US investors take a shine to solar

05. November 2013 | Top News, Markets & Trends, Investor news, Trade show, Global PV markets, Financial & Legal Affairs, Features | By:  Cheryl Kaften

The U.S. solar equity markets enjoyed an upswing in October, driven by a substantial number of utility scale projects in the pipeline and advances in technology.

SolarCity US residential PV installation

SolarCity has seen its share price skyrocket since January.

At the Solar Power International meeting in Chicago, which drew more investors than had been in attendance at many recent industry events, the mood on the floor was relatively bullish. According to a poll conducted by Deutsche Bank research analyst Vishal Shah, most solar players said they expected to see between 45 GW and 50 GW of new photovoltaic capacity installed worldwide, cumulatively, in 2014.

Along with the rising spirits in evidence at the conference, there were a number of rising stars on the NYSE and NASDAQ boards, among them, Advanced Energy Industries (NASDAQ: AEIS), SunEdison (NYSE: SUNE) and SunPower (NASDAQ: SPWR). Another U.S.-listed company deserving of mention this month is China-based Canadian Solar (NASDAQ: CSIQ), which announced several development deals, both in North America and in emerging nations. In addition, SolarCity (NASDAQ: SCTY) made another acquisition that will help build its business.

High hopes

Angelo Zino, senior industry analyst at S&P Capital IQ in New York City, who was not at SPI, told pv magazine that his own analysis closely aligns with the crowd’s solar capacity "guesstimates."

"I'm seeing about 37 GW or 38 GW installed this year; in 2014, 45 GW sounds realistic as well," commented Zino, who is betting that Japan will not announce a significant incentive cut in 2014 and that Europe "either will stay at the levels it is at today or increase -- because it has nowhere to go but up."

Indeed, Zino says S&P Capital IQ is "maintaining its positive stance on solar. We see a recovery on the macro level going forward, which is going to help the industry."

By contrast, Pavel Molchanov, energy equity research analyst at Houston-based Raymond James & Associates, was not quite so sure. He explained to pv magazine, "I met with about 15 companies at the conference and the degree of optimism expressed by any given source was partly a function of where that company is in the value chain and the geographic mix."

Indeed, Molchanov and several other analysts are of the opinion that a key game-changer could be the ability of solar suppliers and project developers to respond rapidly to changing levels of interest in PV deployment in different regions. "If they can identify areas that are conducive to near-term solar deployment -- and seal those deals -- they are more likely to succeed," he said.

Spreading the wealth

One company that has shown a flair for foreign development is Canadian Solar; which announced in October that it had won two major deals, one in North America and one in the Middle East.

The company will use its new facility in London, Ontario, as well as its Guelph manufacturing plant in the province, to supply 445,000 CS6X modules and EPC services to what is being described as Canada’s largest solar park -- the 100 MW Grand Renewable Solar (GRS) project in Haldimand County, Ontario. The US$301 million (€219 million) project -- to be developed on a 736-acre (298-hectare) property -- is expected to reach completion in 2015. It will supply power to the Ontario Power Authority under a 100 MW contract 20-year purchase power agreement (PPA).

Canadian Solar also has won a significant development contract in sunny Saudi Arabia, a nation that has revealed its plans to develop 16 GW of PV solar and 25 GW of concentrating solar power (CSP) within the next 20 years. Before it could seal the deal for 1.78 MW of modules, the company opted to subject its panels to rigorous testing in order to ensure that they would function at optimal levels in the heat, dust, haze and sandstorms that constitute everyday desert weather. Impressed by the modules' durability, efficiency and 25-year linear power output performance guarantee, Saudi Arabian Oil Company (Saudi ARAMCO), the state-owned oil producer that is backing the King Abdullah Petroleum Studies and Research Center (KAPSARC) project, chose Canadian Solar for the project, further expanding the manufacturer’s aims to widen its global footprint into new and emerging solar markets.

After the announcement of both wins, during the week of October 21, Canadian Solar was up (3.78%) on 1,096,757 shares traded. The stock is currently selling at US$22.91 (€16.83), up 34.8% for the month and 306.9% for the year.

