Subsidy Woes Continue for Solar

Includes: ENER, PVCRF
by: Mark Henwood

I like the idea of solar PV. It works, it fits in. But for investors, it’s like riding a bull in an arena because solar is still highly dependent on governmental support. When the support weakens, watch out. Here are some examples.

First, on March 10, Energy Conversion’s (NASDAQ:ENER) CEO reported that a dramatic and abrupt shift in the French and Italian solar incentive structures has impacted its business and that the changes may impact as much as 50% of this quarter’s forecasted revenue. The next day, ENER promptly lost 21.5% of its market value.

Next, Renewable Energy Corporation (REC-OL.PK) succumbed to the chill blowing through the solar energy market on May 24, with a plan to cut output and lay off 500 workers, sending its shares tumbling. The maker of wafers, cells and modules for the solar industry also warned second-quarter results would be much weaker than the first three months. The solar industry — which depends on government incentives — has been hit by changes in subsidy legislation in Germany and Italy, the world’s No. 1 and No. 2 markets.

Most recently, PV Crystalox Solar (OTC:PVCRF) announced on June 28, that, as a result of the widely reported adverse PV market conditions experienced in recent weeks, shipment volumes in the first half of the year will be slightly below the guidance of 210-225 MW given in its interim management statement on May 19. Of more concern were its statements about strong downward pressure on prices, which hint that the group may incur an operating loss in the second half. The company concluded its announcement with a warning that it may not pay a dividend in 2011. The market promptly rewarded these announcements with a 41% decline in its stock price.