Watch for fallout in equipment companies as solar crisis hits in 2010

NEW TRIPOLI, USA: Solar equipment companies will feel the impact of a looming solar industry crisis in 2010 according to the report: Opportunities in The Solar Market For Crystalline and Thin Film Solar Cells, published by The Information Network.

“In our release on September 3, we forecast that in 2010 the solar industry will exhibit capacity utilization of 25.7 percent, inventory will be stretched to 133 days, average selling prices could drop below $1 per watt in 2010 and $0.50 in 2011, and as many as 50 percent of the more than 200 solar manufacturers, mired in red ink with current selling prices above $2.00 per watt, may not survive,” noted Dr. Robert Castellano, President of The Information Network.

In addition to the failure and consolidation of the solar panel manufacturers, companies supplying equipment to manufacture panels will be severely impacted. Two things will happen. The obvious impact will be the loss of customers of equipment suppliers.

Solar manufacturers, in their exuberance to increase capacity from 17.6GW in 2009 to 24.2GW will initially purchase equipment only to have it sit idle in factories as inventory stretch to 133 days. As these companies close or consolidate, this equipment will then be sold on the secondary market, further exasperating revenue growth for equipment vendors.

Currently, the equipment companies are experiencing a slowdown because even though solar customers want to buy, financing is still tight. Going forward, the largest solar manufacturers will survive as a customer base. Chinese solar manufacturers, who prefer to purchase low-cost equipment from Taiwan, will also survive, as the Chinese government will subsidize their survival by stimulus packages, generous subsidies, free land, and cash for R&D.

Solar panel manufacturers that have reported losses just in the past few weeks include Energy Conversion Devices Inc, JA Solar, LDK Solar Co., ReneSola Ltd, Solar Power Inc., and Yingli Green Energy Holding Co. Ltd.

“Interestingly, five of the six companies are Chinese. They continue to increase inventory, lose money, and affect the entire solar panel industry. Perhaps, it is an attempt to become the worldwide leader in the solar market by eliminating the competition,” added Dr. Castellano.

In 2008, the top 10 equipment manufacturers of the $4 billion market were:

Table: Ranking of Top 10 Equipment ManufacturersSource: The Information Network, USA

Applied Materials and GT Solar are the only two U.S. manufacturers in the top 10.

LDK Solar partners with Suqian City on PV projects

XINYU CITY, CHINA & SUNNYVALE, USA: LDK Solar Co. Ltd has entered into an agreement with Suqian City of Jiangsu Province for the development of PV power projects.

According to the agreement, LDK Solar will develop PV power projects in buildings, plants and integration systems, totaling up to 300 MW by 2015. The terms, including financing, design and specific location of each of the projects, will require a feasibility study as well as final approval from relevant governmental departments prior to initiation.

"Suqian City has unique advantages in developing PV projects, with average annual sunshine of up to 3,000 hours as well as strong support from the government for growing the solar energy industry," stated Xu Huiming, Vice Mayor of Suqian City.

"Suqian City has become a leading area for the development of the solar PV industry and we hope that our partnership with LDK Solar will further increase our solar resources and promote the expansion of the local solar industry."

"We are very excited to partner with Suqian City and to support the development of its local economy and Chinese solar industry," stated Xiaofeng Peng, Chairman and CEO of LDK Solar. "We are encouraged by the continued support from our government for PV projects and pleased with the enthusiasm for this partnership demonstrated by Suqian City."

The PV application market has been rapidly developing in China this year and the Chinese government is supporting the establishment of the domestic PV market through the use of governmental financial subsidies.

Overview of Chinese solar power industry

Note: This is a regular series of relevant industry news from around China. Courtesy: China Briefing

Solar power
Chinese photovoltaic (PV) maker Trina Solar said earnings per average diluted share topped US$0.71 for the second quarter of fiscal 2009, thanks to a drop in polysilicon prices.

Over the first quarter, the company scaled back polysilicon costs by 30 percent on the back of lower purchase price, effective management of long-term contracts and prudent inventory management. In addition, it drove down non-silicon manufacturing costs for its multi-crystalline modules by around 6 percent to US$73 per watt.

