Thursday, May 21, 2015

sunset on solar?

"Guidance for Q1, coupled with past performance indicates the Company may have entered a death spiral."
I don't want to be an alarmist, but I don't mind being a non-conformist and it's hard not to notice stories on producers of solar panels coming in clumps, so...

Yingli Solar Drops A Bombshell | Seeking Alpha | May 17, 2015:
...given the size of Yingli's debt, the Company is likely to spend all of 2015 in whittling down its debt to more manageable levels. Due to this reason, we find it unlikely that the Company can keep up with its peer group in terms of cost reductions, sales growth or project build out.
Also, more significantly, the Company will be unable to invest in new off-China manufacturing capacity to avoid U.S. tariffs. With JinkoSolar, Trina Solar (NYSE:TSL), and JA Solar (NASDAQ:JASO) set to embark on new tariff-free capacity, we believe that there is a high chance that the Company will be routed from the U.S. market in the second half of the year.
All of these developments look grimmer now in the context of the 20-F filing...
Given, the weak situation that the Company is already in, Yingli, in its current form, seems to have entered a death spiral. The Company may survive for the benefits of debt holders and controlling shareholders, but the most common stockholders and ADS holders will likely be wiped out soon.
In December Forbes showed Yingli as the #2 solar equipment maker in the world.
These things happens in competitive industries, but Yingli's is not the only solar valuation story in the news lately.

Chinese Solar Maker Plunges, Losing Nearly $19 Billion in 24 Minutes | Bloomberg
Just 24 minutes of Hong Kong trading erased $18.6 billion of market value and wiped out almost four months of gains that made it more valuable than Sony Corp. of Japan. Those increases came as analysts and investors questioned why, exactly, this stock was increasing in the first place
Bloomberg New Energy Finance released a report in March saying Hanergy is working with “unproven” technology and has disclosed few details about the work that underpins its valuation.
Li [Hejun], the chairman, owns more than half of Hanergy Thin Film and has been outspoken in defending the company. He says critics fail to understand his strategy and the potential of the thin-film market.
“Hanergy is very cautious in thin-film investment,” Li said earlier this year during a brief interview in Beijing. “Outsiders said Hanergy’s investment is a bet, but I am absolutely not gambling.”
Euphoria might not be the correct motivation for investment.
But Yingli was up 26% yesterday.

Hanergy didn't rank in the world's top 10 solar manufactures of 2014, but Sharp did, and recent news on it isn't wonderful either.

Sharp warns on ability to stay afloat after $1.9bn loss | Financial Times (Registration required) | May 14

Sharp, a century-old stalwart of corporate Japan, has unveiled an annual loss of $1.9bn and warned of “material uncertainty” about its ability to stay in business, less than three years after facing a similar crisis of survival. 
...government officials oppose selling off businesses to foreign players due to concerns over the loss of Japanese technology.
Solar sales dip adds to woes as Sharp nurses $1.9bn loss | | May 14
Sharp’s Energy Solutions unit saw its revenues fall 38% last year due to lower solar cell sales.
The division plunged to a 62.7bn yen loss, compared to a year-earlier profit of 32.4bn.
The Japanese group has spent the last 18 months retreating from its global solar activities.
That process has included the closure of PV manufacturing operations in the US and UK, and the ending of production and development joint ventures with Enel Green Power.
Sharp also sold US developer Recurrent Energy to PV group Canadian Solar.
But the company has on several occasions underlined its commitment to the sector...
All of which serves only as a warning re: investments.

The Globe and Mail published an opinion piece pumping solar this week (subscriber), which included the claim,"the sun doesn’t shine at night."

Actually the sun always shines

It just doesn't always shine on you - or your stock picks.

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