China’s Suntech Power Holdings collapsed under the weight of its own inventory in March, leading to weeks of volatility in the solar equities market in New York. German companies have also seen stocks suffer a shaky month. Overall, it is forecast, focus will be placed on First Solar, SunPower and MEMC/SunEdison in the coming months.
A global oversupply of PV modules, coupled with razor-thin sales margins, led to big losses for the 2010-2011 production leader. Suntech (STP) defaulted on US$541 million (€422 million) of bonds on March 15 and did not contest a bankruptcy petition from eight of its Chinese lenders.
Although the Wuxi, China-based manufacturer intends to continue production during the debt restructuring period, Suntech’s American depositary receipts have tumbled 66% this month and 72% since the beginning of Q1 2013.
Meanwhile, Baoding, China-based Yingli Green Energy Holding Co. (YGE), was down 24% for the month and trading at US$1.90 (€1.48) – its lowest price since December. The company has the equivalent of US$603 million (€470 million) in principal debt repayments due in 2015, according to Bloomberg.
However, on March 20, Yingli announced a non-binding strategic cooperation framework agreement with Hong Kong-based silicon manufacturer GCL-Poly Energy Holdings, in what could eventually become the first mega-merger in the struggling solar panel sector. In sealing the deal, Yingli and GCL announced that they "wish to leverage [our] advantages in the PV sector, including research and development and product manufacturing, and seek to fully cooperate with each other along the PV supply chain."
On the heels of those announcements, on March 25, Shanghai-based JA Solar Holdings Co., Ltd (JASO) reported a Q4 2012 loss of US$2.65 (€2.07) per share. The company, which was number three worldwide in 2011, confirmed that its losses had widened, despite an increase in shipments, due to weak pricing in the domestic and global markets. On NASDAQ, JA Solar was down 18.6% for the past month, at a price of US$3.62 (€2.82).
LDK Solar Co. Ltd (LDK), located in Xinyu City, Jiangxi province, also showed an "all hands on deck" mentality, as stock prices sank to US$1.10 (€0.86) – an 18.5% blip since the beginning of the year.
Pursuant to an agreement made in late January, the solar wafer manufacturer sold a remaining 12 million newly issued ordinary shares to Fulai Investments Limited, at a purchase price of US$1.28 (€0.99) per share – for an aggregate purchase price of US$15.4 million (€12 million) – and granted Fulai the right to designate two nonexecutive directors to the company’s board.
The bottom line
Ticker Spy's Chinese Solar Stocks Index (CHSOL) has fallen over 35% in the past month. What’s the Western wisdom on this Eastern ennui?
According to Jesse Pichel, CEO of New York City-based Pichel Cleantech Advisors LLC, "The module manufacturers over-expanded without developing any differentiation for their products. The scary thing is, there are an awful lot of modules available today for US$0.30 (€0.23) – and it’s going to force other companies to go under. The watch list for China now includes LDK and JA Solar. JA Solar just guided down for the first quarter of this year. It has been a good supplier, but it cannot sustain itself in this market."
Pichel told pv magazine that he is more sanguine about Yingli’s market odds. "Yingli is now the biggest solar company in the world – and in my research and dealings with the government in Beijing, it would appear that Yingli has the regime’s full support. The GCL deal strikes me as a good omen. It tells me that GCL, which also has a mountain of debt, is kind of ingratiating itself with Shanghai’s pet producer."
As for Suntech, Pichel said that he thinks it is "interesting that the company is effectively bankrupt, with no chance of paying off its debt, but the market still is assigning some value to the stock."
In addition, Pichel pointed out that there is mounting evidence of financial wrongdoing by the founder of Suntech, Zhengrong Shi. Formerly the richest man in China, with a bankroll from Suntech of approximately US$1.7 billion (€1.3 billion), Shi recently was removed from the company’s board and is on house arrest, forbidden to leave China.
"That must mean that the Chinese media has reported financial irregularities," explained Pichel. "It has been alleged for the past year that Shi 'bought' two companies he already owned, Glory Silicon and Asia Silicon, on behalf of Suntech for hundreds of millions of dollars."
