North Coast Solar Stocks

November 12, 2009

European renewables bank on 2010 as demand looks up

Filed under: AMAT, JASO — Tags: , , , , — Jason @ 2:00 pm

Thu Nov 12, 2009 2:00pm EST

* Q-Cells, Conergy see 2010 profit despite quarterly losses

* Phoenix Solar cuts 2009 sales outlook, sees profit next yr

* Acciona to install 100 MW in solar, 400 MW in wind in 2010

* Gamesa sees business picking up in Q4 2009

* Q-Cells, Phoenix, Conergy shares close 3.6-6.3 pct lower

* Acciona shares close up 1 pct

By Christoph Steitz and Jonathan Gleave

FRANKFURT/MADRID, Nov 12 (Reuters) – European renewable companies posted moderate to sharp declines in quarterly results but sounded more upbeat for 2010, as costs cuts and an expected pickup in demand help lift profits after a year of turmoil.

Three of Germany’s top solar energy companies said they expected to either return to or grow profits next year following a year of weak economic demand, reduced government subsidies and bruising price competition from low-cost Asian rivals.

The two biggest — Q-Cells, among the world’s largest solar cell makers, and Conergy– aim for a 2010 operating profit.

Still, both companies posted large quarterly net losses, with Q-Cells, a supplier of cells and module components to commercial customers, losing nearly a quarter of a billion euros.

Solar equipment wholesaler Phoenix Solar, which like Conergy, installs residential solar roof panels, posted a small third-quarter net profit, but cut its 2009 outlook due to delays in the financing of solar power plants.

Spanish wind turbine maker Gamesa posted a 21 percent fall in nine-months core profit from a year earlier, but said that its activity should pick up in the fourth quarter of 2009 and plans to launch new products in 2010

Investors will have to wait until February for a 2010 outlook for Gamesa, which was optimistic about the Spanish business environment in 2010 thanks to new renewables regulation, but did not see a recovery at its US business in the short term.

Compatriot Acciona — which is active in the markets for both wind and solar energy — said it expected to install at least 400 megawatts (MW) of wind and 100 MW of solar power next year.

Meanwhile, German group SMA Solar Technology raised its 2009 guidance for the second time.

“Margins of European solar players remain under pressure, but demand is improving,” said Arthur Hoffmann, manager of the new power fund at Swiss Bank Sarasin & Cie.

Renewable companies have been dealt a blow by the global economic downturn, with makers of solar cells and modules — such as Q-Cells and Conergy — hit hard by a worldwide slump in prices, while wind power companies have suffered from a bottleneck in project financing and customer delays.

The importance of solar and wind energy is likely to be highlighted at a global summit in Copenhagen, Denmark, in December, where new steps to combat global warming could be agreed.

PRICES HALVING

Q-Cells and Conergy have massively underperformed the FTSE clean tech index .FTET50, since the beginning of the year, while Phoenix Solar, which installs solar panels on roofs, outperformed as end-customer demand held up relatively well.

Shares in Q-Cells, Conergy and Phoenix Solar all closed down 3.6 to 6.3 percent and Gamesa closed down 1.2 percent, while Acciona closed up 1 percent.

“In the past year, we have seen (cell) prices basically halving, something the industry did not expect,” said Q-Cells Chief Executive Anton Milner.

Milner said that his company was seeing signals of improving demand, also with regard to the financing of the sector.

Apart from the price slump, the sector is fighting a financing bottleneck. The credit squeeze has led banks to give out fewer credit lines companies need to finance operations. This has forced companies to raise money by selling assets and issuing shares to beef up their balance sheets.

“In our opinion, solar cell manufacturing is a bad industry with low technical barriers to entry and too much capital chasing a pot of gold which might not actually be at the end of the rainbow,” wrote Bank of America Merrill Lynch analyst Matthew Yates.

The quarterly losses by Q-Cells and Conergy also highlight the growing gap between European makers and their Chinese peers, who are benefiting from large government subsidies and lower production costs.

JA Solar (JASO) this week reported record high quarterly shipments as demand rebounded, lifting the Chinese solar cell maker to a profit.

Q-Cells and Norwegian peer Renewable Energy Corp have already set up production plants in Asia or are in the process of doing so to cope with their high labor costs.

U.S.-based Applied Materials (AMAT), the world’s leading maker of semiconductor equipment and a major supplier of tools used to produce solar cells, said late on Wednesday that price declines are slowing and credit improving. Mike Splinter, the Silicon Valley-based company’s CEO, said the rooftop solar market was a bright spot, as was China’s market.

(Additional reporting by Clara Vilar in Madrid; Editing by Eric Auchard, Andrew Callus and Sitaraman Shankar)

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