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Suntech Gobbles Up Another Poly Producer

Daniel Englander: May 30, 2008, 9:51 AM
Suntech Power painted a gloomy picture for investors back in February. The company's fourth quarter and full year earnings came in below estimates, and its failure to lock in sufficient polysilicon supplies forced Suntech to revise down its 2008 production estimates from 700 MW to 530 MW. Rising spot market prices and difficulties finding suppliers with enough capacity to sign long term deals during 2006 and 2007 turned the company conservative on its production numbers, forcing it backload planned output until prices came down. But that was then. Since the pounding investors handed the company on February 20, when its stock price fell 23.9 percent in intraday trading before closing down 12.3 percent, Dr. Shi - Suntech's illustrious CEO - has gone on a polysilicon manufacturer buying spree. If you can't beat 'em, join 'em - I suppose. In early March, Suntech took a $100 million stake in Russia's Nitol Solar. The two also have a $1.5 billion, eight year polysilicon supply deal. Around the same, Suntech acquired 11.7 percent of Hoku Scientific in a $20 million deal. Suntech and Hoku also have a $678 million, 10 year supply deal. Besides investments by Suntech, Nitol and Hoku have something else in common - they're both lame. Credit Suisse and Citigroup pulled Nitol's $300 million IPO in February, despite a 40 percent discount on the company's valuation, because of poor market conditions. Hoku's Money Pit troubles have been well documented on these pages. But Dr. Shi has a thirst for polysilicon that only acquisitions can slake. Early this week Suntech acquired a $98.9 million minority stake in Shunda Solar. The two have also signed a 13 year, 7 GW wafer deal for an undisclosed amount. But, Shunda is also building a poly plant in Jiangsu Province with an initial capacity of 1,500 metric tons. Not a lot, but a good start. Shunda probably picked up a thing or two from Hoku Scientific's many, many missteps.

Former Employee to Imperium: You’ve Been Served

Daniel Englander: May 30, 2008, 6:37 AM
A former Imperium Renewables employee has sued the beleaguered biodiesel company. Kenneth Orr, the company's former managing director of trading and commodities, is suing his former employer for $12 million, seeking double damages, attorney's fees, and interest. Orr had earned $58 million buying and selling biodiesel commodities and, according to the complaint, he was entitled to a 10 percent bonus on his trading activities that was never paid out. Prior to his firing in January 2008, Orr alleges Imperium closed down the company's commodity trading section and transferred his bonus to a group of Imperium subsidiaries as a way to stem the company's capital hemorrhage. January was a tough time for the Paul Allen-back company. Within a span of three weeks, Imperium stepped back from a planned $345 million IPO, kicked out CEO Martin Tobias, and laid off most of its corporate work force. Also canned were a three plant expansion plan, of which included a signed $90 million contract with Hawaiian Electric. Imperium has responded to the lawsuit by saying Orr was fired because the company experienced a cash shortage at the end of 2007 (despite raising $213 million in VC and debt financing that year), and his operations were closed down to free up some extra capital. Imperium fell victim to its own shortsightedness. Palm oil prices soared $153.40 in four months, while rising demand in consumer markets closer to the production sources in Malaysia and Indonesia constrained the supplies available to Imperium. Maybe closing down trading operations wasn't such a hot idea - spot markets are dangerous places for the uninitiated. But, then again, that's what you get when you let a former web entrepreneur run a fuel company.

