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Guest nanofrogfish_spf

One final thought that no-one is talking about. I think that's it's likely to see at least a few major M&A's taking place in the space this year, and some involving our US traded Chinese based solars. I would think these kinds of announcements would have a huge impact on trading. And globally, is now a good time for some huge companies to gobble up some of these smaller companies at bargain pricing levels to get into the business, at just the right time before solar starts hitting the 50GW and over demand stage?

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Guest nanofrogfish_spf

I just got done reading an excellent article in REW "The Solar Energy Outlook for 2013". It's dated Jan 1st, so I'm sure many have read it, but if you haven't it's a Must Read! Pretty much sums up why I'm so optimistic on 2013, and why I think this rally is not just another "Solar Junk Rally". Some paragraphs I liked; "Jigar Shah, partner at Inerjys Ventures, says this will continue and predicts “robust” global job growth in the solar industry in 2013. “The volumes are going to go up substantially next year,” Shah said. “The pricing signals that were provided this year were so low, that there’s at least 40 or 50 countries in the world who haven’t done a lot of solar who are earnestly looking at awarding contracts in the first quarter of next year and having construction completed by the end of 2013. You’re starting to see an extraordinary proliferation of solar based on the pricing that was indicated by manufacturers in 2012.” Nat Kreamer, CEO of Clean Power Finance, agrees: “Just as over-investment in fiber optics led to inexpensive bandwidth, creating the foundation for the Internet economy we enjoy today, inexpensive solar modules are creating the foundation for explosive growth of the solar industry.”" and "Shah adds that most developers today are “not looking for price reductions,” citing significantly lowered costs as the primary reason. “The difference between getting a 70 cent a watt module and a 65 cent a watt module is just not that big of a deal anymore for system costs,” Shah said. “People are now looking at non price features for making decision on who to buy from.”" Very Nice.....

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That's very bullish for YGE, since multi is 60% of their capacity. Now it is all HP. From their press release their best ingot produced wafers that would lead to average 250w panels. SOL is already 255w average on an average ingot, so still ahead, but nice to see YGE join the mass production (I assume) low cost HP products. YGE will as things normalize join SOL in high GM and large shipments (they are both already clear leaders in MW shipped 2012 of solar 11). YGE will thrive, but their structure don't allow share holders to benefit much from that (to many other interests with preceeding claims). My hope is that they'll try to change this structure. They started working on it a few years ago and reached some progress on reducing minority interests, but the downturn has instead amplified the adverse structure on both minority interests and debt. Note also that Zhejiang is the home of SOL. Don't know if it is conincidental. SOL runs R&D through multiple small subsidiary initiatives, kind of like a seed portfolio to limit risk and retain potential, by committing only to proven success. Great SA article and Q3 summary, by the way.

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250w is 10w up from their current 240w average (same as industry standard level) a 4% improvement.

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Talking to Jason Tsai, and reading his reports it appears that pricing has stabilized in China for at least a month now. He also reported inventories in Europe had been sold out and glut was reduced if not eliminated. I think it is very opportune for investors like people who gathered here to find ourselves ahead of the curve, with our know-how. Mind you, I was surprised how quickly and without any stops stock had advanced in last two to three days. This is why I do not believe in the solar market dynamic being behind it, but a technical aspect and everyone here agrees. Certainly LDK is not in any position to advance to levels it did and unfortunately Trina does not belong there, again fundamentally on business dynamic. I am disappointed about it, but I remain hopeful, they pull through in December.

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Hi explo I am going to move this discussion to YGE thread. BTW thank you for your opinion on SA article.

