Solar Companies Overseas: Where the Sun Don't Shine No More

by: SA Editor Judy Weil November 21, 2008 | about stocks: FSLR / LDK / SOL / STP / TSL / WFR    
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First Solar (FSLR) derives more than half of its sales in Europe, with particularly heavy activity in Germany. The company reported earnings on October 28 before Germany, Japan and other countries were officially pronounced in a recession. FSLR said then that subsidies by foreign governments had not changed. The company maintained that all plans were in place for continued expansion in Germany, but that projects outside of Germany had stalled.

More bad news could be on the way for smaller solar outfits who are heavily invested in or are planning on expanding in Europe. Furthermore, the fluctuations in the currency markets could mean a boon—or a bust—for these outfits. Hard to say which is likely at this point, but the volatility in currency markets is a challenge at the very least. From First Solar’s Q308 conference call:

Our review indicates that solar projects lending outside of Germany has essentially stopped for the time being. However, we believe most of our IPP customers have adequate funding to bridge lending delays into 2009.

Today, we have identified potential financial risk in our customer base that represent approximately 15% to 20% of our planned sales in to Europe in 2009 and we have identified the demand to reallocate such volumes.

From LDK Solar Co.'s Q308 conference call: (LDK)

By geography, revenue was 28.6% generated from China, 41.8% from Europe, 25.7% from Asia Pacific excluding China and 3.9% from North America in the third quarter of 2008.

Q: In terms of that $2.9 to $3.1 billion in revenue you were talking about… how much of that is to the international customer versus the domestic customer?

A: At the moment, most of our sales is international customers so if you see that most of our local customers only 20% to 30% range and then you'll keep seeing the similar range, for next year.

Q: In terms of majority of them being international customers, [are] your sales denominated in US dollars or in Euro?

A: Mostly US dollars, US dollars roughly 50% to 55%, a little bit under 30% RMB and a little bit around 20% in Euro.

From Trina Solar Ltd.'s Q308 conference call: (TSL)

Despite the current quarter industry standards, we believe our industry growth patterns were not changed in 2009, driven by favorable solar investment legislation in the United States and Japan will grow with emerging European market led by Italy, Belgium, France and Czech Republic as well as further growth in Germany. So, those who are not immune to the affect of market conditions, we expect to increase our shipments and the market shares on a year-to-year basis given expected demands.

Now-a-days we have many more countries that are putting on the table new subsidies and example is the USA with it’s tax rate for extension for eight years and hopefully also other countries that are now on the table like Europe, France, Belgium, Changzhou, Italy, Bulgaria, outside Europe like Korea, Australia, so we expect the market to ramp up.

In Q4 we will experience this impact of exchange rate and also we are foreseeing that in 2009, unless the Euro gets stronger we will be anticipating this 10% reduction to be conservative.

 
 

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This article has 16 comments:

  •  
    Nov 21 06:55 AM
    This looks like another case where LDK is in a better position than most other solars. Your figues indicate that LDK has relatively little downside from a stronger dollar. In fact it would seem more likely that it has upside (at least relative to the EURO) since has guaranteed fixed price contracts for 2008 and 2009. The other companies seem to have a bigger exposure to the lower Euro.
    Reply | Link to Comment
  •  
    Nov 21 06:56 AM
    Two negetives equal a positive.
    Reply | Link to Comment
  •  
    Nov 21 06:57 AM
    Two negitives equal a positive.
    Reply | Link to Comment
  •  
    Nov 21 09:03 AM
    Sales drops do not seem to be due to demand, but currency.
    Sure some project will be delayed due to financing.
    No mandates or incnetives are being pulled.

    In any case, y-o-y revenues will be up dramatically.
    LDK is an outright gift at 10
    Find me another industry growing faster and we will talk about it!

    Look at the recent LDK/BP deal and now today's JASO/BP deal.
    BP is a quality customer and making a true commitment to solar.

    Duke Power wants to put modules on customers' roofs. Why?
    Can justify proximity to user mitigating losses during transmission.
    Reply | Link to Comment
  •  
    Nov 21 10:01 AM
    despite a squeeze for 2009 growth still exists. this is without putting a number on u s sales. obama is serious about addressing global warming and energy security. why can not the street consider these realities?
    Reply | Link to Comment
  •  
    Nov 21 10:52 AM
    If PV made sense, the production plants would not be connected to the grid. Until then, it is merely a transfer of peak power to opportunity power; a sham.
    Reply | Link to Comment
  •  
    Nov 21 11:37 AM
    keithfeather

    You are uninformed or misinformed. Do some research. PV will be cheaper than fossil fuel energy in a few years. In fact it probably already is cheaper if you look at a levelized comparison, adding in the real cost of externalities of fossil fuels. This will be much more obvious when a cap and trade or similar system is in place.
    Nanosolar can already build a solar system cheaper than you can build a coal fired power plant. And it won't need any coal or environmental remediation.


