SOLAR SHAKEOUT

Surviving The Shakeout: With PV Stocks Plunging, Where Are We Headed?

Jessica Lillian, 24 April 2012 (Solar Industry)

“…[T]hin-film PV manufacturer First Solar…[anounced it] would cut 2,000 jobs and shut down its manufacturing operations in Germany …[and] the company's stock hit an all-time low as analysts questioned its core business model in an era of low polysilicon prices…[M]ost analysis indicates that First Solar's woes are representative of a broader corporate-finance trend in the solar sector. While many companies will survive and emerge as more competitive players, the worst may be yet to come for others.

“During the first quarter of 2012 (Q1'12)…[the] Lincoln International [solar index] declined by 4%, underperforming the S&P 500 index…Two of the four solar segments studied - cells and modules, and vertically integrated firms - posted quarter-over-quarter declines. Stock performance for manufacturers of cells and modules slid the most, decreasing 6.5% quarter-over-quarter, while the index for vertically integrated manufacturers declined 0.8%...Only the wafers/ingots segment and the engineering, procurement and construction (EPC) contractor and developer segment measured increases…[But] relatively few EPC providers and project developers factor into solar stock trends…”

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“…Lincoln International's index ranks ReneSola, China Sunergy, Solar Power Inc. and Akeena Solar Inc. as the best performers in their respective industry segments. LDK Solar, Solon, SolarWorld and Premier Power fared the worst in Q1'12…Lincoln International's solar index declined less in Q1'12 than in the three previous quarters. The worst drop came in Q3'11, when the index plunged more than 50%...[and Lincoln International predicted that companies] closer to the actual solar projects and to the end purchasers of solar projects should weather the current difficulties better than the manufacturers…

“…[C]ould First Solar be one of those survivors? The company's project-development plays have expanded in recent years as it has sought to diversify its market activities…At the same time, however, First Solar - like many other PV manufacturers that have bulked up their project-development pipelines in recent years - focuses on utility-scale projects…[and] this segment comes with its own set of vulnerabilities, and less exposure may enable a solar firm to be better positioned…”