Revenues rose by 13.5 percent to US$150 million from the previous quarter but dipped 26.5 percent from a year earlier, dragged by a lower module average selling price. Total shipments went up to 63.9 MW from 48.8 MW in the first quarter and 47.6 MW in the corresponding period of 2008.

The increase was fueled by robust demand in the company’s key European markets, easier customer access to PV system purchase funding and expanded government schemes to encourage clean energy development.

The higher revenue and the lower cost structure helped a rise in gross margin to 27.4 percent in the second quarter from 17.2 percent in the first quarter and 23.3 percent a year ago.

The company confirmed its 2009 PV module shipment guidance at a range of 350 MW–400 MW, expecting to ship between 90 MW and 110 MW in the third quarter. But it says its average selling price is headed for a 10-15 percent drop in the third quarter and a further 10-12 percent in the fourth. The decline should be offset by improvements in manufacturing costs by 15-20 percent in the fiscal 2009.

The construction of a 200 MW solar power plant was started in the Golmud Desert of Qinghai, western China, on Thursday. The investor, China Longyuan Power Group, a subsidiary of China Guodian, will invest RMB4 billion into the project. Some RMB400 million will be spent on the first phase of the power plant. The first phase will have an annual production capacity of 36 million kWh and will become operational in September 2010.

Following other major players in the electronic devices industry, Taiwan Semiconductor Manufacturing Co. has decided to invest US$50 million in solar power industry, Electronics Weekly reported. US-headquartered Applied Materials already earns half of its income from selling manufacturing equipment to solar-focused companies. In 2008, Intel established its solar power business SpectraWatt.

Chinese multicrystalline solar wafers maker LDK Solar said yesterday it has inked an agreement with Yancheng City, Jiangsu Province, under the terms of which LDK Solar will develop a number of PV power projects, including PV ground-power stations, and roof and building integration systems totalling up to 500 MW over the next five years.

Eager for a bulkier market share, Chinese solar heavyweight Suntech Power supplies solar PV panels in the United States below materials, assembly and shipping costs, founder and CEO Shi Zhengrong told the New York Times.

The move underpins a drive by Chinese manufacturers to gain a major foothold on the global green arena, where the United States is a major player. They have already driven down the price of solar panels by almost a half over the past year. Chinese producers will tap into generous government support to build assembly plants in the United States to skirt rules that would lock Chinese-made products out of stimulus monies.

The Obama administration has announced US$2.3 billion in tax credits to clean energy equipment manufacturers. Suntech is poised to take over from Germany’s Q-Cells as the world’s second largest PV cells supplier, breathing in the neck of U.S.-based First Solar. The Chinese company plans to construct a US assembly unit on a location due to be announced in a month or two. It is now scouting Phoenix, Arizona and Texas.

Despite his bold ambitions about the United States, Shi predicted earlier this month that the Chinese market will grow by a less-than-expected margin this year before government stimulus measures could give it a bounce.

Singapore-based semiconductor foundry United Microelectronics said it will establish a new business development center to focus on solar power and light-emitting diode projects.The company’s board approved on August 24 an injection of up to TWD1.5 billion in a new wholly-owned subsidiary, named UMC New Business Investment. The entity will be run by Wen Yang Chen, senior vice president of UMC.

Initially, the new company will complete the development of respective technologies and establish a preliminary scale of operations. While in the future, UMC New Business Investment is expected to become a part of UMC’s core business with high competitive advantages.

Taiwanese power supplies, consumer electronics and optoelectronic products maker Lite-On Technology has signed an agreement with the government of Yingtan city, Jiangxi Province, to carry out a thin solar film power generation project for agricultural greenhouses, Xinhua’s China Economic Information Service reported. Prior to this deal, the company had signed a contract with Jiangxi’s Shangrao city for the construction of a solar power generation systems for five agricultural greenhouses, with 20 KW of installed capacity each.

Chinese PV maker Yingli Green Energy Holding said yesterday it would supply up to five MW of PV modules to Czech commercial property developer CTP Invest. The companies have inked a letter of intent (LoI), which calls for PV modules deliveries in the fourth quarter of 2009. The solar equipment will be utilized in several grid-connected rooftop installations at CTP’s industrial parks and office centers in the Czech Republic.

