Solar's slippery footing

Solar firms are taking hits all over the world, but is there some light on the horizon?

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 per cent 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 $US420 million – were less than half the sales of $US921 million in the comparable quarter last year and also lower than the sales of $US472 million in the preceding quarter. Gross margin during the quarter was -65.5 per cent compared to 27.3 per cent in the October-December quarter of 2010 and -3.6 per cent in the preceding quarter. Operating margin during the quarter was 126.5 per cent.

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 $US2 billion to $US2.7 billion 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 per cent 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 $4 to $4.50 a share against the earlier forecast of $3.75 to $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 $US0.02 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 $US1.08 a Watt in the last quarter.

Sharp of Japan said last week that its solar-panel business would lose 10 billion yen ($US125 million) 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 program. 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 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 per cent fall in profit last year. The company laid off 180 workers or 3 per cent 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.

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