Bottom line: Diversification moves away from manufacturing by Canadian Solar and ReneSola could bring more stability to the companies, while panel makers are likely to take a big hit from new US anti-dumping measures.
ReneSola, Canadian Solar in new diversification moves
A trio of solar energy stories are in the headlines that underscore difficulties panel makers are facing due to a recent glut that looks quite typical in this highly cyclical sector. Two of the stories reflect a trend that has panel makers trying to diversify into the less cycle-prone business of solar plant building, with major new developments from Canadian Solar (Nasdaq: CSIQ) and ReneSola (NYSE: SOL). The third has a research house predicting demand for the panels, which are the main component of such plants, could dive by up to half in the US this year, following a major new anti-dumping ruling by Washington.
Again, all of this shows that the world is still swamped with too much solar panel-making capacity and is in sore need of a downsizing. The main obstacle to that is coming from China, where many companies have slipped into the loss column but refuse to slim down due to resistance from local interests intent on staying in the business come hell or high water. It’s a bit unclear who will blink first in this battle to stay in business, though in this kind of war the market usually determines who emerges as victor. Read Full Post…
Bottom line: India is unlikely to levy anti-dumping tariffs on Chinese solar panel makers, despite the likelihood that it will launch an investigation.
India set to launch anti-dumping probe on Chinese panels
The news just seems to be getting worse and worse for China’s embattled solar panel makers. First the group was hit a few years back by anti-dumping tariffs from the US and Europe, and more recently the highly cyclical industry has gone into a downturn that has pushed a growing number of players into the red. As if that wasn’t bad enough, media are reporting that India may be getting set to launch an anti-dumping investigation against the group.
The news has been spooking investors somewhat, but not as much as you might expect. In fact, most of the solar shares have been on a rally for the last month, and have pulled back a little in light of this news from India. Perhaps that’s because some are saying an anti-dumping probe will take at least a few months to complete, and also that it’s far from clear that India will actually rule against the Chinese companies. Read Full Post…
Bottom line: New reports detailing big amounts of idle wind and solar plants, and Beijing’s plans for a new EV incentive scheme, reflect wasteful spending under earlier development plans, the result of China’s rush to quickly develop the new energy sectors.
Huge volumes of China solar, wind plants sit idle
Two new reports are shining a spotlight on the failure of China’s efforts to promote new energy through the construction of wind and solar power plants, and to put more hybrid and electric vehicles (EVs) on the road. Neither report will come as a huge surprise, since the failure of both efforts has been widely reported this year. But they both highlight how cutting-edge industries promoted by Beijing often attract participants more interested in getting generous government subsidies than actually building anything of value. Read Full Post…
Bottom line: Canadian Solar’s raised revenue guidance hints at rising prices and could signal upside for the company’s profits, while YIngli’s latest signals may show it’s trying to sell itself to a healthier rival.
Canadian Solar surges, YIngli struggles
The strongest and weakest players from China’s lively solar panel sector are in the headlines today, with superstar Canadian Solar (Nasdaq: CSIQ) and the struggling YIngli (NYSE: YGE) both releasing their latest quarterly results. But whereas Canadian Solar has just announced its financials for this year’s first quarter, including a raised revenue outlook for 2016, Yingli is just now releasing its results for the fourth quarter of 2015.
Most companies typically release their quarterly results within 60 days of the quarter’s end, or 90 days at the very latest. But YIngli’s ongoing struggles have led managers to say several times the company could become insolvent, as it sits on a massive pile of maturing debt that it can’t repay. The latest of that debt comes due today, and Yingli is saying it’s unlikely to make the repayment on time. Read Full Post…
Bottom line: A new report spotlighting suspicious sales by BYD shows that last year’s EV explosion in China was fueled by people seeking to pocket government subsidies, while Yingli looks set to receive a government bailout from Beijing.
Yingli set to get new government rescue
A couple of stories from China’s new energy sector, one from the car space and the other from solar panels, are shining a spotlight on the challenges companies are facing after becoming too reliant on government support. One recounts a twisted tale involving electric car maker BYD (HKEx: 1211), and shows how its boom in sales last year may have been largely due to big government rebates for buyers. The other has Beijing telling one of the nation’s biggest policy lenders to provide money for struggling solar panel maker Yingli (NYSE: YGE) before it defaults on a bond payment due next month.
Let’s begin with BYD, which has experienced a rocky road over the last few years as its dream of a future filled with new energy vehicles failed to take off. That seemed to change last year, as new energy vehicle sales suddenly exploded at the company backed by billionaire investor Warren Buffett. BYD and industry boosters said the sales explosion showed that Beijing’s years of support for the sector was finally bearing fruit. Read Full Post…
Bottom line: Yingli is likely to get sold or announce a major government-led restructuring, which could include bankruptcy, before a new round of 1.4 billion yuan in bonds comes due next month.
Yingli shrivels under crushing debt load
In what looks like a case of deja vu, fast-shrinking solar panel maker Yingli (NYSE: YGE) is in the headlines again as it looks set to default on 1.4 billion yuan ($220 million) worth of bonds set to come due next month. The default would be Yingli’s second within a year, after it failed to pay off part of another big bond that matured last October.