SolarCity zeroes in on Zep

Also up considerably since the beginning of 2013 (233.1%), and for the month (54.4%), is SolarCity, trading at US$53.41 (€39.25) on October 31. Shares of the Foster City, California-based installer and financier were up more than 3% after the company said it would acquire privately held PV mounting specialist Zep Solar for US$158 million (€115 million).

San Rafael, California-based Zep sells innovative mounting hardware, which SCTY believes will cut its installation time by about half. Indeed, industry pundits are saying that the acquisition was motivated by Solar City's determination to block other downstream solar companies from using Zep’s technology. What's more, pv magazine's analysts, Molchanov and Zino, have identified this as their "deal of the month."

Adding to its installed solar capacity for the year, SolarCity also announced on October 22 that it had begun work on a 1 MW solar system for the South Central Regional Water Authority in Hamden, Connecticut. The ground-mounted solar system is expected to comprise more than 4,000 solar panels, making it one of the largest in the state. The Regional Water Authority (RWA) will save money by paying less for the solar power than they're currently paying for utility power, while reducing both pollution and water use.

Utility scale surge lifts SunPower

According to SNL Financial, a research firm based in Charlottesville, Virginia, utility scale installations in the United States at the end of the third quarter were 15% higher than a year ago. As of the end of September, total new installations nationwide rose from 942 MW in 2012 to 1,081 MW in the same period in 2013. An additional 311 MW of new solar installations were announced in the third quarter, most of which will not be in service until next year or later.

One of the key beneficiaries of this trend has been Silicon Valley-based SunPower, a producer of high-efficiency crystalline silicon PV cells, roof tiles and panels. In a third-quarter report delivered after close of business on October 30, the company announced:

  • Continued construction of the 579 MW Antelope Valley project in Los Angeles and Kern counties, California, for Warren Buffet's MidAmerican Energy;
  • A supply deal with Tokyo-based Shimizu -- one of the top 5 contractors in Japan -- for a 69 MW power plant in for Eurus Energy Corporation, a joint venture between Toyota Tsusho Corp. and Tokyo Electric Power;
  • A 70 MW merchant power plant in Chile in partnership with Total S.A.; and
  • A North American commercial project pipeline that exceeds $1 billion.

With all manufacturing facilities operating at full capacity, SunPower also revealed plans to expand inventory, with a 350 MW cell capacity increase planned for 2015 production. This will bring the company’s total cell capacity to more than 1.8 GW when fully ramped up.

During the fourth quarter of 2013, SunPower anticipates that it will generate revenue of US$575 million (€423 million) to US$625 million (€460 million); while for full year 2013, it expects revenue between US$2.52 billion (€1.85 billion) and US$2.57 billion (€1.9 billion). Shares were selling on October 31 at US29.49 (€21.67), up 12.7% for the month and 270.2% for the year to date.

Share and share alike

Finally, as of the end of this month, our analysts are sticking to their September stock picks. Raymond James & Associates’ Molchanov still likes Fort Collins, Colorado-based Advanced Energy Industries, which, on October 29, also was upgraded by equities research analysts at New York City-based Needham & Company from a "hold" rating to a "buy" rating in a research note issued to investors. The company, which makes most of its money on inverters, was selling at US$21.02 (€15.45) on October 31 -- up 20% for the month and 19.1% year to date.

As for S&P Capital IQ's Zino, his top pick still was St. Peters, Missouri-based SunEdison, selling at US$9.36 (€6.88) per share on October 31. His rationale: The company revealed early in September that it planned an IPO for its semiconductor division in the March 2014 timeframe in order to focus more attention on its high-margin solar power business. SunEdison is up 96.2% year to date, and 18.1% for the month.

Zino also added a few Chinese solar companies to his "watch" list, including Hanwha Solar (NASDQ: HSOL), JA Solar (NASDAQ: JASO) and Trina Solar (NYSE: TSL). On October 31, Hanwha was down for the month (minus 3.6%) but considerably up overall for the year to date (233.9%). JA Solar was down 5.5% in October, but up 61.2% for the year; Trina was down 4.6% for the month; up 170.1% year to date.


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