    Reply | Link to Comment
  •  
    Nov 21 11:49 AM
    I have done some research. I looked at solar panel prices this year, and they are higher than they were 10 years ago when I last bought panels. Lots of predictions of lower costs, but the reality is prices are going up.
    Reply | Link to Comment
  •  
    Nov 21 01:19 PM
    If PV was competitive, the production plants would be off the grid, no? Even if just as a PR ploy, since that would not iinclude the fossil fuel used to mine, transport, bring employees to the site, ship, etc. But it just won't work where one can be on the grid.

    Misinformed? no. Analytical
    Reply | Link to Comment
  •  
    Nov 22 08:52 AM
    NEWS.
    France to install over 5500 MW new solar PV to 2020 with new feed-inn tarifs!!!!
    renewableenergyworld/r...
    Reply | Link to Comment
  •  
    Nov 22 08:57 AM
    renewableenergyworld.c...
    Reply | Link to Comment
  •  
    Nov 23 05:34 AM
    Remember most experts said that Solar dances with oil.
    Oil up, Solar up. Oil down, Solar down.
    That's the dance steps to remember.
    Reply | Link to Comment
  •  
    Nov 24 12:20 AM
    Thin films CDTE ,cigs, and amorpherous silicon will all be below 1 dollar a watt watt within 2-3 years.Thats without 30% incentives coal plants will be relagated to backup and slowly phased out. Nucklear Geothermal(next best thing to perpetual energy) and wind will be the main competitors. I think amorherous silicon will win out in solar, no rare emements like tellurium (first solar) or Indiu(nano solar)
    Reply | Link to Comment
  •  
    Nov 24 06:45 AM
    There were a couple of other points in LDK's favor that came out in the conference call (and elsewhere). First LDK does not have long term polysilicon contracts (i.e contracts to buy polysilicon from other manufacturers). This is actually a good thing. Plysilicon prices are now expected to fall to $100/kg or less. LDK should be able to buy some of theirs at this lower price, while other solars (who did not have plans for their own polysilicon manufacturing plant) are locked in to higher prices for long term contracts. This will hurt their margins down the road. It will make LDK more competitive. Second LDK expects to make 5000 - 7000 tons of polysilicon in 2009 in their two new plants (15,000 tons per year capacity by the end of 2009). LDK expects the cost of this polysilicon to be about $80/kg in the first year. Subsequently LDK expects to be able to bring the price down to the $22-$32 range. This should put LDK in a much better position than most other solars going forward.

    Another important point is that LDK has fixed long term contracts for its solar wafers for virtually all of 2009 production. According to LDK these contracts are not thought to be at risk at all. They are almost all with big respectable companies. LDK sold its wafers via the same type of fixed price contracts in 2008 for under the market value. LDK did not try to back out of its contracts. It is expecting all of the major contractors to do the same this year, when they could be getting the wafers for less from another company. This is probably a reasonable expectation. LDK did say that some small Chinese companies might try to back out of contracts. However, LDK pointed out that these companies represent a very small portion of the actual sales. LDK does not expect this to have a significant impact on its results in 2009.

    LDK's margins should go up on lower spot polysilicon prices in 2009, plus LDK's own polysilicon coming online in 2009.

    I expect that many of the large companies that contracted with LDK also palnned to buy some of their solar wafers from other companies. The large contractors will likely not have made firm commitments to the other companies. This likely means they will cut back on purchases from other wafer makers before they try to get out of contracts with LDK. This should be good for LDK. It will tend to hurt their competition.
    Reply | Link to Comment
  •  
    Nov 24 06:58 AM
    dwhite1: After LDK completes its polysilicon manufacturing plants, it should have margins very similar to FSLR's. It should be able to compete even at the lower prices. Also Nanosolar has said they could produce CIGS solar for $1/watt in the near future. However, they did not start trying to sell their solar at prices far below the current market values. They started very close to the current market values. It is unclear when the price of solar will get to $1/watt. It may not happen as quickly as 2-3yrs, even though companies such as Nanosolar will likely have the ability to produce it for that profitably. The old adage "charge what the market will bear." comes to mind. LDK is already planning to sell solar for about $2/watt next year, so even LDK is not too far from that figure now.
    Reply | Link to Comment
  •  
    Nov 24 12:47 PM
    I always felt FSLR was better positioned than other solar companies, but as time is showing this is not exactly the case. People are loosing faith in solar companies--sentiment for FSLR has recently become bearish and they are forecasted to close down according to www.predictwallstreet.... which have been beating the market by 65% in the past few weeks.
    Reply | Link to Comment
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