Manufacturers Wince as Solar Continues Slide Down the Price Curve
China’s LDK Solar surprised the market last week when it announced plans to triple its polysilicon production capacity by 2014. The raw material for making solar panels has been on a sharp price descent and was selling at below USD 35 per kilogram last week – half the price at the beginning of the year – a Bloomberg New Energy Finance survey showed. LDK plans to increase its capacity to 55,000 tonnes annually in what is being seen as a move to deal with crashing prices by building new low-cost plants.
The impact of the price drop of the commodity was seen in the results announced by US polysilicon maker MEMC Electronic Materials last week. Not only did it report a net loss for the third quarter, it also forecast a full-year net loss of USD 35-55 cents a share on sales of USD 2.7bn to USD 3bn. Analysts had expected net income of 28 cents a share and sales of USD 3.35bn, according to data compiled by Bloomberg.
These falling prices have also altered the competitive dynamics of companies that make solar panels without the conventional quantities of silicon. First Solar of US for instance – the world’s largest maker of competing thin-film solar panels – announced a slowing of new factory expansion. This marked a reversal of the expansionary policy followed by departed chief executive officer Rob Gillette, who was replaced by chairman and founder Michael Ahearn as an interim chief executive on 25 October. The company has slashed sales and profit expectations for 2011.
The economic pain runs down the whole solar supply chain, with average module prices slipping to as low as USD 1.10 a Watt, from more than USD 2 a year earlier. Bloomberg New Energy Finance expects the supply of modules to continue to exceed demand, exerting further pressure on prices. California’s SunPower – a solar-cell manufacturer now majority-owned by Total – reversed its expectation of income of USD 0.75-1.25 per share, to the possibility of a net loss of USD 5 cents or income of up to USD 20 cents a share for 2011.
The week also saw the beginning of the auction of miscellaneous items from US-government-backed bankrupt panel maker Solyndra. A beneficiary of the loan guarantee programme of the Obama administration, the company filed for bankruptcy protection on 6 September, citing competition from foreign manufacturers funded by their governments. The core assets of Solyndra – which received federal loan guarantees worth USD 535m – will be sold in an auction on 18 November. Evergreen Solar, another US government backed company, which filed for bankruptcy in August, had blamed increased competition from government-subsidised solar panel makers in China for its troubles.
Chinese solar manufacturer Trina Solar caused some ripples when its chief executive Jifan Gao said that the interest rates paid by the Chinese panel-makers are higher than what Solyndra was charged by the US government. “We have to make it clear that the strength of China-originated solar companies is not about subsidies or cheap loans from the government. We don’t have any advantages in this area,” he said. Both Trina and LDK Solar have multi-billion-dollar credit lines from the state-owned China Development Bank.
Two other companies backed by the US Department of Energy are also facing financial troubles. Electric car battery maker Ener1 – a recipient of a grant from the energy department – had its shares delisted from the Nasdaq Stock Exchange on 28 October. Another recipient of a loan guarantee – energy storage company Beacon Power – filed for bankruptcy on 30 October. It had received a USD 43m guarantee in August 2010.
In a conference last week in Washington, US Energy Secretary Steven Chu conceded that the loan guarantee programme could be better designed so that it pays for itself while stimulating investment.
CARBON PLUNGES ON EUROZONE DEBT CRISIS
European carbon allowances for December 2011 delivery plunged 9.6% last week to end at EUR 9.42/t, compared with EUR 10.42/t at the previous week’s close. EUAs were on an almost steady decline from the beginning of the week as Greece threatened a referendum on the EU financing package. They rebounded from a low of EUR 9.37/t on Thursday morning after Greece signalled it would cancel the referendum and the European Central Bank unexpectedly announced it would cut interest rates to 1.25%. But prices fell again on Friday as G20 leaders failed to agree further resources for the Eurozone debt crisis. United Nations Certified Emission Reduction for December 2011 fell 7.5% to close at EUR 6.50/t last week, compared with EUR 7.03/t at the end of the previous week.
SUPER SEWER COSTS RISE; INVESTMENTS IN ASIA
London’s so-called ‘super sewer’ came under fire as the UK government conceded that costs would likely rise to over GBP 4bn, according to the Financial Times. Meanwhile, the FT also reported that UK rule changes will allow 26,000 companies to choose their water supplier as of next year. The US Environmental Protection Agency is set to start the first federal investigation into whether hydraulic fracturing (or fracking) pollutes and diminishes drinking water supplies, as reported by Bloomberg Businessweek . The Asian Development Bank will provide around USD 465m in loans towards the construction of the USD 1bn Nam Ngum 3 project, a 440MW hydropower plant that will export electricity to Thailand, The Nation (Thailand) reported. China CAMC Engineering Corporation signed a USD 176m deal to build the Yan Oya irrigation reservoir in Sri Lanka, according to Xinhua.
MEXICO, BELGIUM TURN AWAY FROM NUCLEAR
A reactor at Kyushu Electric’s Genkai nuclear power plant became the first to resume operations since the nuclear disaster in Japan earlier this year, the FT reported, as the Fukushima plant’s operator Tepco forecast a second year of heavy losses despite securing USD 11.4bn of government aid. Belgium’s political parties reached a conditional agreement to close down the country’s two remaining nuclear power plants, which in 2009 supplied over half its electricity generation, Reuters reported. The three oldest reactors will be shut in 2015 provided there is adequate alternative supply to avoid power shortages; the remaining reactors will be closed in 2025. Mexico cancelled plans to build as many as 10 new nuclear reactors following its discovery of natural gas reserves earlier this year, Bloomberg Businessweek reported. Russia signed a USD 2bn deal to build a 2,000MW nuclear power plant in Bangladesh, according to Bloomberg.
