision to levy punitive tariffs last summer, and the finalization of those tariffs in November. (previous post)

In the meantime, the EU launched its own investigation since many European solar panel makers also struggled for similar reasons. Like the US case, the EU process has been long and involved a number of major milestones, the latest of which will be the recommendation to impose tariffs this week. That move will be followed by a few more administrative steps, before such tariffs are most likely finalized later this year.

In the face of this tired and ultimately destructive cycle, leaders in Beijing should seriously reconsider their approach, taking a more constructive and proactive tack. This kind of angry and reactive approach is actually quite typical for Beijing in many areas, from trade disputes to diplomacy and domestic social issues.

Chinese leaders typical abhor the idea of any kind of “interference” in such issues, and usually just prefer to let matters build to a crisis level before taking any action. The only problem is that usually by that time, the problem has become so great that it’s difficult to solve. What’s more, frustration and anger from all parties make constructive dialogue difficult or impossible, which ultimately results in this kind of destructive deadlock.

At this point in the solar panel dispute, it’s probably already too late for Beijing to take any constructive steps to try and address concerns in the US and Europe. But that doesn’t mean that China shouldn’t at least try to make at least some kind of conciliatory effort, which could perhaps help to end this dispute sooner rather than later. That’s important, since it’s in everyone’s interest to salvage this key sector  that will be critical to creating a sustainable energy environment in the future.

Bottom line: Beijing needs to change its approach to one of constructive dialogue rather than angry warnings to solve its solar panel disputes with the US and EU.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

Photo: Angry sculpture in Majishan Grottoes in Gansu Province, northwest China.  Photo by MarsmanRom via Wikipedia Commons.

European Commission Recommends Tariffs on Chinese Solar

James Montgomery

Trade War
Trade War. photo via Bigstock
The European Commission has decided to recommend duties on Chinese solar panels up to 67.9 percent, according to reports from multiple sources.

Wall Street Journal reports that the tariffs will affect more than 100 companies, and be implemented at a range from 37.3 to 67.9 percent at an average of 47.6 percent, close to projections earlier this week. Companies will face tariffs as follows:

  • Suntech (STP) and its subsidiaries: 48.6 percent
  • LDK Solar (LDK): 55.9 percent
  • Trina Solar (TSL): 51.5 percent
  • JA Solar (JASO): 58.7 percent

Other companies that cooperated with the investigation will likely be hit with a 47.6 percent tariff, while those that did not cooperate will face a 67.9 percent tariff.

China strongly opposes the tariffs and is calling for extended dialogue to resolve the situation, according to Bloomberg. The Alliance for Affordable Solar Energy (AFASE) also expressed its concern in a statement, claiming that punititve tariffs at any level will cause "irreversible damage to the entire European Photovoltaic value chain."

Last November the U.S. handed down antidumping and countervailing duties. Europe already was eying actions against China's solar manufacturers in motion for more than a year, before the U.S.' own trade case was finalized, though presumably the U.S.' decision provided momentum.

The EC's preliminary decision on antidumping was scheduled for early June, followed by a preliminary ruling on antisubsidies in August. Both are expected to be finalized in December.

In recent weeks the EC has further tightened the screws on Chinese solar imports, first requiring registration of panels, and more recently initiating antisubsidy and antidumping investigations into solar glass from China. The latter, spawned by a complaint by EU ProSun Glass, is a distinct investigation from the Chinese solar panel investigation, and is said to be not formally affiliated with the SolarWorld (SRWRF)-led "EU ProSun" coalition which launched the broader solar complaint a year ago.

Not all of Europe is united in this solar dispute. The Solar Trade Association (STA), a collection of EU national industry associations — UK, Italy, Romania, Poland, Hungary, Sweden, and Slovakia — has expressed "deep concerns" and "overwhelming opposition" in an open letter to European Trade Commissioner Karel De Gucht, arguing that the EC's investigation into Chinese solar manufacturers already has been damaging. "The impact on employment and EU value added will far outstrip any impact that the duties may have on EU photovoltaic producers, particularly because these producers are struggling with structural issues that cannot be efficiently addressed through the imposition of duties," they say. "Duties at any level are already having a significant impact, dwarfing any possible benefit for European solar producers and setting back the objective for grid parity for years." Meanwhile, China and France have been formally discussing broader "economic relations and the cooperation of common interest," including having the French urge the EU "to cautiously utilize trade remedy measures" regarding the PV investigations.

And China has repeatedly suggested it might retaliate with its own probe into US and European polysilicon suppliers. "I continue to not understand the logic" of a retaliatory Chinese penalty on silicon imports, said Thomas Gutierrez, president and CEO of GT Advanced Technologies (GTAT), which makes equipment for producing the silicon starting material for solar cells and modules, days ago during the company's quarterly results conference call. "China can't support itself in high-quality production of polysilicon. And if they put tariffs on polysilicon, they're going to increase the cost of their already profitless wafer and cell manufacturing industry."

Among the arguments lobbed in the EU/China trade dispute is the issue of jobs at risk, as it was in the U.S./China dispute. A report earlier this year suggested nearly a quarter of a million jobs might be at stake across several European countries, potentially wiping out €18.4-€27.2 billion of market activity. Chong Quan, deputy international trade representative with China's Ministry of Commerce, has suggested