Germany Feed-in Tariff Cuts Compromise Reached

Daniel Englander: May 30, 2008, 2:19 AM
A 2:00 A.M. Friday morning a compromise was reached between the Christian Democratic Union and the opposition Social Democratic Party to cut feed-in tariffs at a rate lower than the initial 25 percent to 30 percent proposed earlier this month by CDU MP Joachim Pfeiffer. Herman Scheer, president of Eurosolar and an SDU MP, acknowledged an agreement was made, though he wouldn't give specifics on the tariff cut. Scheer did say the biggest facilities could face a subsidy cut of close to 10 percent in 2009. Solar stocks were up in morning trading across Europe, with Q-Cells surging 8.8 percent in early action, while REC also moved up 6.8 percent. The speculation regarding a possible Q-Cells sale of its REC holdings has not been resolved. The extent of the feed-in tariff reduction compromise will be announced on Monday when the draft legislation is reconciled with the existing law, known as the EEG. The new law may be voted as early as Friday of next week - the vote on the new tariff was initially scheduled for late June or early July. The compromise comes at a crucial time for the solar industry, which is also facing possible subsidy cut backs in Spain, Italy, and the United States. Spain's feed-in tariff program will expire in September 2008, and many have speculated that it is unlikely to be renewed in its current form. Any adjustment would likely have a negative impact on the Spanish solar industry. In the U.S., solar installers and integrators are already starting to feel the pressure stemming from the high probability the investment and production tax credits will not be renewed. For the last few weeks, a fear has moved through the industry that the collapse of the German, Spanish, and American programs would send the solar markets into a tailspin. The news that Germany's tariff cuts are less than initially expected may be a good step forward to halting the downward motion.

The Morning Feedstock

Daniel Englander: May 30, 2008, 1:30 AM
Crude oil prices settled down $4.41 to close the day at $126.62 in New York trading. This is lowest price level since May 16, and the largest single day drop in the price of light sweet crude since March 31. The drop came in only after a sharp spike in morning trading following the release of a Department of Energy report that found U.S. crude supplies had fallen down 8.8 million barrels to 313 million, surprising analysts who thought supplies had moved up. But those analysts, they're a silly sort. By mid day yesterday most analysts had decided that part of the shortfall was artificial, resulting from fog at U.S. oil terminals that prevented supply unloading. Most of the missing barrels were in fact sitting offshore. Prices moved down accordingly. However, at about the same time the Commodity Futures Trading Commission made public their six month long investigation into market manipulation of oil derivatives and futures contracts. The CFTC also announced they would partner with Britain's Financial Services Authority to conduct trans Atlantic oversight of oil futures trading, including those fog-delayed freighters. Some of the problems associated with oil speculation may be spilling over into other energy trading markets. The European power markets are roiling, with German electricity contracts for current delivery up 12 percent this year, following a 12 percent rise in year off delivery contracts last year as well. Contracts for 2009 delivery are already up 20 percent, on the back of a price doubling for South African coal and a tripling for British natural gas. But, while revenues are up, margins are way down from the combined effect of input price increases and an 18 percent in the cost of emissions permits. Average profits from running a coal power plant in Europe are down 66 percent on the year, to only about €4/MWh. Across the board price increases have driven many industrial buyers to begin picking up contracts on the international power markets, whose volume is up across the seven largest exchanges to a third record year in a row. Rising power demand combined with high commodity prices and margins below the value necessary to incentive new plant construction (in the U.S., margins need to be around $30/MWh in order for a new gas plant running 16 hours a day to be considered economical), may cut into the power plant construction boom. This is probably a good thing, considering the impact of rising research and construction costs on the development clean coal technology. However dubious this technology may be, it is widely assumed that carbon dioxide sequestration will be one of the ways in which we reduce the impact of anthropogenic gases on the atmosphere. The current fear is that the risks associated with incorporating IGCC technology into new plant construction will raise the costs precipitously, while failing to do so will bring public and regulatory scrutiny, as well as causing investors to baulk. Clean coal has a kind of chicken and egg problem - the technology costs are high because it hasn't been done on a wide enough scale, while it hasn't been done on a wide scale because technology costs are extremely high. Versions of the technology that create additional energy streams may prove useful in addressing the scale and cost problems, but so would an accepted price for carbon and globalized emissions markets to match the globalized energy markets.

Q-Cells to Dump Its Stake in REC?

