The Solar CEO of the Year in 2011 Is...

NEW YORK ( TheStreet) - Can there possibly be a worthy candidate for CEO of the Year among the solar companies?

The sector crashed and burned in 2011, led by the colossal implosion of First Solar ( FSLR), whose shares plunged 75% to qualify as the S&P 500's biggest loser.

If ignominy is the goal, former First Solar CEO Rob Gillette could act as the stand-in for the sector's woes. There's also the House Energy Committee Investigative Subcommittee that has spent more tax dollars in 2011 pursuing every Solyndra scandal angle than Congress as a whole has spent in the past five years on creating comprehensive energy policy.

For a contrarian take, Axiom Capital analyst Gordon Johnson or hedge fund manager Jim Chanos fit the bill. Both famously and ceaselessly said First Solar was headed for a spectacular fall when it was at $180.

The truth, though, is that even amid the disaster otherwise known as solar stock investing in 2011, there are two very worthy candidates -- for two very different reasons -- for Solar CEO of the Year in 2011, ReneSola's ( SOL) Xianshou Li and Tom Werner, the head of SunPower ( SPWR), and the pair will share the honor this year.

ReneSola CEO Xianshou Li

On April 28, 2011, ReneSola held its first-quarter conference call. In answering a question from Lazard Capital Markets analyst Sanjay Shrestha about pricing expectations for solar panels in the fourth quarter 2011, CEO Li said that price per watt could fall as low as $1.10 or even $1.

The comment was quickly passed over until later in the call, when then-Auriga Securities analyst Mark Bachman followed ReneSola down into the pricing rabbit hole. Here's the exchange between Bachman and ReneSola's CEO and CFO, reprinted in its entirety (and it could have saved you a whole lot of money in solar stocks if you got out after reading this conference call transcript):

Mark Bachman: I need some clarification here. In response to Sanjay's question about ASPs in Q4 of 2011, you mentioned that pricing was going to reach $1.10 per watt, and again that's $1.10. Did you get confused here with euro and dollar pricing, and should have been quoting euros there instead of dollars?

Julia Xu, ReneSola CFO: No, I did not.

Bachman: So you truly believe that you're going to see module pricing at $1.10 by the end of this year.

Xianshou Li: (interpreted) We have always been conservative in terms of pricing. But as we have also mentioned, the Module business now is not our core business, but we have to be conservative in building our assumptions. The downstream capacities are pretty massive, so it is not unlikely module prices can fall very substantially from the current levels.

Bachman: So Julia, you may have a very competitive cost structure here across your whole business, but when you look at the industry, do you really believe the pricing will go this low and the industry is going to survive, based upon this outlook that you give?Your competitors can't even produce at $1.10 per watt right now. Why would you suggest that the module price then would reach $1.10 by Q4?

Julia Xu: I'll answer your second question first. We are at full capacity so we cannot raise any more shipments. So that's to your second question. But I will refer the first question to Mr. Li.

Li: It is not a rosy picture Mark. The reason why we are saying it is not because people cannot survive, or whether or not they can make a profit off the current cost structure. It is because there is really massive capacity that's out there. So when you have a fairly severe over-capacity situation, it is very difficult to pinpoint pricing just based on a cost structure.

Bachman: Julia, I guess our -- go ahead, I'll let Dr. Li finish.

Li: Well, just because -- I am trying to answer your question in a sense of cost structure. Even wafer price is around $0.70. The cell and the module processing costs are going to be well below $0.50, so even at $1.20, companies are still going to make a slight profit, and this is not that bad of an outcome against a very large over-capacity situation.

Bachman: I would just say I would argue with you there. You can quote all the capacity numbers you want, but it's not cost effective capacity out there. I would say that I find these comments here quite reckless, and I just hope you didn't kill the solar market.

The Renesola CEO wasn't reckless. He didn't kill the solar market, either; he just warned all of us it would be killed. And he was right.

Xianshou Li, whether you intended to or not, you were the Cassandra of solar's future in 2011. Keep up the "reckless" management. You told it the way it was, or rather, the way it was about to become.

Oh, and by the way, the latest industry data on the average price per watt of a solar panel as of this week: 95 cents.

And here's the Co-CEO of the year in solar, who didn't just say something, but did something, something big, before the worst arrived.

The solar industry dealmaker of the year didn't warn us that prices would fall off a cliff -- and considering his company is among the highest cost vendors out there, probably wouldn't have wanted us to think that -- but he did sell a huge stake in his company at a premium to current share price ahead of the sector-wide carnage.
SunPower CEO Tom Werner

In fact, maybe SunPower's Tom Werner was listening to the ReneSola conference call. Remember, the day of the ReneSola conference call was April 28. The day that SunPower announced a sale of 60% of its shares to oil major Total ( TOT)? You guessed it: April 28.

Putting those two April 28 events together sure gives solar investors a good rearview mirror look at what was about to occur. The truth is that Total had been scouring for a solar acquisition in North America for a few years, according to solar industry sources, so the date is a coincidence.

SunPower shares were sold by Werner to Total for $23.25 per share, a hefty premium to their $16.20 price at the time of the deal, but well below the $140 level reached at the high-water mark of solar investor euphoria.

The current price for SunPower shares not owned by Total is under $6. When Total recently agreed to buy 18.6 million shares of SunPower in a private placement last week, the price was no longer $23.25, but $8.80.

On that same April 28 date, First Solar held its first-quarter conference call and was asked about the SunPower-Total deal. First Solar executives said they were surprised. They weren't the only ones. Analysts in solar to this day would love to be able to answer the question: Was Werner just lucky, or did he pull off the solar coup of solar's first era?

It's logical to ask if or why SunPower would have sold if they didn't see the solar bloodbath coming. Or, did Total come knocking after its multi-year search for a solar property had proved fruitless, and in moment of weakness, Werner opted for the balance sheet lifeline with the thought that the roof could cave in?

It doesn't matter. Kudos to Tom Werner are in order, either way, in a year during which most solar CEOs waited too long to take action, and if they didn't suffer the fate of First Solar's Rob Gillette, are no more lucky for having to deal with the sector aftermath.


>To contact the writer of this article, click here: Eric Rosenbaum.

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