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Guest solarfun

That is very odd situation with the short interest. All the companies, except TSL and FSLR, returned to their short interest levels, that were in Spring 2011. But for TSL, the short position roughly tripled since Spring 2011. I wonder what is going on there, especially with such a big chunk of TSL shares owned by institutions. Maybe they are preparing for a short squeeze on the way up. Similar to what they did with the long squeeze on the way down.

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Guest spiritcraft

Curious as to what some of you folks who have had more time to study the situation, facts and probabilities of the solar 11. What are your thoughts on who performs best when coming out of this hideous downturn. I know that it is a question mark as to when but imagine that we here believe it will happen and the markets tend to look ahead. I currently own TSL, JKS and CSIQ for various reasons. Very brief thoughts: Despite the negativity towards TSL they historically have done well coming out of a down cycle so we will see what management does and how sentiment treats them. With CSIQ, I like the project business and the fact they have that North American pretense as far as "manufacturing" goes. With JKS I like the low float and the historical performance aside from the pollution incident. I would think all of these will be survivors. I did get lucky for once and sold LDK during the time that their share price held up while others crashed. That money went from LDK at $6.00 or so and into CSIQ in the $2's.

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Guest larryvand

May I remind what happened this time last year and where we ended up at the year end??? The supply is still double the demand so unless something dramatic happened (mergers, bankruptcies or extra 30 GW magically appear), we are exactly where we were last year. Q4'12 is going to suck and so will Q1'13. And that's as far as my crystal ball can see. Some reports I've been reading they are looking at 2015-2016 now when we will reach balance of supply and demand. And god help us if that is true. IMO what solar needs is Cap and Trade. You put a massive penalty on big polluters and allow them to trade carbon emissions and solar will shine IMO. And we don't need subsidies if they start putting a $$$ amount on carbon emissions. That is what solar needs IMO.

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I think you listed 3 survival candidates. Two slow bleeders and one that can take a lot. One of them is getting an adrenalin (Ontario FIT v1.0) shot 2013. JKS is without doubt the best share holder capital preserver the last 2 years. Low cash balance, low inventory and spot market procurement strategy has saved them a lot of interest and carrying costs. They also have newer equipment and capacity aligned with their current business volume saving them manufacturing costs. Looking at the daily form JKS would be the pick. Looking at what's pending (but not eternal recurrent), CSIQ is the pick. Looking at who won once and is resilient (but tired) TSL is the pick. Personally I think this is an exceptional phase of extremely high margins in the module and BOS verticals and the more normal scenario is that these two are low margin highly competitive businesses serving from an integration perspective to secure revenue from a module brand or a project pipeline. The module brand helps securing your poly sales if you will. I would therefore like those 3 to acquire some quality upstream business on the cheap now as China is forcing consilidation. If you make the effort to sell a module, why not let that include selling poly, wafers and cells you've made instead of letting your suppliers getting that margin piece (assuming you have the competence to do it equally efficient as your supplier). As the companies look today I think SOL has the best probability of collecting the spoils when the dust settles. The are involved in the whole value-chain from polysilicon and diamond wires and similar raw material to ingot, wafers, cells, modules, inverters, AC kits, project development and power sales and they are some of the most compentent players in several of those verticals with and very good shipment and cost reduction momentum going on. No other solar 11 has the same R&D budget as they and they've had multiple payoffs from that the past year that will capitalize coming years.

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Guest spiritcraft

Yes, I know there are risks, great risks and also know that there are no time-tables yet feel it is worth a discussion. Cap and Trade would be great but we now have PV affordability like at no other time and there are new markets opening up everywhere. I also think that the project business is vastly important globally and that requires panels from makers who are perceived to be survivors for bankability reasons. As you somewhat alluded to, some of the naysayers, polluters and the fossil fuel industries will one day see the light when greed begins to fuel alt energy. And lastly, sadly and tragically global warming is on our side. Whenever this normalizes somewhat, the first hint of one of these 11 turning a profit again would be huge just as in 2009. I of course hope for a less than doomsday scenario or we are all indeed screwed.

