The Solar Shakeout Has Begun
The overall market indices and the sector ETFs tell a mildlydepressing and boring story of solar companies underperforming theoverall equity markets so far this year, but a closer look reveals adramatic contrast between spectacular winners and hapless losers.
The winners include:
- China-based JinkoSolar Holding Co., Ltd. (NYSE: JKS), whose shares are up 125 percent since its initial public offering May 14, 2010;
- China-based ReneSola Ltd. (NYSE: SOL), up 66 percent year to date;
- Littleton, Colorado-based Ascent Solar Technologies (NASDAQ: ASTI), up 61 percent year to date; and
- German-based aleo solar AG (ETR: AS1), up 58 percent year to date.
The losers include:
- Canadian-based Chinese manufacturer Canadian Solar Inc. (NASDAQ: CSIQ), down 60 percent year to date;
- Marlboro, Massachusetts-based Evergreen Solar, Inc., (NASDAQ: ESLR), down 58 percent year to date;
- China-based SunTech Power Holdings, Ltd. (NYSE: STP), down 51 percent year to date; and
- German-based Q-Cells SE (ETR: QCE), down 51 percent year to date.
Meanwhile, the S&P 500 Index has slipped four percent yearto date and the two leading solar ETFs (Market Vectors Solar Energy NYSE: KWT and Claymore/MAC Global Solar Index NYSE: TAN) have each fallen 28 cent.
It is noteworthy that these winners and losers have no apparent geographical bias. Similarly, the two ETFs are balanced geographically, with KWT being roughly 30-30-20 percent China-U.S.-Germany and TAN30-30-25 percent China-U.S.-Germany.
Big winner: JinkoSolar Holding Co., Ltd.
Since the company’s inception as a supplier of recoveredsilicon materials in June 2006, it has rapidly moved downstream byvertically integrating critical stages of the solar power product valuechain, including silicon ingots, silicon wafers, solar cells and solarmodules through both organic growth and acquisition. The company sellsits products in China and to overseas markets.
In its May 2010 IPO registration with the U.S. Securities andExchange Commission, the company stated that its capability to sourceand process large volumes of recoverable silicon materials provides itwith an incremental cost advantage over competitors who rely primarilyon more expensive virgin polysilicon or who purchase recovered siliconmaterials for their production.
Last week, the company reported its first-ever quarterly results as a publicly traded company. Earnings were more than double analysts’ expectations.
Big Loser: Canadian Solar Inc.
Canadian Solar’s headquarters are in Kitchener, Ontario, butthe company’s shares trade on NASDAQ and it conducts all itsmanufacturing operations in China.
The company is a vertically integrated provider of ingot,wafer, solar cell, solar module and other solar applications. CanadianSolar claims to be the first solar PV manufacturer to achieveregistration with ISO: TS16949, an automotive quality management systemmore stringent than ISO 9001.
However, the company is currently under a regulatory and financial performance cloud.
- Last week, in its Q2 2010 financial results release, thecompany stated that an investigation by its board of directors auditcommittee had determined that the transactions identified in a June 2010 SEC subpoena “were properly accounted for in the company’s annualreport on Form 20-for the year ended December 31, 2009 filed with theSEC. Absent new information coming to light, the audit committeeinvestigation has been concluded.”
- The company also abruptly announced that two executives in its U.S. operations, the vice-president of sales and the acting president,have resigned.
- Q2 results were below expectations and poorly explained, according to analysts.
Photo credit: JinkoSolar Holding Co., Ltd.
DISCLOSURE: The writer has no positions in, or professional connections with, these companies.
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