Germany's faster subsidy cuts to add to solar companies woes

Reuters News
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Posted: Feb 24, 2012 8:48 AM
Germany's faster subsidy cuts to add to solar companies woes

(Reuters) - Top solar consumer Germany's plans to advance the date of subsidy cuts could spell further trouble for companies such as First Solar and Trina Solar Ltd already weighed by low selling prices, some analysts said.

On Thursday, German government sources told Reuters they plan to bring forward cuts in solar power subsidies of up to 30 percent by almost a month to March 9, to thwart any last-minute boom in projects.

"In our view, the pricing environment is just too difficult and likely won't improve given additional subsidy cuts in Germany and import tariff risk in the United States," Wells Fargo analyst Sam Dubinsky said, and downgraded Trina Solar to market perform from outperform.

Most panel makers have indicated that they are moving to emerging solar markets like United States, China and India, but demand is yet to pick up significantly leading to lower margins.

"We admit we were wrong with our thesis that North America was going to help offset the risk associated with EU/German region," Susquehanna said in a note, and downgraded First Solar to "neutral" from "positive."

It also downgraded Trina Solar to "negative" from "neutral," saying a decline in selling prices would outpace cut in costs.

On Thursday, Trina posted a wider-than-expected loss for the fourth quarter despite selling far more panels than it had expected.

First Solar, long the darling of the solar industry, gave a bleak 2012 outlook in December and said it would run its factories at 80 percent of capacity this year and eliminate about 100 jobs.

Shares of solar companies have been battered last year, with most of module manufacturers suffering share price declines of more than 60 percent.

First Solar shares, which have lost 77 percent of their value in the last one year, closed at $37.20 on Thursday on the Nasdaq.

Trina Solar shares have shed about 70 percent of their value during the past year and closed at $8.63 on Thursday on the New York Stock Exchange.

The wider WilderHill Clean Energy index is down 43 percent in the last one year.

(Reporting by Vaishnavi Bala in Bangalore; Editing by Sriraj Kalluvila)