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Guest greensolar

In recent years, overly optimistic analysts cost investors a pile of money in solar-energy stocks. Don't blame Gordon Johnson. (ticker: FSLR). Anyone who paid heed escaped big losses when solar stocks collapsed in 2011. Now that investors are starting to revisit clean-energy names, including First Solar and electric-car play Polypore International (PPO), we decided we'd revisit Johnson—who today heads research on alternative-energy stocks at the New York-based broker Axiom Capital Management.</postprocessticker></postprocessticker>Barron's : We've got to pat you on the back with both hands because when we interviewed you in 2009, you were bearish on just about all solar stocks. First Solar was 150 bucks a share then, and it went to $11 before recovering to a recent $34. </postprocessticker>Johnson: The bearishness I feel now is the most pronounced since I've covered the stocks. The reason is simple. Since 2008 we've been calling for Armageddon, because supply massively exceeded demand. But in 2008 and every year through 2011, you had miracles in some end market.

In 2008, Spain decided that they were going to end their solar subsidy. But they announced it ahead of time, and that caused a massive demand rally before the end of the year. In 2009, Germany decided they were going to cut their incentive and caused a spurt that made demand look much better than it actually was. It happened again in 2010, when Germany, the Czech Republic, France, and the U.K. all said that they were going to make incentive cuts. And again, in 2011, Italy announced it would make a Draconian cut in its incentive at the end of that year.

Finally, in 2012, you actually had the cuts in the key European markets. Germany and Italy were roughly half of aggregate solar demand in 2011. In the third quarter of 2012, big incentive cuts took effect in those markets. In 2013 is you will have a full year of these incentive cuts impacting global solar demand.

We've seen estimates for the global supply of solar panels at upward of 100 million gigawatts (that is, billions of watts). What's your forecast for supply and demand?

In China alone we think there was over 40 gigawatts of production capacity at year-end 2012, while aggregate global demand was just about 24 gigawatts. We recently went through all 95 companies in our Chinese solar-supply model, to reflect recent announcements out of these companies, many with negative cash flow. Though some 30 companies left the business, China was adding roughly five gigawatts of capacity in 2012 and plans to add roughly two gigawatts in 2013. Capacity is not being rationalized in China.

Where do they get the capital to expand capacity if their cash flow is negative?

That's a great question. [LDK] was recently on the brink of going out of business. The government and banks came in and bailed them out, to the tune of hundreds of millions of dollars. The same thing happened with Suntech.</postprocessticker>The oversupply in solar is coming primarily from the Chinese economy. Local and national Chinese governments, via their local and national banks, are keeping companies around that should be going out of business.

When we talked a couple of years back, spot market prices for the raw material polysilicon had spiked into the hundreds of dollars per kilogram, but then came down to $50 or $60. Now where are they?

Prices are at $15 a kilogram [2.2 pounds]. Polysilicon prices have never been this low. But the cash cost of making polysilicon is below that. Norway's [REC.Norway] recently said their cash cost was around $11 a kilogram. All the entrenched players— Wacker Chemie [WCH.Germany], Hemlock Semiconductor Group, MEMC, [TKYMF], [url=http://online.barrons.com/public/quotes/main.html?type=djn&symbol=smtof]Sumitomo Electronic [sMTOF], [MIMTF], [url=http://online.barrons.com/public/quotes/main.html?type=djn&symbol=3800.hk]GCL-Poly Energy Holdings [3800.HK], and OCI[010060.Korea]—have cash costs between $10 and $15.</postprocessticker></postprocessticker></postprocessticker></postprocessticker></postprocessticker></postprocessticker>Is it viable for prices to stay this low?

It is viable for prices to fall even further. Just the entrenched players I named will have aggregate capacity to supply 44 gigawatts worth of silicon.