Daniel Englander: May 29, 2008, 6:30 AM
Rumors spread yesterday that Germany's Q-Cells was planning to sell its 17.9 percent stake in Renewable Energy Corporation. Q-Cells, the world's largest solar cell manufacturer, declined to comment on the rumor that sent its stock down 3.7 percent to €73.53. Norway-based REC is currently building 1.5 GW manufacturing plant in Singapore that will combine its wafer, cell, and polysilicon fab works. It's been a tough few weeks for Germany's publicly traded solar, whose stocks are down across the board over investor concerns that the CDU will succeed in its bid to cut the country's feed-in tariff by 30 percent within the next year. The rumor follows on news from the end of April announcing Norwegian industrial Orkla had ended its put option in Q-Cells's shares of REC. In February, Good Energies sold 12.48 percent of REC to Orkla and what would become Q-Cells's 17.9 percent stake. At the time of the sale, Orkla struck the put option deal with Q-Cells, which was worth about $13 million. The agreement's end may have helped spur rumors over Q-Cells's possible dumping of its own REC stock. While it's doubtful Q-Cells would drop its stake in the near term, a move out of REC would give the company some growth capital in the mid- to long-term. Earlier this week Q-Cells announced it would invest $3.5 billion to expand its production operations to Mexico's new "Silicon Border" region in Mexicali State. The Mexico expansion is part of the company's plan to move its presence into potential markets. However, the extent to which the market potential in North America is realized is dependent on the passage of PTC and ITC within the year (unlikely) and the eventual creation of a carbon market in the U.S.. Q-Cells is also expanding into Asia, where its building a new production plant right down the road from First Solar and SunPower.

Abu Dhabi’s Masdar to get into solar with help from Applied Materials

Michael Kanellos: May 29, 2008, 2:57 AM

Abu Dhabi is shopping its way into the solar industry.

Masdar PV, the solar subsidiary of the multibillion-dollar cleantech effort, will invest approximately $2 billion into thin film silicon solar plants. The first plant, in Erfurt, Germany, will be open by the third quarter of next year. A second facility in Abu Dhabi will be open by the second quarter of 2010. The two plants will have a production capacity of 210 megawatts.

 Masdar PV wants to have 1 gigawatt of capacity by 2014, which would make it one of the largest manufacturers in the world relatively quickly. The world will have approximately 10.2 gigawatts of solar manufacturing capacity in 2008 and the figure is expected to climb to 12 to 15 gigawatts by 2015, according to the Prometheus Institute. The largest manufacturers right now have just under a gigawatt. Sharp is expected to hit 1.6 gigawatts of capacity by 2010 while Q-Cells and Suntech Power Holdings will hit a gigawatt around 2010. Those are the three largest manufacturers in the world.

And how are they going to get there? With help from Applied Materials. The semiconductor equipment maker is selling Masdar three SunFab thin film lines. Think of the SunFab line as a solar factory in a box. Applied produces turnkey production lines and then sells it to well-heeled customers. Applied customers will have around 278 megawatts of capacity in the ground by the end of this year and the figure is expected to climb to 4.2 gigawatts by 2012.

Signet Solar, a solar start-up coined by ex-chip execs, just unfurled an Applied-assisted plant. It took only ten months to build. 

The lines produce thin film silicon panels. Thin film silicon isn’t as efficient as converting light into electricity as silicon solar panels, but they cost less. Thin film panels cost around $1.50 to $2.50 a watt to produce while crystalline cells cost around $2.50 to $3.75 a watt. (The figure includes the cost of manufacturing a module only and not other expenses such as installation.)

Still, Applied and its partners will need to boost efficiency over the coming years to stay competitive, said Travis Bradford of Prometheus.


Rumor: GE to get into LED streetlights

Michael Kanellos: May 28, 2008, 10:37 AM
I haven’t confirmed this, but sources tell me that General Electric, the big kahuna in energy efficiency and green tech, will talk about street lights made with light emitting diodes (LEDs) at Lightfair, a large trade show taking place in Las Vegas this week. LEDs use far less power than conventional light sources and can provide more lumens per watt than most light sources. To top it off, they last far longer—50,000 hours or more—than a lot of other light sources, which means maintenance costs are lower. Cree has already been putting LED-based street lights in cities such as Austin and Beijing. GE sells LED-based traffic lights and LED lights for home. But the streetlight market is a big one. Austin earlier this year estimates it could save up to $500,000 a year in utility bills by inserting LEDs into 5,000 street lights. Austin is working with Cree. Others such as Luxim, which has a breath mint-sized light source, are also aiming at putting solid state bulbs into street lights. On other notes, GE unrolled an alliance with Schlumberger (the European oil services company) today under which the two will work together on carbon sequestration technologies.