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Sneha Shah
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I am Sneha Shah, the Editor-in-chief of Greenworldinvestor. A Chartered Accountant by profession, withs interest in Finance,Green Industry, Economics and the Indian Market.
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Greenworldinvestor
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  • How Taiwan Solar Companies Are Flourishing Due To Global Solar Wars

    Taiwanese Solar Companies have been the biggest beneficiaries of the duties on Chinese solar panels imposed by USA and the uncertainty arising from possible sanctions by Europe and India. To hedge their risk, solar companies have been diversifying their orders to solar cell factories in Taiwan which does not suffer from any anti dumping or CVD duties. Even Chinese solar companies with massive unused solar cell capacities are procuring Taiwanese solar cells to assemble them into solar panels for sale in USA. This is being done to avoid the duties imposed by the US Government. Renesola and Trina Solar have come out publicly stating the use of this strategy while other companies (like Yingli) are also doing this without shouting out loud. Taiwanese solar wafer companies like Green Energy Technology, Danen, Gigastorage are also benefiting from the increasing orders of their domestic solar cell peers. They are running at full capacity after facing a very bad couple of years.

    Even smaller solar companies like Solartech and Tainergy are running their operations at full tilt as Japanese solar panel makers have close ties with Taipei. Japan is currently seeing a massive solar boom, thanks to the generous Feed in Tariffs announced a year ago in the aftermath of the Fukushima accident. This has led to increased outsourcing opportunities for Taiwan's solar cell producers who have historically supplied components to companies like Sharp, Mitsubishi and others. With some of the top companies like Sharp and Panasonic sharply curtailing their inhouse operations, Taiwanese companies have benefited even more.

    Taiwan's solar association even claimed that the opportunity in 2013 for Taiwan would be 12 GW compared to the current 8 GW capacity. This would occur when Europe imposed its own duties on more than $25 billion in Chinese solar panel imports. Taiwan's solar industry has not seen a big failure unlike Western solar companies because they are in general well capitalized and mostly OEM palyers. While none of Taiwan's solar companies has become a major solar panel brand, consolidation is staring to happen (Neo Solar and Delsolar) which could create world beating solar companies in the future. Till then Taiwan's solar companies are trying to survive the brutal downturn through the bad luck of others.

    Consolidation is the new way for Solar Companies to Survive

    Consolidation in the global solar industry continues at an accelerated pace with companies exiting the solar business (Sharp, Siemens), bankruptcies being announced (Q-Cells), takeovers by government (NYSE:LDK) and private companies (GTAT buys Twin Creek). Two of the largest Taiwanese solar companies have decided to merge. Neo Solar Power which is the fastest growing solar cell company had decided to merge with Del Solar which was a small solar cell maker owned by Taiwanese electronics giant Delta Electronics. Note while Taiwanese companies have benefited from duties imposed on Chinese solar panel makers by USA and now in the near future Europe, they have not been able to stave off the massive drop in solar cell prices. Solar Cell prices have dropped to as low as 35c/watt which is almost a 70% drop over the last one year. Despite the prices of solar wafers falling, the ASP of 35c/watt means that the gross margin is negative.

    How Taiwanese Solar Industry has evolved

    Taiwan's Solar Energy Industry has shown the fastest growth after China in recent years. The country's leadership in the Solar Industry was led by Motech which was once a top 10 Solar Cell Producer. However the recent financial crisis had hit the island nation's solar industry very hard with Motech and E-Ton facing massive erosion in profits and revenues. With the recovery in the solar industry in 2010, Taiwan's Solar Cell Producers have come back with a vengeance. Gintech, NeoSolar, DelSolar are some of the newer entrants which have grown sharply in 2010. Taiwan's Solar Industry has broadened significantly in the past few years with presence in all parts of the Solar Supply Chain. A Polysilicon Plant was also recently opened in Taiwan which is totally dependent on raw material imports for solar crystalline cells. Note the Wafer and Poly Tightness has already started increasing putting pressure on the input cost of cell producers. However the country's solar industry remains largely dependent on the manufacture and exports of Solar Cells.