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Guest greensolar

But why isn't cheap polysilicon a good thing for solar-panel makers? Well, it should be a great thing because their input cost is falling. But a lot of the bigger solar manufacturers sign long-term contracts with polysilicon manufacturers at fixed prices. So when prices start to fall, they are actually at a disadvantage. The smaller, incremental guy can go get poly in the spot market for $15, while you have a contract at $25. Which is why all of the publicly traded companies in the Chinese market are losing money right now. Some of them are even losing money on a gross-margin basis. And they are all burning cash hand over fist. If the Chinese companies are the low-cost producers and even they are in a bad way, what should we think of an American company like SunPower? SunPower is in a bad situation, as is First Solar and anyone producing panels in the U.S. But the U.S. government has given these companies taxpayer money to build power-generation projects. Johnson's Energy Pans Recent Company Ticker Price First Solar FSLR $33.59 Polypore International PPO 44.44 Yingli Green Energy YGE 2.80 Meyer Burger Tech MYBUF 7.87 Trina Solar TSL 4.92 Suntech Power STP 1.87 Amtech Systems ASYS 3.90 Source: Bloomberg We have given these companies cash grants, loan guarantees, investment tax credits. These companies could fund these projects from their own balance sheets. A 500-megawatt solar plant costs nearly $2 billion, but when construction is done, the number of permanent jobs created is like 20 to 25. It is a complete waste of taxpayer money. And which public companies have benefited from these projects? First Solar, SunPower, and MEMC. The U.S. taxpayer is paying $3 to $3.50 a watt to build these projects. However, if you look where First Solar panels are priced in today's market, you are talking about 60 to 65 cents. They are selling their modules into these projects at bloated levels. First Solar went out and acquired two of its competitors, OptiSolar and NextLight, which had projects they had been working on for years. The power-purchase agreements were struck in 2008 and 2009, when natural-gas prices were two to three times higher than what they are today. Didn't Warren Buffett's MidAmerican Energy agree to buy two SunPower projects for over $2 billion? Yes. Those projects enjoy power purchase agreements struck back in 2008 and benefit from government guarantees and grants that are no longer available. So he'll get returns that you can't get on new projects. Wither First Solar? Our price target on the stock is $9. First Solar shifted to percentage-of-completion accounting. So, in the quarter when they close on these projects, they recognize a huge percentage of the project revenue. In the third quarter of 2011, First Solar reported earnings of roughly $2 a share, because they closed on a project. Come Q1 of 2012, First Solar lost $5. But then they closed projects in each of Q2 and Q3 of 2012, so they reported roughly $1 each quarter. People believe that these earnings are sustainable, but once these projects run out, First Solar will start losing money. They will have a couple of good quarters in 2013, and then they will burn cash, because they'll have to develop these projects on their own. The two biggest projects announced in the U.S. recently were won by Yingli. Why? Crystalline silicon modules are more efficient at converting solar energy to electricity—18% efficiency, versus 12.7% for First Solar's "thin film" technology—and they cost basically the same. Silicon modules are about 66 cents a watt, whereas thin film is about 60 to 65 cents. It does not make sense to use First Solar modules. Not only is the taxpayer getting drubbed on the incentives, but the U.S. government is throwing incentives at thin-film modules that underperform. Underperform? They don't generate the power output that was promised by the company. So your project's internal rate of return falls. These are 20-year investments. In Germany, there were some 5,000 claims made against First Solar modules for producing less-than-warranted power. They only honored about 1,000 of the 5,000 claims.

