Shadow Cast Over Solar Stocks

by: Eric Savitz

Solar stocks have been hit Monday by news that Senate and House Democratic leaders are considering a plan to leave renewable energy out of a pending U.S. energy bill. An alert posted Friday by the Solar Energy Industries Association on its web site says that “there are widespread reports that a decision has been made, at least provisionally, to move energy legislation without a tax title that extends the Solar Investment Tax Credits.”

The notice asserts that “a bill without the solar ITC provisions would be a tremendous lost opportunity for our industry and our country.”

Stephen Chin, an analyst at UBS, this morning asserted that removal of the tax credits from the energy bill “increases the likelihood that the credits could expire in 2008.” He writes that “an orphaned solar ITC may not find bipartisan support during an election year, increasing the likelihood of expiration.”

Chin says that the current tax credit allows commercial system owners a 30% tax credit against total system costs. Expiration of the tax credit, he says, would likely reduce solar system demand among commercial customers, which accounted for 41% of 2006 solar installations. He adds that utilities may be slow to embrace solar if a provision allowing them to take the 30% tax credit isn’t passed.

Chin notes that Applied Materials (NASDAQ:AMAT) could see decreased demand for solar-related equipment without the tax credit, and that there also could be a negative impact on solar-wafer producer MEMC Electronic Materials (WFR), pointing out that its largest customer, Suntech (NYSE:STP), is “increasingly exposed” to the U.S. solar market.

Solar stocks are suffering significant losses Monday:

  • First Solar (NASDAQ:FSLR) is down $22.11, or 10.7%, to $184.74.
  • Suntech (STP) is down $5.22, or 8.5%, to $56.33.
  • SunPower (NASDAQ:SPWR) is down $15.57, or 12.1%, to $113.13.
  • MEMC (WFR) is down $3.04, or 4.3%, to $68.12.
  • Applied Materials (AMAT) is down 28 cents, or 1.5%, at $18.43.
  • JA Solar (NASDAQ:JASO) is down $3.84, or 7%, at $50.67.
  • Evergreen Solar (ESLR) is down $1.28, or 9.1%, at $12.80.
  • Canadian Solar (NASDAQ:CSIQ) is down 75 cents, or 6.7%, at $10.37.
  • LDK Solar (NYSE:LDK) is down $2.35, or 5.8%, at $38.07.
  • Yingli Green Energy (NYSE:YGE) is down $4.05, or 12.7%, at $27.80.

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