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German D-Day Arrives; Solar Losses Mount

Germany will slash its solar feed-in tariff incentive scheme by 16%-17%, a news report indicates on Thursday, and some big-name solar stocks are taking a beating.

(German solar tariff story updated for drop in solar shares and analyst comment)



) -- Germany will slash its solar feed-in tariff incentive program by 16%-17%, according to a report on Thursday from


. Some big solar shares were suffering considerable hits on Thursday afternoon, and trading in the solar sector was well above average daily volumes.


cited government and industrial sources in reporting that the solar financial incentive scheme would be cut by 16%-17% for both rooftop and ground-based sites, beginning in April.

What's more,


sources indicated that additional cuts to the subsidies will be made in 2011 if solar projects amount to more than 3,000 megawatts, and if the 3,500 MW threshold is reached, the subsidies will see a further reduction.

While the


sourcing was anonymous, the 16%-17% cut dovetails with the expectations of many in the solar market. The most bullish -- meaning those thinking the cuts would be at the low end -- were pegging a reduction by Germany of 10%. The most bearish -- meaning those who expected the most drastic reductions in the solar incentive -- were pegging the cut at 20%.

The fact that the sources are telling


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that the actual number will come in somewhere in between the most bullish and bearish predictions, therefore, makes sense as far as it might reflect a consensus estimate.

At least one securities firm, Piper Jaffary, put out a note saying the


report was wrong. "The Environmental Ministry and solar industry groups met in Berlin on Wednesday to discuss the future of the solar subsidies. Contrary to media and analyst reports, there were no proposals from the industry or specific demands from the Environmental Ministry."

Piper Jaffray cleanteach analyst Jesse Pichel did offer an outlook on a feed-in tariff cut of 15% by Germany, if it turns out to mirror that prediction: "We believe a 15% FIT decline on July 1st would be appropriate given poly/module reductions and healthy for the industry long term, and that such a cut would not derail the long term growth rate of this industry in Germany."

The Piper analyst continued: "Anything over 15% would favor the Asian suppliers that could cope with such reductions while the European suppliers may find it difficult toachieve required cost structures."

France also announced a reduction in its solar subsidies on Wednesday.

Solar firms with huge businesses in Germany, such as

First Solar

(FSLR) - Get First Solar, Inc. Report

, were down after the news broke, and losses were edging higher in the early afternoon. Many of the losses in big solar stocks had doubled between noon and 2 p.m.

First Solar was down over 3%, on more than twice its average daily volume.

However, losses in Chinese shares did not mirror Pichel's belief that a reduction above 15% would favor Asian solar players. Some of the high-flying Chinese solar shares were down much more than First Solar.

Trina Solar


was down by more than 10%, on more than twice its average daily volume -- 3.1 million shares traded versus 1.2 million shares.

Yingli Green Energy


was down close to 8%, with 2 million more shares than normal traded by 2 p.m.

Canadian Solar

(CSIQ) - Get Canadian Solar Inc. Report

was down near 7% on twice its average daily volume -- with 3.1 million versus 1.6 million shares traded on Thursday by the early afternoon.

Suntech Power


was down over 6.5%, trading one million shares above its daily average by 2 p.m.

First Solar and Canadian Solar had both started Thursday with positive news sending shares up, but by the early afternoon any boost from the company-specific news had been wiped out.

First Solar announced on Thursday that it had acquired private land in the U.S. on which to develop solar farms.

Canadian Solar announced on Thursday a deal in Japan.

-- Reported by Eric Rosenbaum in New York.


>>France Cuts Solar Tariffs, Panic Averted

>>Solar Tariffs: 2010 Outlook

>>First Solar Acquires Private Land

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