Remon L. Vos, managing director of CTP, expects the binding contract based upon this LoI will be achieved in the following weeks.The Chinese company has already delivered over 10 MW PV modules to customers in the Czech Republic since the beginning of 2009, Liansheng Miao, CEO of Yingli Green Energy, noted.

China-based solar cell and module products maker Canadian Solar said on August 26 it had signed a Letter of Intent (LOI) with the Administration Committee of Baotou National Rare Earth Hi-Tech Industrial Development Zone under which Canadian Solar has obtained the rights to design, install, operate, and maintain a 500 MW solar power plant system.

Under the terms of the LOI, the solar power project will be located in CPT.The project is pending government approval.

Chinese power generation systems distributor A-Power Energy Generation Systems reported yesterday an unaudited net profit of US$6.3 million for the second quarter of 2009, slightly up from US$6.2 million booked a year earlier.

Diluted earnings per share were US$0.14, down from US$0.18 a year earlier, as in the second quarter of 2009, the weighted average number of shares on a fully diluted basis was 35.3 million while in the same period of 2008 it was 33.9 million.

The fast-growing manufacturer of wind turbines said its revenues in the three months ended June 30, fell to US$57.5 million from US$65.7 million last year. The decline was attributed to delays in some distributed power generation projects.

Gross margin in the period went up to 13.4 percent versus 12.1 percent in the second quarter of 2008, thanks to higher efficiency derived from cost-saving in labour as the A-Power undertook 30 MW-plus DG projects.

However, higher selling, general and administrative expenses dragged the earnings before interest and taxes to US$4.7 million, down from US$6 million in the same period in 2008.

Commenting on the quarterly financial results, the CEO of the company, Jinxiang Lu, said that during the period A-Power has built a foundation for prospective growth in the future. The company set up a joint venture with Jiangsu Miracle Logistics System Engineering to produce and sell wind turbine components in China. A-Power has also completed assembly of two units of the 2.7 MW wind turbines in Shenyang and purchased Shenyang Huaren’s technology for 1.5 MW wind turbines, along with its backlog to produce and sell 10 units of the 1.5 MW wind turbines.

Focused mainly on wind power, the company has also signed a memorandum of understanding to take over Japanese thin-film PV products developer Evatech Co.

Chinese thin-film technology developer Astronergy announced today that it had won a bid for the development of a two MW PV project.

The large-scale grid-connected PV system will be located at the Hangzhou Energy and Environment Industrial Park in the province of Zhejiang, eastern China. Its installation will be financed by China Energy Conservation Investment, a promoter of energy-saving, environmental protection technologies and projects.

Astronergy will cover the roof of the Green Science and Technology Hall in the industrial park with a combination of its crystalline silicon-based and thin-film PV modules. The hall will incorporate mainly building-integrated PV technologies.

Chinese photovoltaic panels maker Sky Global will invest EUR14.5 million in a plant in Mataporquera, southern Spain. Sky Global will open the plant in 2011 and will create 465 jobs. The company will also build a 9.9-MW photovoltaic park with 672 panels. Sky Global operates in Spain through its subsidiary Sky Global Solar.

LDK Solar's revenue drops in Q2

XINYU CITY, CHINA & SUNNYVALE, USA: LDK Solar Co. Ltd, a leading manufacturer of multicrystalline solar wafers, reported its unaudited financial results for the second quarter ended June 30, 2009.

All financial results are reported in US dollars on a US GAAP basis.

Recent highlights:
-- Second quarter 2009 revenue was $228.3 million;
-- Shipped 231.7 MW of wafers, up 20.9 percent year-over-year;
-- Secured an RMB500 million (equivalent to approximately $73 million) short-term loan from The Export-Import Bank of China, and anRMB 500 million three-year loan from Huarong International Trust Co. Ltd;
-- Reached mechanical completion of the first 5,000 metric ton (MT) train in its 15,000 MT annualized capacity polysilicon plant in Xinyu, China.

Net sales for the second quarter of fiscal 2009 were $228.3 million, compared to $283.3 million for the first quarter of fiscal 2009, and $441.7 million for the second quarter of fiscal 2008.

For the second quarter of fiscal 2009, gross profit was negative $205.5 million, compared to $4.9 million in the first quarter of fiscal 2009, and $112.3 million for the second quarter of fiscal 2008.

