Chinese Solar Going Bankrupt While American Solar Printing Big Gains
First the backstory. If you had a solar panel for every expert that got airtime in the financial media by saying that American solar is dead, you could power a small neighborhood. It’s been said for years and First Solar in particular has suffered from the idea that the Chinese can do solar better and cheaper.
And like American industry loves to do (not that its necessarily wrong), solar companies have accused the Chinese government of unfair trade practices. According to Bloomberg, four of the top six solar companies are based in China with Chinese banks throwing a lot of cash the way of these companies.
Before Americans cry foul at such a practice, one word comes to mind: Solyndra.
According to reports, Suntech went the way of Lehman Brothers. Everybody, including Suntech, was expecting a government bailout but instead, eight Chinese banks forced the company into bankruptcy on Wednesday. Apparently, $2.2 billion in debt was enough for banks to say, “we’re done.”
But it might be about something a bit more important. China, along with the rest of the world, knows that there is too much supply in the solar space. China said that it would no longer bailout solar companies because it wanted something that amounted to corporate natural selection to take place.
According to Bloomberg, Stefan de Haan, principle solar analyst at the consultant HIS (NYSE: IHS) said, “The consolidation in the [solar] industry will continue. There are still many hundreds of suppliers, and there is still a fundamental overcapacity in the market.”
Does it feel a little like the airline industry? It should, and once the consolidation is over, who will be left standing?
There’s no doubt that the U.S. solar industry will have a rough time making a case to investors that it’s an industry with a “bright” future but for years experts have called for the death of First Solar. Benzinga reported on how the company was reinventing its business model and that seems to be paying off.
This is a company that added nearly 40 percent of upside in the past six months. Hardly a trend, but its balance sheet looks good and that may make it a survivor in the solar consolidation process.
SunPower is another name that looks strong. This is a company that is up 170 percent over the past six months and analysts are generally positive on the name going forward.
One bankruptcy doesn’t change the face of the American solar industry but it might cause a few less “experts” to head to the airwaves to present the overwhelming bear case.
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