In the past week, Credit Suisse held over a dozen meetings with solar companies across the value chain at its annual Renewables Roundup event. This was part of a larger Solar Power International conference in California. The firm was cognizant of considerable concerns around the ITC step-down in 2017 for the U.S. utility scale market, a nearing China/U.S. tariff settlement that could keep module prices at elevated levels (although positive for module manufacturers with Chinese capacity) and persisting delays of the Chinese FiT (Feed-in Tariff) payment that are starting to call into question the value — and monetization options — of the assets being amassed in China.
A few of the main Chinese solar companies seeing the most gains from this are Trina Solar Ltd. (NYSE: TSL), JinkoSolar Holding Co., (NYSE: JKS) and JA Solar Holdings Co. Ltd. (NASDAQ: JASO).
In its report, Credit Suisse said:
Checks indicate continued pressure on module pricing, especially in the US, but prices in China appear to have stabilized. Our checks indicated pricing around $0.58-$0.59/w (watt) in Japan (driven by FiT cuts, competition, FX), $0.63-$0.65/w in the US (down 2-to-4 cents/w from early second quarter), ~$0.64/w in Europe (dictated by the EUR 0.56/w MIP), and $0.54/w in China (expected to remain stable with payment terms improving very slightly). Companies continue to be dismayed by the lack of any FiT catalog announcement in China, meaning that connected projects are not receiving the subsidy portion of the FiT. Assuming a catalog is announced by year-end, the precedent for delays would mean all 2015 vintage projects may not receive cash flows until 2017, potentially jeopardizing public-vehicle monetization plans. Fortunately, however, the energy portion of the FiT (~35% of cash flows) is sufficient to cover all (or nearly all) of the project debt servicing needs. There is growing consensus that China will increase their long-term targets to 150 GW (gigawatt) (from 100 GWs) by 2020 but the need to address FiT delays (via more frequent catalogs, etc) is paramount.
The settlement in the U.S.-China trade dispute seems to be very close and potentially a win-win. U.S. and Chinese solar companies are increasingly likely to finalize a settlement over the next few weeks.
Shares of Trina were up 1.3% at $9.17 on Monday afternoon. The stock has a consensus analyst price target of $15.40 and a 52-week trading range of $7.15 to $14.23.
JinkoSolar shares were up 2.6%, at $22.46 in its 52-week trading range of $14.52 to $32.28. The consensus analyst price target is $33.13.
Shares of JA Solar were up 3%, at $7.84 in a 52-week range of $6.30 to $10.80. The consensus price target is $11.64.
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