During the preparation of its second quarter 2009 financial results, LDK Solar's management determined that an inventory write-down and loss on firm purchase commitments of polysilicon materials of approximately $175.8 million and $16.7 million, respectively, was required as a result of the continued rapid market price decline for solar wafers.

As a result, gross margin and results from operations were negatively impacted in the second quarter of fiscal 2009.

Gross margin for the second quarter of fiscal 2009 was negative 90 percent, compared to 1.7 percent in the first quarter of fiscal 2009 and 25.4 percent in the second quarter of fiscal 2008.

Loss from operations for the second quarter of fiscal 2009 was $235 million, compared to a loss of $16.1 million for the first quarter of 2009, and compared to income from operations of $100.3 million for the second quarter of fiscal 2008.

Operating margin for the second quarter of fiscal 2009 was negative 102.9 percent compared to negative 5.7 percent in the first quarter of fiscal 2009 and 22.7 percent in the second quarter of fiscal 2008.

Excluding the inventory write-down and loss on firm purchase commitments of polysilicon materials, gross profit was negative $13.0 million, or a gross margin of negative 5.7 percent for the second quarter of 2009 and loss from operation was $42.5 million, or an operating margin of negative 18.6 percent for the second quarter of 2009.

Income tax benefit for the second quarter of fiscal 2009 was $29.5 million, compared to income tax benefit of $1.6 million in the first quarter of fiscal 2009.

Net loss for the second quarter of fiscal 2009 was $216.9 million, or $2.03 per diluted ADS, compared to a net loss of $22.5 million, or $0.21 per diluted ADS for the first quarter of fiscal 2009.

LDK Solar ended the second quarter of 2009 with $265.7 million in cash and cash equivalents and $123 million in short-term pledged bank deposits.

"Our results for the second quarter of 2009 reflect the prevailing operational challenges for the solar industry. The continued decline in prices for solar wafers impacted our top and bottom lines and required an additional inventory write-down for the company, which significantly impacted our margins in the second quarter," stated Xiaofeng Peng, Chairman and CEO of LDK Solar.

"As part of our ongoing efforts to realign our near-term strategy and operations with current industry dynamics, we remained focused on improving our cost structure, increasing wafer sales and ramping up polysilicon production.

"During the second quarter, we took a measured approach to capital spending and proceeded with implementing our curtailed manufacturing expansion plans. We believe this approach allows us to improve our strategic positioning while continuing to best serve our customers.

"We continued to ramp our polysilicon production and also achieved mechanical completion for the first 5,000 MT train of our 15,000 MT plant. Construction is proceeding as planned and we look forward to the cost savings benefits that we will realize once larger scale in-house polysilicon production commences," continued Peng.

"We are encouraged by a number of recent developments in the solar industry. Demand for solar wafers is beginning to turn more positive. The current momentum surrounding China's Golden Sun solar subsidy program reflects the long-term confidence in the local solar industry.

"We believe that we are well positioned during this critical early stage of development of the PV industry in China, and we are pleased to be negotiating contracts for a number of local projects. During the quarter, we also made significant strides in further diversifying our business by collaborating on a number of PV development projects, particularly in the fast growing European markets.

"As we continue to evolve as a leader in the solar industry, we look forward to expanding our growth opportunities once we overcome the near-term industry challenges," concluded Peng.

Business outlook
The following statements are based upon management's current expectations. These statements are forward-looking in nature, and the actual results may differ materially. You should read the "Safe Harbor Statement" below with respect to the risks and uncertainties relating to these forward-looking statements.

For the third quarter of fiscal 2009, LDK Solar estimates its revenue to be in the range of $240 million to $270 million with wafer shipments between 260 MW to 300 MW and module shipments between 10 MW to 20 MW.

Solar PV module revenues and volumes (not prices) bottomed in Q1

Here's a beautiful article I found on E4 Capital LLC, an independent research firm started in 2009 providing ideas to professional investment managers in the public equities of “cleantech” related companies

The solar energy sector, measured by revenues, appears to have hit bottom in calendar Q1. We expect that when full Q2 results are in they will show a strong rebound (better than 30 percent in aggregate) off the Q1 low, although the Q2 level is unlikely to recover all the way to the Q4:08 level.