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Guest greensolar

Grid parity is a farce. Solar is intermittent, peak-load power, meaning you don't get power when there's cloud cover or the sun goes down. It can't replace fossil fuel or nuclear base-load power, which is the same level, day or night. If you want to build an electrical grid based on solar, then right next to each solar plant you must have some type of combustion-based turbine that will turn on when the solar goes off. You also have to rebuild your transmission infrastructure. They claim to be at grid parity in the Mojave Desert, Spain, and Italy, but without government incentives there's an inconsequential amount of solar being installed. What other solar stocks should we discuss? We should talk about Meyer Burger Technology [MYBUF], a Swiss company that makes saws that cut polysilicon ingots into wafers. And Amtech Systems [ASYS], which makes diffusion furnaces that help turn wafers into solar cells. They were plays on production growth in the solar industry. Now there's a slowdown, and you really need capacity to come off-line. Meyer Burger trades around seven Swiss francs [a franc is 92 U.S. cents], and we think the downside is three to four. For Amtech Systems, we see 30% to 40% downside. Tell us about Polypore International. They make separator material for the lithium-ion batteries in consumer electronics and electric vehicles, as well as for conventional lead-acid batteries. Ions pass through the material as the battery discharges and recharges. Investors are excited about the electric-vehicle opportunity. Our key thesis is that you have an oversupply of lithium-ion material, and electric-vehicle demand isn't as robust as Polypore predicts. When we initiated coverage, the stock was $56. The day after, Polypore's key customer announced they were going to make lithium-ion material for themselves, and the stock went from $56 to $38. Now Polypore is spending $304 million to ramp up capacity to make separator material for electric cars. Why? They got incentives from the U.S. government. But to use their 2013 capacity, there would have to be a fivefold increase in demand from their customers. The problem is, you have capacity being ramped by some 20 other guys, specifically for electric vehicles. Yet electric-vehicle sales have disappointed expectations. General Motors had to shut down Volt production two times in 2012 to right-size the built-up inventory. GM also had to implement aggressive incentive programs to increase sales of the Volt, as did Nissan for its Leaf. With Polypore shares at $44, what's the earnings multiple? It is 23 to 25 times, depending on whose numbers you're looking at. The stock is up from $30 to $45 on hopes that electric-vehicle sales are going to re-spark and that earnings have troughed. Their free cash flow was negative for 2012 through September. They say they will be free-cash-flow positive in 2013. But we are highly skeptical. Our price target is $25—14 times our forecast of $1.68 in 2013. Prices in the lithium-ion space are falling, and this has been reflected in Polypore's margins. The company missed earnings for the past five quarters. After every miss, they say, "Earnings have troughed." Someone believes them. Polypore has an extremely aggressive management team. They are marketing to a new set of investors, primarily European. Some European renewables investors have flowed out of solar stocks and into Polypore on the assumption that earnings have troughed. But when I asked to be invited to their analyst day, they told me that I couldn't come. They've disputed my reports on their last two conference calls, but won't let me ask questions. This is reminiscent of the way First Solar treated me and other investors in the early days of its decline. If you don't have anything to hide, why not talk to me? http://online.barrons.com/article/SB50001424052748704723404578207732007178380.html?mod=BOL_hpp_mag#articleTabs_article%3D3 Sorry for posting the whole article but from experience I have seen the article dissapear

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Guest nanofrogfish_spf

LOL...that poor guy is all over the place...talk about an article full of half-truths and misleading statements (believe me, I could go on and on...I'd just love to debate this clown). No wonder none of the CEO's will let him in the door! At least he didn't accuse any of the CEO's of being big fat liars in this one. First he comes out with a whole bunch of excuses of why solar is growing every year, even though he said it never had a chance. Then he says China solars are doomed, but then says FSLR is doomed because they can't compete with China's cheap silicon modules...so which is it? And it's not just the misleading statements, it's all the stuff he purposely didn't talk about. Let me just address one of his many half-truth misleading statements; "Grid parity is a farce. Solar is intermittent, peak-load power, meaning you don't get power when there's cloud cover or the sun goes down." Really??? First of all, the only ones I ever hear talk about solar meeting 100% of power demand are these misleading analysts and big oil lobbyists. Everyone else thinks that in the long term 10% to 15% could be a good energy mix (and that's a huge number btw), and that could grow if storage solutions become more viable. And even when it's cloudy, the panels still produce power...just not at peak ratings (in fact, he failed to mention that FSLR's thin film performs better relatively speaking under these lower light conditions). And the definition of grid parity for solar is being able to provide power cheaper than with conventional equipment during peak usage hours, but is not intended to be a total replacement for the base load energy source. That's 3 misleading items in just that one sentence! And btw Gordon, in case you haven't been watching the news lately, there's a global warming crisis going on now, resulting in huge devastating storms, droughts, floods and melting icecaps. How many BILLIONS of TONS of carbon will solar save from being injected into the atmosphere? And what about all those countries around the world that don't have access to cheap clean energy sources and their strive for energy independence? And why is he in total denial about grid parity?...even admitting that some areas in the Mojave Desert, Spain, Italy are there now, but the list has no chance to grow (his reasoning for this?, the only explanation is again that he's in complete denial). As to why this solar stuff is so important, and will continue to grow despite want Gordon thinks, go to the SkyPower website under the media tab...they have 3 short videos and a couple audios that just make you want to do the right thing...any comment Gordon, or are you in denial about global warming also? Unfortunately for him these misleading statements are becoming quite transparent, and all the news that's flowing in contradicts his thesis of solar not ever being viable...

