Energy Business

American Superconductor Restatement Highlights The Woes In Solar Sector (AMSC, ESLR, SOLR, SOL, TAN)

Jon C. Ogg

Today is not a good-news day in the alternative energy sector. American Superconductor Corp. (NASDAQ: AMSC) has said that it will restate revenues for the last two calendar quarters of 2010, resulting in a -35% drop in sales. The company has been struggling to get its largest customer, China’s Sinovel Wind Group, to pay for deliveries made in those quarters and to accept new contracted deliveries.

Another struggling company, Evergreen Solar Inc. (NASDAQ: ESLR) reported a -60% drop in sales for the first quarter of 2011 and has now received a deficiency letter from Nasdaq that the company no longer meets the $1/share minimum stock price and will be delisted unless the situation is corrected by next January 3rd.

One of the hottest solar stocks of recent days has been GT Solar International Inc. (NASDAQ: SOLR), which has announced several large orders for its solar manufacturing products. A new research report has now predicted a drop of -47% in manufacturing equipment sales in 2012. And solar PV maker ReneSola Ltd. (NYSE: SOL) has cut its guidance for the rest of 2011.

American Superconductor’s problems with Sinovel have been well documented and should be no surprise.  The writedown totals $74.7 million against previously stated revenues of $215.7 million. The company also said it expects revenues for its fiscal year ending in March 2011 to total just $307 million, far below the current Street estimate of $360 million, and more than -30% below original estimates.

The revenue loss is perhaps the least of the company’s worries. Because American Superconductor had booked the revenue before it was received, the company faces more uncertainty about its accounting practices. The company did say that it should have used a cash-based method of accounting. Shares are down more than -5%, at $8.08, having bounced back from an intra-day low of $7.44, virtually at the bottom of the 52-week range of $7.40-$38.88.

Evergreen’s announcement should also have been no surprise. In its SEC filing the company noted that if the shares are delisted, “the holders of its existing convertible notes will have the right to require the Company to repurchase their notes, which it is almost certain the Company would be unable to do. Such a default under the Company’s obligations to its note holders would likely cause the Company to file for bankruptcy.”

GT Solar has been a high flyer in the solar sector, posting a new 52-week high earlier this month. The company’s shares are getting beaten down nearly -9% today following a loss of more than -4% yesterday. Capacity expansions at solar PV makers have been driving GT Solar’s share price increases, but those capacity boosts are expected to result in serious oversupply by the end of this year and into the next two. Demand for more manufacturing equipment is expected to drop as well.

ReneSola shares are off more than -5% following the company’s pull back on quarterly revenue and gross margins. The revenue forecast for the June quarter was reduced from $280-$300 million to $235-$245 million. Analysts had been expecting $287 million. The forecast for gross margin fell from 25%-27% to 17%-19%.

The Guggenheim Solar ETF (NYSE: TAN) is also falling today, down more than -3.5%, to $6.46, after posting a new 52-week low of $6.44. The new range is %6.44-$9.34.

Paul Ausick