Analysts Pick 2009's Solar Winners: Suntech - TheStreet

Written by Ucilia Wang

A weeklong gathering of solar companies in Spain

ended Friday

Sept. 5 with predictions of a tough year ahead.

Solar companies announced deal after deal to impress investors as 715 companies and more than 20,000 attendees gathered at the European Photovoltaic Solar Energy Conference in Spain.

But falling crude oil prices -- a result of weak demand -- and predictions of a difficult year for the solar industry in 2009 likely dampened investors' enthusiasm.

Solar stock prices slipped during most of the conference.

Share prices of major players, such as

SunPower

(SPWR) - Get Report

,

Suntech Power

(STP)

,

First Solar

(FSLR) - Get Report

and

Trina Solar

(TSL)

, headed south for most of the week before rebounding on Friday

Sept. 5.

LDK Solar

(LDK)

saw its shares open at $50.51 per share on Tuesday

Sept. 2 and closed at $45.15 per share on Friday

Sept. 5, despite announcing contracts to sell its silicon wafers and buy equipment to equip new manufacturing plants.

Shares of First Solar opened at $270.40 per share on Tuesday

Sept. 2 and closed at $236.01 per share on Friday

Sept. 5.

After meeting with key industry players at the European Photovoltaic Solar Energy Conference in Spain, analysts said shifting government policies, a potential oversupply of silicon and hype about the next hot markets will converge in 2009 to weed out weak companies.

"The year 2009 could start to show signs of bifurcation between long-term winners and the companies with a 'me-too' strategy in the solar sector," wrote Lazard Capital Markets analyst Sanjay Shrestha of Lazard Capital Markets in a research note Friday

Sept. 5.

Solar company executives and analysts have predicted a drop of anywhere from 5 percent to more than 20 percent in solar panel prices next year. During the conference, SunPower CEO Thomas Werner told

Reuters

that panel prices will likely fall between 10 percent to 20 percent in 2009.

Jeff Osborne, an analyst at Thomas Weisel Parners, has already aired his pick of winners.

"We see Suntech (high volume, low cost), SunPower (high performance and vertical integration), and First Solar (low cost, high volume) weathering the storm well," Osborne wrote in a research note.

In spite of its location, the conference didn't produce much more clarity on the fate of the lucrative solar incentives in Spain. The country has become a booming market thanks a government policy that requires utilities to buy solar electricity through long-term contracts at prices higher than conventional power.

But the policy is about to change. The current prices and 400-megawatt installation cap are expiring at the end of this month, and Spain's energy commission in July proposed capping the overall installation capacity in the country at 300 megawatts for 2009.

Although the government hasn't announced any change to the July proposal, the country's energy secretary Marín Uribem said that an increase could be coming. Speculation about the new cap ranges from 400 megawatts to 500 megawatts.

Already, companies are making bets on the next big market. Italy has been a front-runner, thanks to comments from company executives.

But analysts said they don't believe it.

"We also have a hard time believing management teams ... saying they have 20 to 30 percent share in Italy and how the Czech Republic will be 300 to 500 megawatts in 2009 (up from less than 1 megawatt in 2007)," Osborne said in the research note.Italian government officials and manufacturers have weighed in, saying the country's appetite for solar isn't likely to be as grand as expected.

Although Italy also has an incentive program in place, its bureaucracy has made it difficult for companies to gain project approval.

Angelo Nogara, managing director of Solkraft Italia, told

Reuters

that many solar power plants have had to wait a year after completion before being connected to the grid. Nogara also recalled the case of a local government requesting a report on the acoustic impact of a solar power plant, which doesn't produce noise during operation.

Meanwhile, the European Photovoltaic Industry Association on Thursday said its members -- which make up more than 95 percent of the European photovoltaic industry -- unanimously agree that photovoltaic energy could provide 12 percent of European electricity demand by 2020.

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