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Guest eysteinh

As the companies look today I think SOL has the best probability of collecting the spoils when the dust settles. The are involved in the whole value-chain from polysilicon and diamond wires and similar raw material to ingot, wafers, cells, modules, inverters, AC kits, project development and power sales and they are some of the most compentent players in several of those verticals with and very good shipment and cost reduction momentum going on. No other solar 11 has the same R&D budget as they and they've had multiple payoffs from that the past year that will capitalize coming years.

I agree that SOL is a survivor candidate. For the result of the R&D you can look at for example the interview done here on pvsolarinvestor: http://solarpvinvestor.com/spvi-news/377-renesolas-technology-and-market-strategy-to-make-the-company-a-major-force-in-2013

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Guest spiritcraft

@ explo, that's why I am enjoying this as compared to yahoo... thanks for the thoughts. We are certainly not to any point to point to spreadsheets and potential profits and are in a stage to think about who survives and who gains positive sentiment. That is what TSL had in 2009, a perception that they played it well and were "going" to come out of that downturn strong. History shows that perception and sentiment sometimes even trumps fundamentals especially in terms of a PE ratio which I hope we see again sometime soon. I was in SOL and broke even there, perhaps a small loss in 2011 and have been trying to read more about them again. Feel free to expand on your thoughts when you have time.

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Guest spiritcraft

@eysteinh That was an interesting read. I had not seen that. It seems like a good strategy and business plan.

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Guest Klothilde

Does any of the solar 11 have a sustainable competitive advantage? Something nobody else can replicate in 3-5 years? It seems to me there are way bigger fish outside of the solar 11 who are just waiting for the dust to settle to step in and take over the game. Samsung, LG, Foxconn for starters. Samsung and LG e.g. have spent way more on PV R&D and have way more PV patents than any of the solar 11: http://www.q-cells.com/uploads/tx_abdownloads/files/17_RESEARCH_AND_DEVELOPMENT_Paper_02.pdf How would a CSIQ compare to a Samsung who decides to ramp up 3GW of state of the art integrated production lines? Where is CSIQ going to get the money for the next investment cycle, if they already run at >400% debt/equity? What technological edge do they have relative to Samsung? What marketing edge? The EPC business gives them a vitamin shot for 2013, but how much will they be able to improve their balance sheet with that? The points made are just to show that I personally don't have any transparency on what will be the outcome of the consolidation process. There's definitely a threat of dormant players jumping in. Also at the end of the day survival among chinese peers depends more on the political support and mandated credit the companies will get offered rather than on their performance and cost track record. Just look at prime survivor LDK.

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I think all of those have tried LG, Samsung, Hyundai. I think from their perspective,solar module does not give an edge in technology and this is why they are not really in it. Margins are too low and Chinese are real competitors.. I think a lot of companies, call it all, have very little or basically no advantage over each other. This is the same machine, same line and same cell more less. There is an interesting blog with somewhat "big word" thesis from VP Colville of Solarbuzz on the PV-Tech. The tech advantage age has not arrived yet, interesting. I think that this will become a point in the near future, when cost and ASP will not model the industry but efficiency and demand. http://www.pv-tech.org/guest_blog/whats_next_for_pv_technology_in_2013

