The week in cleantech and carbon: Solar cull continues

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LDK Solar’s job cuts last week amount to the toughest action so far on solar overcapacity; plus carbon market’s oil woes, and nuclear wrap.

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The speed and scale of job cuts revealed by LDK Solar last week surpassed any announcements made so far by other companies trying to cope with the problems in the PV sector. The Chinese maker of polysilicon, wafers and solar has cut 5,554 workers since the end of 2011. This represents about 22% of its staff strength.

The company’s workforce peaked at 28,000 in July last year. It is now down to 19,195 workers, Xingxue Tong, chief operations officer, said in a conference call.

LDK Solar announced its fourth quarter results on Monday last week. Net sales during the October-December quarter of 2011 – at USD 420m – were less than half the sales of USD 921m in the comparable quarter last year and also lower than the sales of USD 472m in the preceding quarter. Gross margin during the quarter was -65.5% compared to 27.3% in the October-December quarter of 2010 and -3.6% in the preceding quarter. Operating margin during the quarter was -126.5%.

The outlook for 2012 is not too encouraging either. Chairman and CEO Xiaofeng Peng said: “In 2012, we expect excess capacity and further policy uncertainties in Europe and the US will result in continued intense competition within the solar industry.” The company would continue to focus on driving down production costs and managing operating expenses. Revenue of USD 2bn to USD 2.7bn is projected in 2012.

In March, First Solar had said that it would cut 2,000 jobs by the end of the year – representing 30% of its workforce – while scaling back production at some locations in a bid to reduce costs. The positive effect of these changes – euphemistically referred to as ‘restructuring’ – on the company’s financials was visible when it announced its first quarter results last week. The world’s largest maker of thin-film solar modules increased its earnings guidance for 2012. Net income this year will range from USD 4 to USD 4.50 a share against the earlier forecast of USD 3.75 to USD 4.25, it said.

Another US-based solar company – SunPower – announced the end of production at an older plant in the Philippines last month. This would reduce its average cost of producing solar panels by USD 0.02 a Watt, Tom Werner, chief executive officer, said last week. “We are confident of achieving or beating our cost target of 86 cents per Watt, on an efficiency-adjusted basis, by the end of 2012,” he said. The company’s costs were USD 1.08 a Watt in the last quarter.

Sharp of Japan said last week that its solar-panel business would lose JPY 10bn (USD 125m) this year.

On the policy front, the main announcement of subsidy pruning last week came from China – the world’s largest base for the manufacture of solar panels. It cut subsidies for demonstration solar projects by a fifth, from CNY 7 per Watt set in February, to CNY 5.5. The subsidies are available to captive projects under the so-called Golden Sun programme. GCL-Poly, Yingli Green Energy Holding and about 100 other developers of projects with about 1.7GW of combined capacity are eligible for the subsidy in 2012.

The news from the wind sector also continued to be troubled. Shares of Vestas – the biggest wind turbine maker – tested nine-year lows last week as it reported a near-doubling of its first quarter loss to EUR 162m from EUR 85m a year earlier, and said it expects to spend more to repair faults.

Denmark-based LM Wind Power – which makes turbine blades for companies including Vestas – announced a 41% fall in profit last year. The company laid off 180 workers or 3% of its staff as orders fell. “We will continue to face difficult market circumstances with overcapacity, slower demand and price pressure,” said Roland Sunden, CEO of LM.

Renewable energy companies could get a booster dose if a suggestion by a London-based lobby group – Project Developer Forum – is accepted. It has suggested that all solar, wind and geothermal projects should be included in a positive list of facilities that can win tradable carbon credits.

Some more policy details emerged meanwhile from Japan, which is set to launch feed-in tariffs to boost renewable generation from July. It is targeting addition of 2.5GW of clean energy by the end of its fiscal year in March 2013. The additional costs are to be passed on to power users as a surcharge.

CARBON PLUMMETS WITH OIL ON GLOBAL ECONOMY WORRIES

European carbon allowances, or EUAs, for December 2012 delivery tumbled 9.0% last week, closing at EUR 6.70/t, compared with EUR 7.36/t at the end of the previous week. After trading above EUR 7.40/t in the first half of the week, EUAs began falling on Wednesday. Carbon prices tracked oil prices down, with European Central Bank President Mario Draghi saying on Thursday the eurozone’s economic outlook had become “more uncertain.” United Nations Certified Emission Reduction credits, or CERs, for December 2012 dropped 5.5% last week to EUR 3.60/t, down from EUR 3.81/t the week before.

INDIAN STATES INK DEAL ON MEGA IRRIGATION PROJECT

In India, Andhra Pradesh and Maharashtra signed an agreement on the USD 7.49bn Pranahitha-Chevella irrigation project, which will provide drinking water to major cities and irrigate 1.7m acres (0.68m ha) in the two states with joint population of almost 200m, The Hindu reported. The project is expected to be completed by 2018-19. Meanwhile, a district of Cochin in India’s Kerala state will get a USD 177m drinking water project, the Deccan Herald reported. In Europe, Germany, Austria and Switzerland agreed last week to promote the cross-border use of pumped storage to complement the expansion of intermittent renewable electricity generation, the Swiss Federal Department of the Environment announced. In the Americas, Peru announced it is seeking investors for a USD 530m irrigation project, Chinecas, on the country’s northern coast, Bloomberg News said. The government of Chile sold its stake in water utility Empresa de Servicios Sanitarios de Los Lagos, or Essal, at auction for USD 89m, Bloomberg News reported.

FRANCE TO SHUT ONLY ONE NUCLEAR PLANT AS JAPAN GOES NUCLEAR-FREE

In the televised debate building up to the French presidential election last week, socialist winner Francois Hollande pledged to shut only one nuclear plant – EDF’s oldest unit at Fassenheim – in his first term, Bloomberg News reported. Meanwhile, EDF raised its cost estimate for building two new nuclear reactors in the UK by 40%, the Times said. State-owned China Guangdong Nuclear Power emerged as a potential bidder for another UK nuclear project – Horizon, the joint venture being sold by Eon and RWE – joining four other groups including China’s State Nuclear Power Technology Corporation, the Financial Times reported. Spanish newspaper Expansion also said Iberdrola is studying whether to bid for Horizon. In Asia, Bloomberg News reported that Japan went nuclear-free for the first time since 1970 as its last operating reactor, the 912MW Tomari 3 unit, was shut down for scheduled maintenance on Saturday.

Reproduced with the permission of Bloomberg New Energy Finance. For further information, see www.newenergyfinance.com

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