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good discussion. abc, glad to see you've joined spvi forum. I've missed your links to interesting news since Yahoo disabled that. singular, spot on comments. I think the downhill ride in PPS ended in late 2012. The question is when the climb will start. 2013 might be bumpy until the market feels confident in the new direction. Would EU really put tariffs on China PV products? China makes the majority, EU buys the majority. It would be disastrous for China's renewable strategy. China would be furious. EU cannot afford that and understands that China is the current hub (to which it has sold a lot of manufacturing equipment and polysilicon). These seniors have been partners in trading goods and technologies for many centuries and should be well aware of the benefits of not restricting their exchange through protectionism..

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Guest greensolar

Thanks for the input, Gordon is a joke.... I have been looking for an article which I seen a couple weeks ago where an R&D company have discovered by using some chemical used in florescent lights in the production of cells can produce the same out put in modules on cloudy overcast days as on hot summer days.

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Guest greensolar

China to subsidize solar firms

Updated: 2013-01-04 20:17

(chinadaily.com.cn)

Posted ImageComments(0)Posted ImagePrintPosted ImageMailPosted ImageLarge Medium Small0

Posted Image

Technicians supervise the solar panels on the roof of a building in Shaoxing, East China's Zhejiang province, Dec 27, 2012. [Photo/Xinhua]

China has announced renewed plans to give subsidies to solar projects, under a plan to install solar panels in rooftops.

The third batch of tariffs, ranging from 7.5 yuan ($1.12) a watt to 9 yuan per watt, will sponsor 126 different projects nationwide with a total of 1.82 billion yuan, the Ministry of Housing and Urban-Rural Development said.

Solar firms in Shandong province will get the highest amount, 258 million yuan for a total generating capacity of 44.97 mW, while companies in Liaoning and Jiangsu provinces follow Shandong, with generating capacities of 41.67 mW and 39.7 mW, respectively.

To boost the use of solar energy, China launched initiatives such as the Golden Sun Program, as well as a scheme to install solar panels in rooftops in 2009.

http://europe.chinadaily.com.cn/china/2013-01/04/content_16082435.htm

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Green, are you still holding LDK? What's your view on their turn around chance? My view is that they're too much under water now, that only an imminent huge demand scenario can save them.

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Guest abcdefgjoho

I 100% agree on the EU thing explo. solar is for europe peanuts. europe has way more to loose in other industries to risk trade war. problem though is that currently in europe we have a climate of many conflicts and i am not certain that we dont end-up with political nonsense, suicide. the risk of EU penalties on solar is real and my risk no1 currently in regards to my csiq holding. I will watch this very closely but cant handle it fully I fear. besides than that we have good news. i wanted to share some links on yahoo but doesnt work anymore so I quit posting there. they had time to improve the board - it is lousy now. what I wanted to share were two things. a) there is a massive pile forming in spain of solar 2.0 projects. meaning without FIT. this gets very real now. energy prices continue to increase in europe. believe it or not my utility company now wants me to pay 30 eurocents beginning jan 1st 2013. so needless to explain that the market will shift. smaller FIT projects mostly done by privates will only work with storage solutions as FITs get very low now in germany e.g. on the other hand you get now utilitly plants for companies, hotels, warehouses, factories and so on as they can produce their energy below market prices with solar. also you have companies building farms and then selling it to consumers- as with the 30 eurocent utilities now try to charge this is easy to achieve. b) one of the best posters on photovoltaikforum.com says japan will get nuts. 1 GW of application requests in november alone so he thinks this could get a 10 Gw market... as always - glta. my strategy. 1. watch EU, 2. watch china on capacity reduction, 3- watch 200 dma