However, Pichel said, "When I approached Suntech with that information, they told me they were conducting an investigation at the board level. We don’t know what the evidence is or what the allegations are. I don’t think there’s been a bankruptcy to date from a Chinese company listed in the USA. It’s really new territory. Do the bondholders have any recourse in China? We’ll be watching this carefully."
Grinding to a halt in Germany
Germany, which also made early strides in the solar sector, is now suffering setbacks comparable to China. Among the companies that announced they were hitting a financial wall this month were:
Hawi Energietechnik AG, headquartered in Eggenfelden, which on March 7 announced an insolvency that could affect about 100 employees;
Würth Solar, which on March 15, released word that it would "turn over major parts of its business to [Munich-based] BayWa and probably to a second partner." The company explained that the basis for this decision "was a comprehensive internal evaluation process on the future perspectives of solar activities at Würth Solar and intensive meetings with possible partners on the potential of the existing activities."
Bosch, which on March 22 announced that it would "quickly" sell its solar business units, including its majority stake in Aleo Solar AG of Oldenburg. Decreasing prices have been blamed for the decision. Up to 3,000 employees will be affected.
SolarWorld AG, the Bonn-based solar manufacturer that started a trade war on two continents, was removed from Germany’s stock index, the TecDAX, on March 18. Just two months ago, SolarWorld announced that it would have to undertake massive debt adjustments and business restructuring –and its shares at mid-month were trading at €1.20 (US$1.54).
While none of these companies are listed on a New York exchange – except the U.S. division of SolarWorld (SRWRF), which was down 30.7% for the month at US1.15 (€0.90) – their fate is creating "schadenfreude" among other firms in the solar sector worldwide. Indeed, Pichel sees SolarWorld as a "goner." In his discussion with pv magazine, he remarked, "SolarWorld clearly has no room to maneuver at this point."
Project-driven profits
Among the winners in March were companies that have funneled their manufactured goods into corporate and utility-scale solar projects.
Seville, Spain-based Abengoa Bioenergia (ABGOY) announced that it had partnered with Oakland, California-based BrightSource Energy to build two 750-foot concentrating solar power (CSP) towers on a 3,800-acre site in Riverside County, California, with construction of the 500 MW project due to start at the end of this year. The company was up 12.1% this month, with a stock price of US$1.48. (€1.15).
Kyocera Corporation (KYO), based in Kyoto, Japan, was also up. The company announced on March 12 that it would supply solar modules to Chicago-based urban developer VGI Energy for multi-family housing units in the Windy City. Kyocera rose 5.1% for the month, with a healthy US$91.45 (€71.34) price per share.
In the U.S., Tempe, Arizona-based thin film forerunner, First Solar Inc. (FSLR), gained 4.3 % and San Mateo, California-based installer SolarCity (SCTY) climbed 4.2% in March, with their shares at a $26.96 (€21.03)and $18.88 (€14.73), respectively.
According to the latest data from Wiki-Solar, First Solar Inc. is now the top photovoltaic project installer globally, having added 759 MW across 11 sites. For its part, SolarCity released word on March 21 that it plans to open a new location in Nevada, and expects to create hundreds of jobs in the state in the next several years.
Meanwhile, Silicon Valley-based SunPower Corp. (SPWR), rose 110.2% during Q1 2013, with a stock price of US$11.54 (€9.00). On March 8, the company dedicated the new 5 MW Kalaeloa Solar Farm in West Oahu, Hawaii, which is had designed and built. To date, it has developed seven sites, for a total of 201 MW.
Finally, on March 13, MEMC (WFR) of St. Peters, Missouri, heralded a name change for its solar division, SunEdison. What’s more, on March 28, the firm released word that it had reached "a global milestone in the company's solar operations, [with] more than one gigawatt (GW) of global solar PV assets." SunEdison was up 38.8 % for the first quarter of 2013, with a share price of US$4.40 (€3.43). Overall, it boasts 15 solar projects and a cumulative 380 MW.
Jesse Pichel is very optimistic about the proposed new SunEdison. "They are going all in on distributed generation, so we expect to see some growth here," he opined.
Overall, Pichel predicted that, within the next few months, "We will see that the Chinese are going to be left for dead; the focus will be on First Solar, SunPower and SunEdison."
