Boruma

The 'Problem' With Solar Companies is Not Really a Problem

GS's remarks on cashflow were linked to concerns over the continuing availability of credit to fund growth and also ability to refinance debt which in some companies will be terming out over the next 12 months. The GS analysis was based on their knowledge of the bond market and capital market funding sources which have deteriorated since the start of the credit crunch. BUT it is an oversimplification and fundamentally ignores the fact that the bank debt markets (where the brokerages are less experienced in my opinion) are eagerly stepping in to fill the void (particularly in Asia) i.e. renewable energy companies with good fundamentals are not having any difficulty accessing short term bank credit - in the current environment it is impossible to foresee a cash flow crisis in the sector!

Will Some Solar Companies Face a Cash Crunch?

Envoy: I disagree with your assessment. (1) This type of negative carry is completely normal in high growth sectors; and (2) Regarding availability of credit, although I agree that the traditional bond market is difficult (currently) I can assure you that the bank market is enthusiastically taking up the slack. The renewable sector (e.g. solar, wind, waste etc.) has become very fashionable for banks and in fact is one of the few areas of banking that is expanding since the credit crunch began a year ago - a quick review of the recruitment pages will verify this.

Disclosure: Although I work in project and energy (bank) financing however I have no dealings with any of the names mentioned in this article.