Only about five of approximately 25 public solar companies that report quarterly results have reported their calendar Q2 results to date (8/11/09). After reviewing their results and looking at the consensus expectations for the remaining 20 names, we concluded that most of the remaining companies will achieve Q2 revenues above the Q1 trough.

Another upswing is getting underway. The peak quarter for solar PV revenues was Q3:08, or about a year ago, ending a remarkable run up driven mainly by extremely generous feed-in tariff subsidies in Germany and Spain.

Volumes of panels installed roughly doubled from 2007 to 2008. The Spanish subsidies were capped after it became apparent that country could not afford the original subsidy program, and Germany made changes to phase down its subsidies more rapidly.

Mainly due to the Spanish program, and aggravated by the global recession and reduced credit availability, prices and volumes fell sharply in Q4 and again in Q1.
The solar companies were slow to react to the downturn, perhaps because so many of the companies in this sector are newly formed and have yet to experience a downturn.

Capital spending continued to grow in Q4 over Q3 and did not begin to drop until Q1. Inventories rose modestly in Q4 and especially steeply in Q1 as companies were slow to curtail production and cut prices. Prices for modules and cells have fallen by on the order of 30 percent to 50 percent, and we believe they are still eroding.

These price cuts have triggered some demand growth as solar energy has become more price competitive in areas with subsidy programs less generous than Spain and Germany (e.g., the US).

The capacity build up in both the principal raw material (polysilicon) and the various conversion steps (wafers, cells, and modules) was such that we do not expect producers to be able to raise prices for awhile.

Two of the hardest hit solar companies will report on 8/12/09. Consensus estimates look for a nearly 100 percent revenue gain Q1 to Q2 at JA Solar to $67 million (still well below the year-ago level of $180 million). There is unusually wide variability in the estimates for JASO though.

Revenue at LDK Solar is expected to fall about 21 percent from Q1:09 to $225 million, however. The company had issued a press release on 7/23 saying it expected revenues of $225-$235 for the Q2 and would be taking an inventory write off of $150 to $170 million. Before the 7/23/09 guidance, the company had estimated revenues of $215 to $225 million. The weak LDK results have thus been well telegraphed.

Evolution Solar explores China opportunities

PHOENIX, USA: Evolution Solar Corp. has sent representatives to China to explore potential opportunities there and to consider strengthening the Company’s existing presence in China.

As the company has developed, it has become increasingly clear that China will be a leader in the development of new solar products (such as thin-film solar) and a major consumer as well.

EVSO seeks to convert relationships it has developed in China into a major component of its business strategy. This trip is aimed at establishing top level strategic relationships with solar companies in China and at evaluating possible locations for a new Chinese headquarters.

“We see growth coming both through acquisitions and through strategic relationships with leaders in the solar industry in China,” stated Robert Kaapke, CEO of Evolution Solar Corp. “The Company is entering an exciting new phase of development with these two new foundations for growth.”

EVSO expects to incorporate products produced by, Sun Power, First Solar, Trina Solar and LDK Solar Co. Ltd.

LDK Solar provides business update

XINYU CITY, CHINA & SUNNYVALE, USA: LDK Solar Co. Ltd, a leading manufacturer of multicrystalline solar wafers, provided an updated outlook for the second quarter ended June 30, 2009.

For the second quarter of 2009, LDK Solar estimates shipments between 220 and 230 megawatts ("MW"). This compares to its previously issued guidance for the second quarter of 2009 of wafer shipments in the range of 200 to 220 MW. The company expects to record between $215 and $225 million in revenues.

LDK Solar additionally provided an update on its financing activities. The company secured a loan in the aggregate principal amount of RMB 500 million (equivalent to approximately $73 million), with a term of one year, from The Export-Import Bank of China.

The company also secured a loan in the aggregate principal amount of RMB 500 million (equivalent to approximately $73 million), with a term of three years, from Huarong International Trust Co. Ltd to support LDK Solar's polysilicon plant construction.

Huarong International Trust is a state-controlled company permitted under the relevant PRC laws and regulations to provide enterprises with financing facilities.

LDK Solar had a healthy cash position of more than $250 million and pledged bank deposits and time deposits of more than $170 million as of June 30, 2009.