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Guest nanofrogfish_spf

Btw, those FIT1.0 adrenalin and vitamin shots are scheduled for 2014 also. 8) These will be supplemented with lower dosage FIT2.0 and US shots, and future CSSKY shots, but in ever growing quantities from now until 2015 and beyond. The achievable GM’s on investment capital will most likely be higher on downstream than upstream, or by owning, now and in the future. So in a world where technologies are continuously leapfrogged, and no one really knows for sure on a company by company basis how this will ultimately all play out, why not go with the company that has visible revenue streams in the best markets, with very probable booked GM’s, that go out for over 2 years? Not only will this pipeline continue to grow under FIT2.0, but this is also just the beginning of the US & Japan project work and the global build-out with SkyPower. And it’s not like they have an inferior product line to hide under these projects, or no R&D going on. Others will also do well...many will grow and return significant shareholder value...I’m happen when anyone reports positive news. But you can’t beat the booked, visible revenue streams, especially in this high-risk, chaotic environment. And as prices (panel & BOS) continue to fall, these booked projects return even higher margins. So how can making money be bad for the balance sheet? Odyd hit the nail on the head in response to the old bear argument of some large company coming in and taking over the entire industry (don’t hear it much anymore after prices and GM’s crashed). But I do think at some point, that some large players will enter or re-enter...and there will also be plenty of room. Keep in mind this solar thing is starting to explode. In just 2015 50GW is expected, and you know how these estimates have also been predictably low (some analysts were predicting 20GW in as late as march for 2012. Don’t be surprised if we hit close to 40 GW this year,depending on EU outcome, and 60GW in 2015. But someone isn’t going to come in and be a dominant player overnight, unless they buy one of the existing dominant players...it would certainly take some years. From an investment perspective, visibility is good...so I’m going with the one with the most visibility right now, and the one with the business plan that has the highest chance of succeeding. If something changes in the next 3-5 years, I’ll adjust my investment dollars accordingly...

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Nano, I've been trying to find who to bet on now that share prices are very low. At some points companies could be picked up at 20% of (adjusted) book value. No matter how I twist and turn things I get SOL as an extremely clear candidate and then nothing. Far, far behind there's been other companies that seem to be structured for some profitability in a low ASP world, like JKS, CSIQ, HSOL, JASO, but there's always been some issues with them. I need to find 1-3 other solars to complement my SOL position.

Right now I think you'll be happy to hear that CSIQ is the best runner-up candidate and that is based on that I think they are best positioned for 2013-2014. Here's my view on CSIQ.

Strengths:

[*]Sales efficiency. Can channel modules flexibly at low organisational overhead cost.

[*]Module processing. Have focus on automation and it looks like they are ahead of competition.

[*]Downstream pipeline. Have a pipeline of projects with great projected margin. Not huge, since they only do small project, but still many projects at high return to have and interesting risk/reward pipeline at respectable size. Continued success here is uncertain though.

[*]Procurement. The seem to be able to get raw material at prevailing market prices.

[*]Taking the emerging and lucrative markets.

[*]Low opex and interest per watt.

[*]Wafer manufacturing. Not good at this so far, leaves them no choice but to outsource much of this and give up the margins for this vertical from the modules they sell. This is a major difference compared to YGE for example.

[*]Cell manufacturing. Have a lot of capacity here, but it seems less cost efficient than peers, again inferior to YGE.

[*]Naive (or sneaky?) management? Management kept talking about being able to secure fixed price wafer constracts at prices where GCL would lose money, like they thought 2012 price developement was a normalized cost based development. It should be quite basic economics that, over time, the more you've made yourself of the product you are selling, the more profits from that sale end up in your own pocket. You cannot claim the profits for values added in parts of the chain where you've not contributed.

[*]Product quality. Can they do premium products at low cost? ELPS was only a 5MW for a long time, but now they're ramping ELPS to 120MW. I see this as a chance that CSIQ have a chance to become a player with premium products in mass production mode. Still something stranges with ELPS. 21% cell efficiency only results in 16.5% module efficiency (similar to SOL, JASO and YGE mono offers).

The reason that SOL is a clear choice is that after 5 years they've reach a very strong poly position. The 6kT their adding now will have a 16 $/kg cost and very low interest on top of that due to record low capex per kg. That's a very low cost for a relatively small scale. From here they can just expand that. This is a strength that took 5 years to build. On wafers, they've spent a lot of R&D and are now in a position where they can make the best wafers at the lowest cost. Having the best stuff in-house to power their modules have led them to easily take module market-shares from a position of nothing. In Q4 the are growing their module shipments with 80% from Q3. The are also (like CSIQ) free from high SG&A and interest cost and from large purchase commitments.

