First Solar Sinks to Another New Low (FSLR, SPWR, YGE)

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Shares of First Solar Inc. (NASDAQ: FSLR) just can’t seem to find a bottom. The only thing to say about this is that maybe today’s the day. Yet the company’s singular story is part of a larger tale that, not surprisingly, is being played out on different stages around the world.

Shares of First Solar are down another -6% today, currently trading at $16.61, after putting up (down?) a new 52-week low of $16.51 earlier. The other large US solar panel maker, SunPower Corp. (NASDAQ: SPWR) is down -5.5% at $5.50 in a range of $4.94-$23.36. Even China’s Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) is down about -3.6%, and that’s after the news that the company completed a $238 million bond sale at yields as low as 5.78%.

Compare Yingli’s yield to Germany’s SolarWorld AG, the country’s largest solar panel maker, which saw rates on its 5-year notes rise to 49.4% last week. And the government of Angela Merkel wants to cut the country’s subsidies for solar installations even more in a move that has drawn opposition from political foes and even some allies.

Four of Germany’s solar panel makers have filed for bankruptcy since December. This is leading to job losses in an industry that had been adding jobs to the country’s economy for years. First Solar will close its plant in Germany and eliminate 1,200 jobs. Q-Cells, the largest of the German countries to file for bankruptcy, could be forced to fire as many as 1,300 German workers.

Merkel and her government have taken a hard line on the subsidy cuts, insisting that the subsidies are driving up the cost of electricity to consumers. The government’s environment minister said last month that the industry will just have to learn to live with lower subsidies and he believes that employment in renewable energy will continue to rise. He told Bloomberg Businessweek:

The success story in the job sector continued last year, and everything points to that it will continue this year. If enormous overcapacity exists in the solar sector, this will lead to adjustments that we can’t and shouldn’t stop with excessive subsidies.

Germany’s state governments and representatives to the federal government don’t agree, though. The governor of one state — and a member of Merkel’s political party — has said that the planned subsidy cuts “are detrimental to the many companies producing in our region and we want a fundamental change.”

This is the austerity vs. growth argument writ small. If Merkel is getting pushback from her own party on an austerity measure, it’s not so hard to believe that she’ll begin to feel the pressure soon to be coming from France and maybe even Greece.

The solar industry could be a bellwether for Germany as the steep cuts in jobs could begin to pinch local and regional governments. The country has already lost many of its manufacturers and is not really an exporter of solar panels. And exports have been the key to Germany’s ability to withstand the financial woes that have hit other Eurozone countries.

None of this matters to First Solar, though, and probably doesn’t matter much to SunPower. But Yingli, a low-cost, high-volume manufacturer, that looks like it can weather the current storm in the solar industry could be a longer term winner.

Paul Ausick

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