"During the second half of the second quarter, our wafer shipments were driven by stronger than expected demand," stated Xiaofeng Peng, Chairman and CEO of LDK Solar. "Our annualized wafer capacity at June 30, 2009 reached 1.5 gigawatts ("GW"). We are encouraged by the recent improvement in market demand and expect to resume the expansion of our wafer plant with the goal of reaching 2 GW annualized wafer capacity by the end of 2009."

"The construction of our polysilicon plant continues to remain on schedule. The second train is targeted to reach mechanical completion in the third quarter of this year and the third train is expected to reach mechanical completion in the first quarter of 2010. We are very pleased to receive continued financial support for our growth plans from our local banks and view this as a testament to the promising future of the solar industry in China," concluded Peng.

This outlook for the three months ended June 30, 2009 is an estimate. Results are subject to change based on further review by the management. LDK Solar plans to report its full second quarter 2009 results in mid-August 2009. Once the reporting date is finalized, LDK Solar will issue a press release announcing the date and details of its second quarter conference call.

LDK Solar produces larger size ingots

XINYU CITY, CHINA & SUNNYVALE, USA: LDK Solar Co. Ltd, a manufacturer of multicrystalline solar wafers, announced that it has successfully produced a multicrystalline silicon ingot weighing 660kg.

The 660kg ingot was the largest ingot produced at LDK Solar and represents a 46.7 percent increase in capacity from the standard 450kg ingot. Maximum furnace capacity is approximately 800kg.

“We reached an important milestone on the roadmap of our technology development for multi-crystalline silicon ingots,” stated Dr. Yuepeng Wan, Chief Technology Officer at LDK Solar.

"We have continued to develop technology aimed at solidifying and augmenting LDK Solar’s cost leadership position. Our objective with this development was to improve product quality and at the same time decrease the cost of multicrystalline ingot production. The larger ingots will lower capital expenditure and contribute to the reduction of production cost. The increased charge size directly contributes to lower power consumption, higher yields, improved efficiencies of downstream processing equipment, and reduced unit consumption of consumables and some direct costs.”

EVSO: Why solar wins!

PHOENIX, USA: According to Evolution Solar Corp., as America evolves from a petroleum economy to a green energy economy, investors seek to predict what industries will experience maximum growth.

As a solar consulting firm, EVSO sees strong market trends toward solar. Why will solar be a winning technology when others fail?

* The cost per kilowatt of solar panels is dropping dramatically with the introduction of thin film technology;
* Solar is the cleanest and quietest alternative energy technology available;
* Solar power can be installed as huge commercial power plants or on an individual home;
* It is the perfect distributed power technology.

“With prices dropping and efficiency rising, we see solar as the next big thing in alternative energy at a time when demand is being pushed hard by Congress and the Obama administration,” stated Robert Kaapke, CEO of Evolution Solar Corp. “We believe we are well positioned in an industry poised to experience explosive growth.”

Evolution Solar expects to benefit from growth within the solar industry along with competitors such as, Sun Power, First Solar, Trina Solar and LDK Solar.

Sunrise Solar signs agreement with Macon County

SAN ANTONIO, USA: Sunrise Solar Corp. has signed an agreement to assist Macon County, Alabama, with the implementation of new alternative energy projects.

The company will evaluate green technologies that will benefit the County, government buildings, public lighting and educational facilities. Projects will then be designed and implemented to meet these needs.

Addressing energy needs will include both improving energy efficiency in the County and bringing new alternative energy resources to the area. Funds are available from government sources, including the $800 Billion stimulus package to provide energy solutions that will reduce costs and dependence on foreign oil across America.

"We are pleased to become a partner with the leaders of Macon County," noted Maurice Stone, president of Sunrise Solar. "We expect to expand this model of working closely with government leaders to municipalities across America."

"We are excited to have this opportunity to work with Sunrise Solar in an effort to identify and develop alternative energy sources for Macon County," stated Louis Maxwell, Chairman, Macon County Commission. "We realize that to continue doing business in the same way, will produce the same results; we must change if our children will have a chance to become energy independent."

Sunrise Solar competes with green alternative energy players such as: Sun Power, First Solar, Trina Solar and LDK Solar.