South Korea`s solar commitment crisis- SPVI`s solar weekly
17 February 2012
Posted in News - SPVI news
While small companies are disappearing from the landscape, big conglomerates seem to be taking their time to rethink business strategy
Last week the solar industry claimed another corporate fatality. Energy Conversion Devices filed for bankruptcy protection, along with all its subsidiaries. ECD flourished at one point in the high ASP market, but was unable to compete with even average-cost makers. After recent production shutdowns and layoffs, it was only a matter of time before bondholders stripped down any remaining company assets.
While small companies are disappearing from the landscape, big conglomerates seem to be taking their time to rethink their own business strategies. In December 2011, LG Chem canceled plans for a 5,000MT poly plant, saving around $500M with the decision. Now, the wafer unit LG Siltron is delaying a 400 Billion won ($350M) expansion, which would increase wafer capacity from 150MW to 700MW. LG Electronics, the largest unit of the LG Group, is also pausing before plunging into its own cell and module expansion, which was scheduled to see 1GW by 2014, up from today’s 300MW. LG is not the only one hesitating; according to Greentech Media, who translated the story from Korea Times, Samsung is having second thoughts as well. Unofficial sources revealed a possible announcement of the complete pullout from solar business. The news took center stage for the duration of the conference call with MEMC, as one of the analysts was curious about the future of a joint venture between Samsung Fine Polysilicon and MEMC’s Singapore subsidiary, involved in a 10,000 MT plant development in Ulsan, South Korea. MEMC execs deflected the question, but on a positive note for MEMC we suspect Samsung`s polysilicon ambitions will continue to be long term, fueled by a desire to compete with OCI Chem and Woongjin Chem.
In cell/module business things may be different. Samsung Electronics sold off its solar business to Samsung SDI, separating its core from the adventures in photovoltaic in May 2011. Shortly after, SDI announced a $12B objective in revenues by 2015, in an effort to “secure” 3GW capacity in thin-film and other expansions. However, up until now, no attempts were made to expand beyond the small capacities of its 150MW plant. Taiwanese Digitimes frequently uses South Korea as an offset to China's dominance in cost and aggressive ASP management. Counting on an ability to compete and the success of the skillset manifested in electronics and semiconductors, solar was going to be an easy prize for multi-industry, cash-rich organizations. At the end this may not be the case. Korean companies arrived late to the solar party and frequently overcompensated for their tardiness by making outlandish statements regarding the sizes of their investments. In 2010 Samsung made a deal with the government of Ontario to build 2.5GW worth of renewable-energy sources, while creating 16,000 jobs in the process. A few reruns of the same story last year upped investment from $6.6B to $7B and added the promise of a new module plant in London, Ontario. Until now things remain quiet in Eastern Canada, and may stay that way if Greentech Media got it right.
Japan, once a high-flying manufacturer, seems to be experiencing shifts with influx of imports and reduction of domestic production. Q3 results illustrate that imports grew 46% quarter over quarter. The result is even greater on a year-to-year basis, showing a 70% increase. It appears that domestic Japanese makers dropped multicrystalline cells and modules production by around 30% in the quarter, while imports picked up 122% rise. What has been missed in C-si, is being made up largely by Frontier Solar in thin-film. Quarter-over-quarter results show sales increasing by an astronomical 1400%. The success of Frontier is related to pricing, which is able to compete with cheap imports - in contrast to other Japanese makers.
In the area of US and China relations, a new collaboration between Yingli and DuPont was announced this week, whereby Yingli committed to buy metallization, polyvinyl fluoride films and backsheets for $100M from the US Company. Normally a non-event, the presence of the Department of Commerce as an organizer of the signing ceremony made all the difference. This is the same government body that is seeking possible sanctions against Chinese solar companies. Secondly, Suntech announced an agreement with DuPont just two weeks ago. It seems almost inappropriate that speaking of cooperation and trade exchange today would turn into importation duties against Yingli in March. Perhaps what it will come down to is the amount of trade between Chinese companies with American partners. Since the case will review each company separately, we may see few more collaborations supporting this theory.
In Europe, a number of Trina`s modules became certified for a “made in EU” label, and eligible for an additional 10% discount in Italian tariff calculation. Trina did not disclose the source of the wafers that are European made. Copying the Italian incentive, France announced a 10% discount for those companies that use 60% of components made in the EU, with the program ready to start in April.
In a separate release Trina announced a structured term loan with Standard Chartered Bank of China for its 500MW expansion of high conversion cells and modules called “Honey”. Built on selective emitter cell technology, Honey modules are already record holders in conversion efficiency in the lab setting. This expansion will bring Trina’s capacity to 2.4GW.
GCL, a native of China, has obtained financing from Merrill Lynch, an investment arm of Bank of America, for current and future US projects worth 1GW of energy production. This is a follow-up news story to one from a week ago, announcing GCL and NRG forming a joint venture called Sunora Energy Solutions. GCL will provide equipment for the installations, which most definitely will be produced on GCL wafer technology.
Ja Solar announced the sale of 23MW to a utility-scale photovoltaic project in the city of Lingwu, Ningxia province, China, jointly managed by the Angli Group and China Datang Corporation. This project qualifies for a feed-in tariff of RMB1.15/kWh under the FiT program introduced by China's National Development and Reform Commission (NDRC) in August 2011.
Gintech Energy, a Taiwan-based maker of solar cells, announced on February 16th the formation of a 5-year strategic cooperation with a European solar company. The name was not disclosed at the time, but Digitimes believes it is Schott Solar.
In financial results this week, MEMC reported a $1.4B loss in Q4 and concluded the year with a number of reorganizations and write-offs. A joint venture with Ja Solar, as reported by MEMC, produces wafers at $.15 per watt, which is the world's lowest production cost per watt of the wafer, but in its own facility in Kuching, Malaysia, the same cost is well over $ .20. China’s venture went into production in the second part of 2011 with 250MW, with undisclosed timelines and plans for 1GW. We predict MEMC to move further into development stage company format, having SunEdison to build solar plants across the globe and winding down its manufacturing segments, in a similar fashion as the closure of the polysilicon plant in Merano, Italy. MEMC has 3GW of pipeline for solar plants and is expected to deliver 400MW in 2012. The cautious approach is dictated by financial constraints resulting from reorganization and cost savings. MEMC has stated that large numbers of solar projects are available for development this year.
Sunpower reported its Q4 and full year. Outside of write-offs, Sunpower had a surprising earning of $0.16 per share due to investment gains. Sunpower produces high-efficiency cells and modules using monocrystalline all back-contact cells reaching 24% conversion and modules with over 20% conversion. Sunpower claimed 25% of all sales in California for the duration of Q4.
Equipment maker Applied Materials reported Q1, showing $207M in sales in EES Segment, down 34% QoQ, and a 64% drop in new orders to $33M. Reviewing K-10, AMAT sold $1.5B of equipment in 2011, with 80% of orders sold to China. The reduction in backlog is not a surprise. Few companies may consider equipment purchases; Trina is the only one expanding at this point. The majority are holding on to cash, trying to survive, while others have closed their doors already.
Lastly, Suntech reported its preliminary results. The company has taken on $571M of non-cash impairments, reduced inventory and accounts receivable by $450M. Net debt also declined by $200M; while cash has increased to $700M. The company beat its previous guidance for yearly MW sales by 90MW to 2.09GW and met its financial guidance. Full results will be published on March 8th.