Source: Bloomberg
The impact of the price drop of the commodity was seen in the results announced by US polysilicon maker MEMC Electronic Materials last week. Not only did it report a net loss for the third quarter, it also forecast a full-year net loss of USD 35-55 cents a share on sales of USD 2.7bn to USD 3bn. Analysts had expected net income of 28 cents a share and sales of USD 3.35bn, according to data compiled by Bloomberg.
These falling prices have also altered the competitive dynamics of companies that make solar panels without the conventional quantities of silicon. First Solar of US for instance – the world’s largest maker of competing thin-film solar panels – announced a slowing of new factory expansion. This marked a reversal of the expansionary policy followed by departed chief executive officer Rob Gillette, who was replaced by chairman and founder Michael Ahearn as an interim chief executive on 25 October. The company has slashed sales and profit expectations for 2011.
The economic pain runs down the whole solar supply chain, with average module prices slipping to as low as USD 1.10 a Watt, from more than USD 2 a year earlier. Bloomberg New Energy Finance expects the supply of modules to continue to exceed demand, exerting further pressure on prices. California’s SunPower – a solar-cell manufacturer now majority-owned by Total – reversed its expectation of income of USD 0.75-1.25 per share, to the possibility of a net loss of USD 5 cents or income of up to USD 20 cents a share for 2011.
The week also saw the beginning of the auction of miscellaneous items from US-government-backed bankrupt panel maker Solyndra. A beneficiary of the loan guarantee programme of the Obama administration, the company filed for bankruptcy protection on 6 September, citing competition from foreign manufacturers funded by their governments. The core assets of Solyndra – which received federal loan guarantees worth USD 535m – will be sold in an auction on 18 November. Evergreen Solar, another US government backed company, which filed for bankruptcy in August, had blamed increased competition from government-subsidised solar panel makers in China for its troubles.
Chinese solar manufacturer Trina Solar caused some ripples when its chief executive Jifan Gao said that the interest rates paid by the Chinese panel-makers are higher than what Solyndra was charged by the US government. “We have to make it clear that the strength of China-originated solar companies is not about subsidies or cheap loans from the government. We don’t have any advantages in this area,” he said. Both Trina and LDK Solar have multi-billion-dollar credit lines from the state-owned China Development Bank.
Two other companies backed by the US Department of Energy are also facing financial troubles. Electric car battery maker Ener1 – a recipient of a grant from the energy department – had its shares delisted from the Nasdaq Stock Exchange on 28 October. Another recipient of a loan guarantee – energy storage company Beacon Power – filed for bankruptcy on 30 October. It had received a USD 43m guarantee in August 2010.
In a conference last week in Washington, US Energy Secretary Steven Chu conceded that the loan guarantee programme could be better designed so that it pays for itself while stimulating investment.
CARBON PLUNGES ON EUROZONE DEBT CRISIS
European carbon allowances for December 2011 delivery plunged 9.6% last week to end at EUR 9.42/t, compared with EUR 10.42/t at the previous week’s close. EUAs were on an almost steady decline from the beginning of the week as Greece threatened a referendum on the EU financing package. They rebounded from a low of EUR 9.37/t on Thursday morning after Greece signalled it would cancel the referendum and the European Central Bank unexpectedly announced it would cut interest rates to 1.25%. But prices fell again on Friday as G20 leaders failed to agree further resources for the Eurozone debt crisis. United Nations Certified Emission Reduction for December 2011 fell 7.5% to close at EUR 6.50/t last week, compared with EUR 7.03/t at the end of the previous week.
SUPER SEWER COSTS RISE; INVESTMENTS IN ASIA
London’s so-called ‘super sewer’ came under fire as the UK government conceded that costs would likely rise to over GBP 4bn, according to the Financial Times. Meanwhile, the FT also reported that UK rule changes will allow 26,000 companies to choose their water supplier as of next year. The US Environmental Protection Agency is set to start the first federal investigation into whether hydraulic fracturing (or fracking) pollutes and diminishes drinking water supplies, as reported by Bloomberg Businessweek . The Asian Development Bank will provide around USD 465m in loans towards the construction of the USD 1bn Nam Ngum 3 project, a 440MW hydropower plant that will export electricity to Thailand, The Nation (Thailand) reported. China CAMC Engineering Corporation signed a USD 176m deal to build the Yan Oya irrigation reservoir in Sri Lanka, according to Xinhua.
MEXICO, BELGIUM TURN AWAY FROM NUCLEAR
A reactor at Kyushu Electric’s Genkai nuclear power plant became the first to resume operations since the nuclear disaster in Japan earlier this year, the FT reported, as the Fukushima plant’s operator Tepco forecast a second year of heavy losses despite securing USD 11.4bn of government aid. Belgium’s political parties reached a conditional agreement to close down the country’s two remaining nuclear power plants, which in 2009 supplied over half its electricity generation, Reuters reported. The three oldest reactors will be shut in 2015 provided there is adequate alternative supply to avoid power shortages; the remaining reactors will be closed in 2025. Mexico cancelled plans to build as many as 10 new nuclear reactors following its discovery of natural gas reserves earlier this year, Bloomberg Businessweek reported. Russia signed a USD 2bn deal to build a 2,000MW nuclear power plant in Bangladesh, according to Bloomberg.
Source: Bloomberg
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