Solar Companies Squeezed Twice by Economic Crisis

Interesting tidbit from Jefferies & Co.'s '09 cleantech outlook. Solar companies are getting squeezed by both the credit crunch in Europe and the stimulus in the Chinese economy (home to a big chunk of low-cost solar panel makers). From the report (bold is mine):

We see the fundamentals for solar as still somewhat unstable. We believe module oversupply is being exacerbated by liberal lending practices among Chinese banks which continue to support many public cell and module plays with ever larger amounts of short-term debt, leading to a disincentive to rationalize industry capacity. Conversely, in Europe, the financial institutions historically responsible for the bulk of project lending in the renewables space remain focused on fixing their own balance sheets and unable to fund significant amounts for traditional project lending time frames, apart from key projects in Germany.

Too much product in China thanks to loose lending by government-sponsored banks meets ailing demand in Europe, where banks are still in fearful hibernation. Just goes to show: The recovery in solar, as in the rest of the market, will always and everywhere be a credit-driven phenomenon.

Comments

[TigerFund:]

This is ridiculous conclusion. It assumed that chinese solar companies will expand their productions even there is no market. Why would they do that?

What about new incentive from chinese government for solar projects?

These new policies will however, change the power structure among the solar companies. Silicon's preferred much lower price to spwr is over. Chinese solar companies will have access to precious capitals now and their stock price will not be easily shorted by Wall Street Liars. In the long run, because of their lower price, these companies have better chances to dominate the industry.

Apr 23 09:16 AM

[disdaniel:]

Interesting tidbit if your investment timeframe is 3-4 months, otherwise fairly irrelevant imo.

Apr 23 03:31 PM

[Dustinian:]

That is precisely why the Chinese will come out of this crisis far more ahead of the west in terms of solar energy technology.

Apr 23 11:39 PM

[Wisdom vs. ...:]

even if fully committed, the chinese solar subsidies will not materially affect the supply/demand problems in china

Apr 24 10:24 AM

[Fred W:]

You ask: Why would Chinese solar companies expand into "no market" or at least a situation of oversupply?
The Answer is quite simply: BECAUSE THE COMMUNIST PARTY PAYS THEM TO DO SO...selling at a "loss" is made up by the export incentive paid by the government...this was inevitable and I have written about it extensively over the past 12 months.
The "subsidy" for Chinese based installations is another matter entirely.



On Apr 23 09:16 AM TigerFund wrote:

> This is ridiculous conclusion. It assumed that chinese solar companies
> will expand their productions even there is no market. Why would
> they do that?
>
> What about new incentive from chinese government for solar projects?
>
>
> These new policies will however, change the power structure among
> the solar companies. Silicon's preferred much lower price to spwr
> is over. Chinese solar companies will have access to precious capitals
> now and their stock price will not be easily shorted by Wall Street
> Liars. In the long run, because of their lower price, these companies
> have better chances to dominate the industry.

Apr 24 12:29 PM

[Gregory Pepin:]

We faced a lot of bankruptcy in the Chinese Solar environment. The consolidation has been done their. Right now the listed company (which are the only real company left) are serious company and therefore the chinese bank are financing them.
That's is as simple as that:)

Apr 28 08:53 AM