Still Too Many Mixed Solar Signals (FSLR, ENER, AMAT, CSIQ, VECO, ED, WFR)

There are many things that help solar power and orders for the sector, but arguably higher energy prices and tax incentives or subsidies probably dwarf the overall economic situation.  There seems to be a steady series of ups followed by more downs, and you can blame part on the economy and on energy prices.  First Solar Inc. (NASDAQ: FSLR), Energy Conversion Devices, Inc. (NASDAQ: ENER), Applied Materials Inc. (NASDAQ: AMAT), Canadian Solar Inc. (NASDAQ: CSIQ), Veeco Instruments Inc. (NASDAQ: VECO), Consolidated Edison Inc. (NYSE: ED), and MEMC Electronic Materials Inc. (NYSE: WFR) have all been in solar light with news.

First Solar Inc. (NASDAQ: FSLR) soared on Tuesday on reports that it signed a contract with the Chinese government that will allow it to build a 2 gigawatt solar power plant in Inner Mongolia to be the world’s largest solar energy field covering some 25 square miles. When completed after four phases, this field will be able to supply power to three million homes.  The closing of the deal is contingent on execution of definitive agreements.  Shares rose almost $13.00 yesterday and shares are up over $3.75 at $138.23 this morning.  Today’s follow-through volume is on word that First Solar secured a new $300 million credit facility.

Energy Conversion Devices, Inc. (NASDAQ: ENER) was up huge yesterday on rumors that the company was close to being acquired by Applied Materials (NASDAQ: AMAT).  While this rose $2.60 on over 16 million shares to $13.01, shares are playing a give-back this morning as many question the notion that a buyout is likely.  Applied Materials is further up the food chain in solar.  Shares are down 2.5% at $12.69 on fairly active trading today.

Canadian Solar Inc. (NASDAQ: CSIQ) is trading up marginally on reports that it entered into a second memorandum of understanding with a subsidiary of the LG Group of South Korea to implement at least 10 MW of PV power projects in Korea in 2010.  Shares are up 0.7% at $16.82 on fairly active volume of 530,000 shares considering an average volume of 1.9 million shares.

Veeco Instruments Inc. (NASDAQ: VECO) is trading higher after saying it has received a multi-million dollar order from GroupSat (Hong Kong) Limited for its suite of FastFlex™ Web Coating Systems for solar products and tools in Suzhou, China.  Veeco shares are up 1.9% at $22.44.

Word came yesterday that Consolidated Edison Inc. (NYSE: ED) has canceled or delayed its 12-megawatt solar pilot program that was just announced in April, according to Clean Technology Insight.  It seems that the subsidies and stimulus funds did not come through or were not enough for it to be feasible.  As that is an $11 billion utility, this is more of a blow to solar rather than a blow to Con Ed.

Also, yesterday came word from MEMC Electronic Materials Inc. (NYSE: WFR) that it will end production of silicon crystal ingots and wafers at facilities in Sherman, Texas, and St. Peters, Missouri in closures in 2010 and 2011.  This comes as the company lowered guidance on weakness in the chip demand for its products and for the continued weakness in solar demand.

Because US subsidy money has been slow to come and that Germany is under pressure over its subsidies, China is the last one that has increased its solar subsidy plans.  The problem here is that companies are now losing money in the sector which were not losing before.  Companies kept increasing capacity and inventories are rising at the same time that orders are faltering.  With the cost per watt getting closer to an average of $1.00 per watt next year, this adds woes all the way up the food chain.

What the solar sector needs for the demand to come back is either a screaming economy to return or $100 oil to jolt everyone again as a reminder that fossil fuel is both expensive and not endless.  If neither of those occur, the solar sector is likely to see a continued wave of ups and downs.  And the men will be separated from the boys.

JON C. OGG
SEPTEMBER 9, 2009