rana

Will Some Solar Companies Face a Cash Crunch?

let's start with the risk of not being able to raise money. with this i totaly agree. capital markets are problematic right now and we don't know when things will get better. of course there is the risk of the companies in the sector but this is another issue.
now let's check the statement "And the list goes on: YingLi (YGE) lost over $300 million from operating activities in 2007, despite claiming a $52 million accounting earnings gain."
this statement is completly WRONG. cash flow isn't a profit and loss statemnet. if we were to use this method we would have been looking at things the wrong way. a company can have a profit even if the cash flow is negative. this is an accounting issue.
the proper way to say is: YGE used 300m$ (assuming this number is the correct one) in it's operating activities. it didn't lose, it used (or burned or whatever term you choose from the accounting lingo).
regarding the future needs for investing activities, there's no doubt money will need to be raised if growth will stay at the current levels.
regarding the accuracy of the statements i can't comment.
regarding the type of contracts there is a problem as the customers can turn down the order as it's take or pay contracts. so for a given fine (or no fine at all if the contracts are not take or pay, but subject to price nagotiations) they can turn it down.
so no doubt we have lot of risks in the sector (many of them aren't even mentioned here), but what does it all say?
for new industries, over the centuries, we can see the same pattern - new companies burn money in the early stages. they give good credir terms to the customers, they build higher inventories, they buy lots of equipment and employ more workers... at some stage things turn and if they don't some of the companies go bust. still, the fact that the cash flow is negative doesn't mean much here. if we have a retailer that has big cash deficits it's a big red sign, but in this sector it's natural and thinking that a company can be in this industry for a short time and have great positive cash flows (operating or free) is kind of misunderstanding the issue.
so the bottom line is simple - there are risks, because of these risks there is a possibilty for high rewards, if someone checks the reports of a company and thinks that the risk is too high than stay out. but do it for the right reasons. if you think the credit crunch will get worst than we must stay away from some of the companies since they might not be able to raise money or the dilution will be too big.