Yingli is still working to repay the remaining debt from that earlier bond, which amounts to another 1 billion yuan. That means that Yingli now needs to find some $375 million in funds to repay all of its maturing debt by the time the new round of 1.4 billion yuan in medium-term notes come due on May 12. That looks all but impossible for a company that’s bleeding money, which resulted in a $500 million net loss during its latest reporting quarter. Read Full Post…
Bottom line: Trina’s new loan and BYD’s uncertain outlook for EV sales this year reflect continued reliance of new energy technology companies on state support, which could pressure them as government incentives get retired.
Trina, BYD fueled by state support
Two new energy stories are in the headlines today, reflecting the progress but also the continued reliance on government support that this up-and-coming group of companies faces. That particular reality isn’t new, though some who were hoping the industries would become commercially independent more quickly may be disappointed. But more important, this reality could challenge many of the companies in the next 2-3 years in the face of disappearing support from governments that believe they have already given enough incentives to this slowly-developing group.
The first development has solar panel maker Trina (NYSE: TSL) announcing $143 million in financing for a new plant in Thailand, with all of the money coming from local lenders that almost certainly have government ties. The second has electric car maker BYD (HKEx: 1211; Shenzhen: 002594) reporting annual results that showed a surge in its EV business last year thanks to government incentives, setting the stage for a possible rapid slowdown this year as those incentives get set to retire. Read Full Post…
Bottom line: The EU’s extension of punitive tariffs to China-made solar panels transshipped through shell factories in Malaysia and Taiwan could kill a recent wave of offshore factory construction by Chinese manufacturers.
EU freezes out Chinese solar panels in Taiwan, Malaysia
A recent offshore movement by Chinese solar panel makers seeking to avoid western anti-dumping tariffs could come to a sudden halt, with word the European Union (EU) is extending its previously announced punitive duties to Taiwan and Malaysia. The EU’s ruling means it believes that many of the offshore solar panel plants recently built by Chinese manufacturers are little more than shells designed to hide the true origin of their products.
This story dates back 3 years, and began when the EU levied anti-dumping tariffs on Chinese-made solar panels after determining manufacturers were receiving unfair government support via policies like cheap land, low-interest loans and export rebates. Chinese manufacturers quickly agreed to raise their prices to levels comparable to those of western rivals in a bid to avoid the tariffs. But then they almost immediately began to violate the spirit of that agreement by offering discounts to buyers in other ways. Read Full Post…
Bottom line: Yingli’s new bank loan will be followed by a major restructuring that will force big losses on bond and shareholders, while a new asset-backed bond program to help the broader panel sector raise money will meet with tepid reception.
Beijing throws new lifelines to Yingli, solar sector
China is throwing a couple of lifelines to its struggling solar panel sector, including a relatively large rescue package for Yingli (NYSE: YGE), the player in the most precarious position. That package will see a consortium of banks, led by the policy-driven China Development Bank, provide Yingli with 2 billion yuan ($300 million) in funds as the company tries to reorganize its financially strapped balance sheet.
Word of the rescue package comes as media are reporting separately that China is preparing a much bigger lifeline for the sector, by allowing solar panel makers to sell bonds backed by the growing number of solar farms they are self-developing. Such farms provide a steady source of income from the power they generate, and thus should theoretically be more attractive to investors than directly investing in the financially-challenged solar panel makers themselves. Read Full Post…
Bottom line: Weak share reactions to upbeat news from Trina, ReneSola and Ming Yang reflect investor skepticism towards new energy stocks, as they face lingering issues of overcapacity and phasing out of government subsidies.
Investors pour rain on upbeat new energy news
A flurry of upbeat news is in the headlines today from 3 of China’s largest new energy equipment makers, led by a return to the profit column for solar panel maker ReneSola (NYSE: SOL) after a year in the red. At the same time, wind power equipment maker Ming Yang (NYSE: MY) also announced its latest quarterly results that were quite upbeat, and solar panel maker Trina (NYSE: TSL) said it obtained a modest new financing from some major global lenders.
But contrary to expectation, investors greeted the string of upbeat news by dumping shares of all 3 companies, reflecting a high degree of skepticism in the market. Ming Yang led the downward migration, with its shares slipping 3.7 percent after it announced its latest quarterly results. Its shares now trade more than 17 percent below the price for a previously announced buyout bid to take the company private. Read Full Post…
Bottom line: New York IPO plans by a Canadian Solar unit and Solar Power Inc could auger a new wave of similar listings by Chinese new energy power plant builders, offering investors a higher growth alternative to traditional utilities.
Solar Power Inc banks on solar plant construction
Just a day after solar panel maker Canadian Solar (Nasdaq: CSIQ) announced it has spun off its fast-growing solar power plant-building unit for a US listing, another China-based peer is discussing plans for a similar IPO. This time a company called Solar Power Inc is the one disclosing plans for a New York listing to raise up to $300 million, in an emerging trend that’s seeing the rise of a new generation of specialty solar energy plant builders and operators.
A secondary trend in this sudden spurt of new activity also looks encouraging for New York, which has become a pariah these days among Chinese companies that feel US investors are undervaluing their stocks. These 2 new listing plans by Canadian Solar and now Solar Power acknowledge that New York is still an attractive option for certain kinds of Chinese companies, which I’ll address towards the end of this post. Read Full Post…