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Guest nanofrogfish_spf

The recent comment by Gordon Johnson; "Grid parity is a farce. Solar is intermittent, peak-load power, meaning you don't get power when there's cloud cover or the sun goes down." is a popular one with solar bear analysts and other clean energy opponents. It got me to thinking about what solar PV’s (and CPV’s) place in the future could reasonably expected to be as part of a larger green energy generation and distribution system. I did a little research on system efficiency loss on cloudy days, and most had them down to as much as 50%, and on the darkest cloudy and rainy days down to about 10%. This article gets into the science of it more (keep in mind the author is pro thin-film). There are a couple tables that show efficiency changes at different temperatures and weather conditions. What’s interesting is that on cloudy days, the lower sunlight levels are partially offset by the cooler panel coefficients. It should be noted that electrical demand typically peaks on sunny days and is less on cloudy days, so solars output also tends to follow the demand curve. Unless an extremely cost efficient and viable storage solution is developed, coupled with oversized solar plants, PV solar should not be expected to be a total replacement for any major utility grid. A 10% to 15% of PV (with CSP or storage it could be higher), mixed with other energy sources and renewables such as wind (when it’s cloudy, it’s usually windy, and vise-versa) would be a more realistic goal at this point. In the US these would be coupled with highly efficient natural-gas generators and in the EU maybe with bio-fuels. And smart grids extending into the homes makes all these work together at top efficiencies (use as much as possible under ideal conditions). This would significantly reduce the carbon-based energy generation, and also shut-down the dirtier (coal/diesel) generators that were previously required to meet peak load demands. One powerful aspect of PV, verses the other sources, is its ability to be installed very efficiently and in small sizes at the point of use, which is more efficient than central power distribution with large transmission losses. And another further advance to energy efficiency, that is in its infant stages but I believe will continue to build momentum especially in emerging economies, is the revolution of DC and HVDC power distribution systems coupled with smart technology...harder to implement in established AC markets. This is my vision of what the PV solar part of a clean energy future could look like...It seems very realistic and doable to me, especially as the cost of solar installations continues to fall. So I guess I have to disagree with Mr. Johnson, and others like him, on their conclusion that there is no hope for solar in the future FIT-free world.

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Guest spiritcraft

It is obviously not a farce and we all know that. Gordo will be spewing this no matter what happens. It is almost like panic in the face of recent installation news and progress globally.

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Guest spiritcraft

Nice to read you again abc, your euro perspective is always helpful. I hope this becomes what the TSL yahoo board once was... without the pettiness of course.

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Guest spiritcraft

One day greed will be on our side. Those desperately trying to convince the public that PV is not real or viable will be cheerleaders when they see the money to be made there. Gordo will likely go to the big "fossil fuel power plant in the sky" before he sees the light and admits his folly though.

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abc, I think Japan will be a margin haven for those let in. There you can get ASP that can allow tripled GM compared to pressured markets like China and Germany. Suntech and CSIQ have known to have an established footprint there to ride on, but I can really recommend the export data reports sold here on SPVI to see who else of solar 11 are let in to Japan now and who are growing there. I think you will also find it interesting to see CSIQ's general exports numbers and geographical breakdown. It's a bit hard to fully understand the added value the reports bring to the shipment reports and guidance given on the conference calls until you have it in front of you, so I recommend trying at least one or two reports to get this picture.