    SolarTech

    Taiwan-based solar firm Solartech received module OEM orders from Japan recently and is at full capacity, according to the company. The firm also plans to expand its module capacity. Solartech added solar module order visibility is clear to February 2013.Solar makers noted that Japan's solar subsidy is better compared to markets in Europe and the US. In addition, Japan has relatively stable demand which has been attracting China-based firms to enter. As more China-based firms set up subsidiaries and plants in Japan, due to low production costs, China-based peers have been threatening the existence of Japan-based solar firms. Hence, Japan-based peers have been outsourcing solar cells and modules to reduce the overall production costs.

    Taiwan Solar Wafer Makers gaining

    Taiwan-based solar wafer maker Green Energy Technology (GET) saw capacity utilization rate increase in October and is likely to reach full capacity in November. GET has been increasing OEM orders (customers provide materials) to reduce pressure from materials contracts. This has helped the firm see rising capacity utilization rate. In addition, the global solar trade war has been pushing China-based firms to transfer orders to Taiwan-based solar cell makers, which indirectly benefits GET.According to Chen Chi-jen, general manager of Gigastorage, the global solar trade war will benefit the development of the solar wafer market. In fact, said Chen, Gigastorage is planning to expand solar wafer capacity in 2013. In addition, the firm may expand by forming strategic alliances or through acquisitions, added Chen.

    Tainergy

    Taiwan-based solar firm Tainergy has recently seen orders for solar modules increase from Japan and Indonesia. In particular, the modules have been supplied to the public sector in Indonesia, showing growth in the Southeast Asia market.According to Kevin Hsieh, president of Tainergy, the firm's capacity has been moving towards integration which has been beneficial for the firm's sales. Tainergy has 100MW of module capacity, and since the second quarter, the firm has been seeing increasing capacity utilization.Hsieh noted that due to high subsidies, module orders from Japan have been increasing and customers have been accepting reasonable quotes. However, Japan-based customers have relatively strict quality requirements.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 14 3:49 AM | Link | Comment!
  • India's State Owned Power Equipment Maker Appeals For Protection From Solar Dumping

    India's state owned capital equipment maker BHEL has joined the Indian solar manufacturers in protesting against cheap solar panel products. BHEL is planning a $500 million investment to build a solar cell factory in at Sakoli which is a part of Union heavy industries minister Praful Patel's constituency Bhandara. BHEL is currently trading at one of the lowest valuations in its 10 year history and its not a big wonder why. The company has benefited in the past as did other machinery and engineering companies from an infrastructure investment boom. However those glory days are over for the company as it faces competition from the Chinese companies and decreasing orders flow.

    BHEL is arguing its case by claiming that the price of the solar panels is below the costs (a fact which is not true given that some Chinese solar companies like Jinko Solar are making positive gross margins). The company is taking its case to its parent industry ministry which will take it forward to MNRE. Note the current draft of JNNSM Phase 2 is non-committal about providing protection to India's domestic solar manufacturing sector. The Commerce Ministry has already started an anti dumping investigation and the Indian solar power developers are trying to counter the move as well. Note the duties imposed by US on Chinese solar panels of 25-250% has not helped their industry. In fact Suntech has reduced its production while other big solar players like Yingli have managed to win a gigantic 200 MW utility contract in California. The cost level difference between the biggest and lowest cost solar makers and others is so big that a 20-30% duty is unlikely to make a big difference. Recently after much lobbying, the Indian Government imposed a 10% duty on imports of power equipment as Chinese companies had captured half of the Indian market.

    India has already imposed a 10% duty on imports of power equipment

    Indian Government is set to implement a 10% Import Duty on Foreign made Power Equipment in a few weeks. India has a huge Energy Deficit as Supply is always one step behind India's Fast Growing Economy. Low cost Chinese equipment providers like Shanghai Electric and Dongfang Electric have won almost half of the power equipment orders raising concerns amongst the Indian administrators. India's Domestic Companies have been caught on the wrong foot by the Cheap Chinese Equipment. This Duty is aimed at leveling the field for the Domestic Companies. L&T and BHEL are the only significant players and would benefit quite handsomely from this measure.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 14 3:28 AM | Link | 1 Comment
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