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Thanks for the R&D paper Klothilde and the link odyd. Spirit, one way to get updated on SOL is to follow their new blog http://info.renesola.com/ I would also recommend to read their Virtus II presentation on the Module tab under the Virtus II modules page. It's still hard to say to will dominate 2013 market. Yingli dominated 2012 and are upgrading their multi offering now. SOL is growing very rapidly with the introduction of Virtus II. These two and JASO have clearly grown market-share in 2012. SOL and JASO the most but from lowest levels. Problem with JASO is that I think they are very good in some aspects and have severe issues in other aspects. This combined with stubborn non-transparency makes it hard to bet on them. JKS and CSIQ are up slightly 2012. The rest have lost market-share in 2012, with STP being the biggest loser.

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Guest nanofrogfish_spf

explo, agree with about 90% of what you posted. One clarification on the efficiency though. When looking at the ELPS mono product data sheets, you are right that the efficiency is listed at 16.5%, and it does also note "up to 21.1%" in the ELPS cell "sales pitch" part. However, the 16.5% certified rating is the efficiency for this module based on the 19.5% ELPS cells they were producing on the assembly line at that time. The 21.1% was actually a lab stage eff., which in the last CC they said translated to a module eff. of 17.4%. This will increase their top end ELPS module output from the present 265W to 280W. There is still a 20% loss from cell eff. to module eff., you would think there's some improvements that could be made in this area. They also just raised their target for cell eff. to 23% for 2013, up from 21% (that they hit a year early). This would push that same module up to 305W. I would like to see all this make t to the mass production stage. As per the last CC, they had only sold about 13.6MW to date. But it does sound like they are picking up the pace somewhat on the line conversions...as you noted they were looking at 120MW capacity by now (we'll see were they're really at next CC). One thing to keep an eye on, as rooftop solar continues to grow, look at the BOS options and kits to become a much bigger part of the pie moving forward...that's where integrated mounting systems and inverters will come into play (integrated inverters also improve overall system eff.). I still think it makes more sense to bet on the company with the most positive knowns...and that's definitely CSIQ...IMHO of course.

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Guest larryvand

The thing I don't like about CSIQ is on almost every CC, they sound like snake oil salesmen. And in the past year, a lot of the things they said proved them as snake oil salesmen... like the Q4 guidance they gave back in Q2... I have them as dishonest management...

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The thing I don't like about CSIQ is on almost every CC, they sound like snake oil salesmen. And in the past year, a lot of the things they said proved them as snake oil salesmen... like the Q4 guidance they gave back in Q2... I have them as dishonest management...

I agree with that. That makes it very hard to select them. It will be hard for them to fail, relatively speaking, in 2013 though.

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Guest nanofrogfish_spf

The thing I don't like about CSIQ is on almost every CC, they sound like snake oil salesmen. And in the past year, a lot of the things they said proved them as snake oil salesmen... like the Q4 guidance they gave back in Q2... I have them as dishonest management...

Really???...they are snake oil salesmen because they lowered YE guidance because they decided not to chase ASP's any lower? (not to mention just about every other company lowered theirs by a lot more, some several times). I'm actually glad they did it. So what are a LOT of the other things they said that PROVES this?...The 55c to 60c YE fantasy cost...which actually came to be? The only other item that they didn't come thru on that I can think of in the timeframe they anticipated was their ramp up of ELPS. Other than that I think their batting average is pretty good compared to most of the others. Do you make your investment decisions on how someone supposedly sounds in a CC call, and not on the facts (or are they lying about the over $2Billion in booked project revenue also)? I think it's pretty clear what your agenda is here...are you the man with 100 faces?

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