Solar: Spain Subsidy-Slashing Rumors Send Stocks Lower

Many solar stocks are trading lower today on reports that Spanish officials have presented a proposal for a sharp cut in the country’s solar subsidy program. The country has been debating changes for the last few weeks, and it appears that it may choose to cap its current subsidy program at 300 megawatts, a level which Collins Stewart analyst Daniel Ries this morning describes in a research note as “the worst case scenario.”

Ries said Spanish solar trade groups were lobbying for a cap at 480 MW.

The new proposal would also cut the country’s feed-in tariff to solar systems operators by 35% to 29 Euro cents/kWh for ground-based solar installations.

Ries says he believes investors had expected the final cap to be set at 400-500 MW. He notes that 300 MW would be a huge cut: he is forecasting 2008 Spanish solar installations at 1.1 MW. Spain is the world’s second-largest solar market, following Germany. In a previous report, Ries estimated that Spain would account for 24% of global solar installations this year.

Ries writes that the latest proposal, which comes from Spanish Ministry of Industry Miguel Sebastien and General Secretary of Energy Pedro Marin, now goes to the country’s National Energy Commission, which sets electricity rates in Spain. Ries said if they approve it, the measure would go to the country’s Standing Committee of Economic Affairs, and then ultimately would be signed into law. Ries notes that the changes would go into effect on October 1, and so would not impact Q3 results.

Solar stocks, in particular those with heavy exposure to Spain, today are taking a drubbing:

• Canadian Solar (CSIQ) is down $3.12, or 8.8%, to $32.53.
• JA Solar (JASO) is off 94 cents, or 5.6%, to $15.96.
• Yingli Green Energy (YGE) is down 89 cents, or 5.1%, to $16.64.
• Suntech Power (STP) is down 65 cents, or 1.7%, to $37.04.
• SunPower (SPWR) is down $5.54, or 6.9%, to $74.61.
• Solarfun (SOLF) is down 49 cents, to 3.1%, to $15.20.
• First Solar (FSLR) is down $6.60, or 2.3%, to $282.

Comments

[bzh1111]

Thanks for the market highlight. YGE and a lot of Chinese ADR have a limited exposure to spain (YGE 13% of the revenues). Watch ESLR results after the market.

[User 226214]

CSIQ is developing new markets other than Spain, and increased extimated shipment of 550mw next year. Some for SOL and TSL.

[supershort]

I have been saying this all along, that everyone is rethinking the subsidies for solar because in it's present form, is not cost effective. Look for more cuts and further bursting of this solar bubble. Remember Icarus and how he wanted to get close to the sun....well at these P/E ratios and high expectations, it is a similar case.

[User 226214]

It is a old story, every solar company raise the guldens, I doubt that story is truth.

[Wayfarer]

CEO of Sunpower said they would still meet guidance for 2009 regardless of what happens in Spain. Listen to conference call to confirm this. Solar will be up on Friday.

[10QDetective]

All the solar companies will soon be in trouble. Constant need for new financing--and when cost of capital exceeds IRR, forget about 'em!
industry.bnet.com/ener.../

My Best,

David J Phillips - Editor, 10qdetective.blogspot....
Contributing Energy Analyst
CNET/BNET

[jbde]

All the doom-sayers can talk their book, but the fact still remains that solar is the fastest growing sector for pure plays [wind equipment is too fragmented inside companies such as OC and TRN].

So until there is actual PROOF of slowing demand, sales and eps growth, it is the best play in the market. The huge percentage swings also make it great for traders.

Sure there are huge cash needs to create capacity to make solar meaningful and this is happening. Same talk surrounded PC makers back in the 80's - who would buy these things? IBM was the 600lb gorrilla. The industry blossomed and consolidated as will solar.
So disparage if you wish, the bears have proven to provide good entry points for long term holders.

Go to Yahoo Finance and see the institutional and fund investors who are committing funds - think they have done their homework? For an exercise, find where Goldman Sacks has invested.

Disclosure: trade puts and calls on LDK - long at the moment

[buystocks]

only a rumor. The fact is the industrial growing faster than you think.

Long TSL, SOLF.