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Bloomberg has already run the article and found someone who said following from HSBC Bank

“China is going to spend tremendous amounts of money on

renewable energy, and they’ve dramatically raised their targets

for the energy over the past two years,” Leeb said. “Solar

stocks were down last year and the industry is growing.”

http://www.bloomberg.com/news/2013-01-06/solars-drive-steepest-jump-in-3-months-china-overnight.html?cmpid=yhoo

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Guest greensolar

Green, are you still holding LDK? What's your view on their turn around chance? My view is that they're too much under water now, that only an imminent huge demand scenario can save them.

Hi Explo, I'm still holding LDK all the way down from $15 I have added more below $1 and will be selling my stake back out and hold some shares for free this will help with averaging down. The down turn was a lot more severe than I thought it would be, The shorts played a good game and were successful in judging the downturn but all these companies are way undervalued for the future growth potential of solar. My largest position is LDK I am also holding JASO and CSIQ I do regret not selling at $15 because buying under $1 I would be sitting on over a millions shares of LDK today.... I believe if LDK can sell their poly and modules at cost and become cash flow positive that the EPC side of the business can pull in the profits. It is LDK huge large scale manufacturing base that has me as so keen on them. They need to ramp up to full capacity and start making profits. I will hope sometime in the near future some of these companies will start making profits.

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Just got the e-mail from Gintech, sales for December 10% below November sales. Q4 looks like 27% below Q3. This is not good for Chinese Q4. They are normally trending in the same direction where Taiwan gets more losses. Solartech 56% below November. Q4 24% below Q3. NSP -0.3% mom, -17% Q4 over Q3. Year over year NSP 18% improvement. Wafer maker Danen Q4 40% below Q3. DelSolar partner of NSP in the merger, -31% Q4 over Q3. E-Ton -9%, 124% increase YoY.

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Guest Klothilde

I think the only farce here is Gordon himself. The intermittency of a solar array on a rooftop is no bigger problem than the intermittency of the power demand under the rooftop, e.g. when someone turns on the electric stove. What matters is the aggregate power supply and demand within a distribution or transmission network segment. And when you start looking at the aggregate demand of thousands, if not hundreds of thousands of solar arrays you get a perfectly smooth generation load curve, even on cloudy days. Also, as nano pointed out, its all about integration of PV within a mix of renewables and residual fossil power. Its not about PV replacing all fossil generation.

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Guest Klothilde

odyd, what's your take on the current outlook for the taiwanese cell players? Imho a weak Q4 is consistent with the decrease in demand in Europe in Q4 and with the fact that they didn't get to profit from the surge in China in Q4. However I think that the Taiwanese are set to profit the most from the increasing demand out of Japan during the next months. Digitimes already speaks of increasing utilization and prices; http://www.digitimes.com/news/a20130107PD209.html

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Although small change, one interesting point is that poly increases for the first time in a year. Poly is the critical supply to secure, since it takes time to increase the capacity. It is important to remember that a lot of capacity was planned to be added in 2012-2014, but also that a lot of those plans where halted or deferred. It's also good to remember that last time poly showed green was the same time last year. It's probably not safe to make anything of this yet. I do believe that at current poly price, being in the poly business is extremely inattractive, so only the heavily committed, strong and patient players will endure a prolonged period of this pricing. I can't see anyone planning to expand their poly business until there's firm outlook of $25+ prices. The 3 largest non-Asian players have plants in the US. Hemlock and Wacker poly are part of bigger groups and long-term large scope strategy committed I think. REC might give up and let one of those take over their plants, instead of risking to burn the fresh capital they got injected just before final price crash. I think such consolidation of capacity would help the poly segment. Mono shooting up more significantly is also interesting, since mono is the supply-chain bottleneck. It might indicate that inventories have finally been depleted and that there not enough mono capacity for everyone to fill up at current price. The demand side for mono might also have changed with Japan market rising. At the same time the German rooftop market have matured and probably slowed mono demand growth there.

