Sun and Wind Turn Into Clouds and Rain (STP, APWR, JASO, FSLR, ENER)

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The point that alternative energy companies are being battered in the stock market is no surprise. Yet some of the companies, at least, are performing fairly well and probably deserve better treatment.  Solar PV cell-maker SunTech Power Holdings (NYSE:STP) for example. Yesterday, the company reported third quarter revenue of $594.4 million and earnings per diluted ADS of $0.33 on net income of $55.9 million. Analysts expected earnings of $0.42 and revenue of $572 million. Gross margins were up nearly a full point.  SunTech also revised its full-year guidance down from $205 million-$215 millionto $185 million-$187 million.  While this might be "good enough" growth on the surface, it has devastating implications in alternative energy.

The company blames exchange rates between theEuro and the US dollar and the "unstable" credit markets for therevision. Worse, the company’s annual manufacturing capacity is pegged750 MW, and the 2008 product shipment target has been lowered from 550MW to about 490 MW. Idle capacity is the devil’s workshop.

So much for the sun. Now, let’s look at the wind. Another Chinesecompany, A-Power Energy Generation Systems (NASDAQ:APWR), reported thirdquarter revenue of $85.4 million and net income of $9.4 million (EPSof $0.28). Analysts had been expecting EPS of $0.32.

A-Power really can’t catch a break. In October, it announced a newcontract for 50 of its 2.7 MW wind turbines and the share price fell11% on the news. Over time, though, the Chinese government’s commitmentto wind power spells significant future growth for companies likeA-Power.

The problem, of course, is when the future begins. Right now, China’s export markets are stalledand its domestic consumption, which has always been a laggard, is notpicking up the slack. Solar companies like SunTech find more customersoutside China than inside. The same is true of other Chinese solarmakers, such as JA Solar (NASDAQ:JASO), First Solar (NASDAQ:FSLR), andEnergy Conversion Devices (NASDAQ:ENER), which has reached a new52-week low already this morning.

For wind companies like A-Power, China’s caution on spending fordomestic infrastructure will stifle prospects for a turnaround any timesoon. A-Power’s shares are also at a new 52-week low early this morning.

With oil now challenging $50.00 to the downside after just going above $140.00 to the upside in June, it is easy to fathom that even the greenest of the green may have to treat new alternative energy projects with the term "climate change" rather than "global warming."

Paul Ausick
November 20, 2008