Mixed Greens: Solar makers still feeling the pinch

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Suntech, Trina Solar book bigger than expected Q1 losses; Goldman sets $40bn green investment target; why investors still don’t get sustainability.

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Two of the world’s largest solar panel makers, China-based Suntech Power Holdings and Trina Solar, have both reported larger first-quarter losses than estimated by analysts as the global solar glut continues to affect profit margins. Bloomberg reports that  Suntech, the world’s biggest manufacturer of PV panels, reported a loss of 74 cents a share, substantially higher than the 49-cent average estimate in a Bloomberg survey. While world number four, Trina, reported a 42-cent American depositary receipt loss, trailing forecasts of 27 cents. Both companies have now had losses for at least three consecutive quarters, says Bloomberg, with Trina reporting a net loss of $29.8 million for the quarter (lightly up of the previous quarter), while Suntech’s loss widened to $133 million. Suntech’s operating margin worsened to minus 29.1 per cent from minus 10.2 per cent, the company said on Wednesday in a statement, while Trina’s margin improved to minus 11.4 per cent, compared with minus 14.4 the previous quarter. Trina’s shares rose 0.8 per cent to $5.37 at 12:43 pm in New York trading on Wednesday, while Suntech’s fell 3 per cent to $1.92, its lowest value in more than seven months.

“Continued module price declines adversely impacted our profitability despite significant cost improvements,” Jifan Gao, chairman of Suntech said in a statement. “We see further signs of industry consolidation.” Both companies maintained their increased guidance for module shipments for the full-year even if they shipped less in the first quarter, reducing revenue. Suntech expects a 20 percent increase in shipments in the second quarter while Trina sees a 34 percent rise to 500 megawatts to 520 megawatts. Suntech sees second-quarter gross margins of 3 per cent to 6 per cent, while Trina expects gross margins of about 10 per cent. Reuters reports that the company expects a sequential reduction in manufacturing costs in the second quarter after it renegotiates some of its long-term supply agreements for silicon. Trina also says panel costs are expected to fall to 50 cents per watt by the end of 2012 from 58 cents currently.

Trina and Suntech also attributed some of the first-quarter hit to their margins to the need to set aside money to offset America’s tariff of about 30 per cent on Chinese solar panel imports, introduced by the US Commerce Department last week: Suntech’s provisions were $19.2 million and Trina’s $26.2 million. The two companies slammed the new tax, which could force them to raise prices and set up new manufacturing hubs outside of mainland China. “The tariffs breed inefficiency, raise prices and make solar less competitive,” said Suntech CEO Zhengrong Shi on a conference call on Wednesday. An executive at Suntech, the world’s top photovoltaic solar panel maker, said there may be a slight increase in its selling prices in the United States. “Suntech and Trina will be able to offset a large part of (the duties) by raising prices or outsourcing their (manufacturing),” Ardour Capital Investments analyst Adam Krop said. Suntech has said it will ship its products from manufacturing bases outside China to skirt around the duties. China Sunergy is looking at investing in a panel assembly plant in the US.

Goldman eyes green gold

As clean energy contenders around Australia prepare to duke it out for a share of the $10 billion in government funds to be distributed by the CEFC over the next five years, US investment bank Goldman Sachs has revealed plans to channel investments totalling $40 billion over the next decade into renewables, an area it has described as one of the biggest profit opportunities since emerging markets in 2001. Reuters reports that Goldman executives have predicted this week that demand for alternative energy sources will grow with global energy demand, and as countries like China and Brazil set more aggressive targets for reducing emissions. The bank’s new green investment target, set to be announced at its annual meeting on Thursday, would average out to $4 billion a year, which – considering the bank helped finance $4.8 billion in cleantech globally in 2011 – has led some analysts to label it as more of a “charm offensive” than a new initiative.

The $40 billion – which will come from clients’ money as well as the bank’s own funds – will apply to investments and financings for solar, wind, hydro, biofuels, biomass conversion, energy efficiency, energy storage, green transportation, efficient materials, LED lighting and transmission. Stuart Bernstein, head of Goldman’s clean technology and renewables investment banking group, compared the opportunity to technology investments in the 1990s or investing 10 years ago in fast-growing countries like Brazil, Russia, India and China, for which Goldman economist Jim O’Neill coined the term “BRIC” in 2001. “This is another emerging opportunity we think will be quite large,” Bernstein said. And while Kyung-Ah Park, head of environmental markets at Goldman, concedes that now is not the easiest of times in the clean energy market, he stresses that “the underlying thesis as to why cleaner and more sustainable forms of energy need to scale up still holds true.”

Meanwhile, in London…

Not everyone sees the green economy opportunity as clearly as Goldman Sachs. Indeed, according to Christopher Greenwald, who is head of sustainability application and operations at Swiss-based Sustainable Asset Management, the average investor cannot see this potential at all, and is unlikely to see it for a good few years yet. “Companies are 15 to 20 years ahead of investors in terms of understanding the impact of sustainability on their business performance and financial returns,” Greenwald told reporters in London on Wednesday. “Investors are about where companies were in 1995 when sustainability reporting was just getting off the ground.”

Chinese PV giants Suntech and Trina Solar report bigger than expected Q1 losses;  Goldman sets $40bn green investment target; analyst says investors still don’t get sustainability.

BusinessGreen reports that Greenwald said many companies had moved beyond sustainability reporting and were now integrating sustainability into their strategic goals, product strategies, overall metrics, and the way they think about improving their own business performance. But he added adoption of greener business models would need to reach a “critical mass” before impacting investors. “You had about 50 companies in the mid-90s producing some kinds of environmental or social report – now you have over 4,000, and that number has been growing year over year,” Greenwald said. “You have to have a critical mass for the investors to wake up and get their attention. We’ve got that over the last few years but I think it’ll take some time for investors to catch up to companies in terms of the way they think about how sustainability can impact returns and realise financial gains over time.”

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