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Hi Green, My history with LDK is similar to yours, except that I gave up on them a bit earlier. I look a lot at the balance sheet and at this point it does not matter if LDK survives, the management have already given away the shareholder stake to banks and other creditors. If I was still in LDK and had already averaged down around $1 I would see the recent pop as a ticket out or at least unwind and diversify. LDK is nicely structured only if they can utilize their capacity, otherwise their huge capacity is a big negative force for them. That seems to be the current situation. They can't sell as much as they want, at least not without loss and therefore have to idle tons of capacity. This makes me think that, although it does not matter to shareholders, LDK won't survive. Someone else will take over the capacity. This has already been done with the plant in Anhui province. If you still like the strategy of LDK, but implemented more prudently, I believe SOL is a good alternative. They've had good momentum the whole past year. From 13Q2 they'll produce 2500 MT poly per quarter at $13 cash and $18 fully loaded. Their HP multi wafers are highly demanded and has superior efficiency. They will cost 21 cents (16 cash) to make (all in-house controlled in case poly price goes up) and should receive a high premium price. It's the worst of markets, but their module business is flourishing with 80% QoQ growth in Q4 and they can use their own wafers to offer premium panel and collect margins there, while waiting for poly and wafer pricing to normalize. The main poly break-through for SOL in 2012 is that as they constructed phase II of their Sichuan poly plant they were successful in replacing the simpler hydrogenation process of phase I with a hydrochlorination and FBR based process which saves them 3 $/kg in cash cost. Their phase II is $13 cash and $16 fully loaded. Due to the success in achieving this they decided to integrate this process with their phase I plant (already producing 4000+ MT annually) and are thus halting production at phase I in November to January (perfect time to buy poly instead) and will have the combined plant fully ramped end of March. It took SOL 5 years to reach this level of cost efficiency. I think that's the time it takes and what makes it a competitive strength to be there. GCL arrived there in 2011, LDK still haven't arrived there, as example of others entering the segment after 2005. We've seen with GCL and Oci that once you're here you can expand rapidly. SOL's strength is the 25 $/kg capex and still 13 $/kg cash cost. That only adds $4 in depreciation and interest to the cash cost, while bigger players (except GCL) are adding more like $12 of depreciation and interest to a $12 cash production cost. The main wafer break through is Virtus II. With as simple and efficient production process as the high yield standard multi casting they can achieve mono efficiencies. Note that Virtus II is not quasi-mono (Virtus I), which although casting requires slightly more complicated (less continuous) process with e.g. seeding requirement. The Virtus II process results in size and orientation of grains that is optimal to maximize conversion efficiency. Together with larger active surface, less CTM loss and LID, it's value should be fully on par with mono, but at much much lower production cost. This gives Virtus II the best kWh generated value per cost to build plant proposition. Very simple to sell and that's why they've guided 655 MW shipments in Q4 (above 100% utilization) now that Virtus II is available. I recommend that you look at all the 2012 ERs and presentations from SOL and you'll see good transparancy (e.g. cash flow analysis, detailed segment progress reports) and that they've continuously improved their cost targets. It seems that though a bad market year for them on pricing they've had great momentum on gaining technological and market-share advancement throughout the year. For replacement of LDK's project business I think JKS has a similar strategy (e.g. they too are doing a 200 MW project in Gansu), but CSIQ is interesting with different project strategy (many smaller scale, mainly North America) and better momentum on the module business from what I can see in the export data. SOL also do projects, but more like GCL, for ownership and power sales business. They have plants in Bulgaria and Romania collecting 20-25% IRR and in China collecting 15% IRR. They're extremely selective in this segment and it is not a main priority business segment yet, like it is for CSIQ.

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Guest Klothilde

Isn't there a large mono demand coming from China as well? My understanding is that the Golden Sun scheme stipulates a minimum module efficiency of 15%, which favors monos.

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I wasn't aware of that, thanks. 15% is around 245w for 6x60 module or 290w for a 6x72 module. HP multi is getting there for more and more players, while HP mono is now at 16%. Still mono contributes to the supply of 15% modules, so I agree that Golden Sun can be another mono demand factor.

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