Hapoalim Comments on Italy's Solar Subsidy 'Overhaul' (FSLR, SPWRA)

Hapoalim is out with its report today on Italy's decision to "overhaul" its solar subsidy program. In a note to clients, Hapoalim writes, "Though subject to change, Italy's draft legislation to overhaul its solar subsidy program sheds light on Italy's impact on 2H11/2012 industry demand and pricing. In targeting 23 GW of installed solar PV and annual subsidies of €6‐7 billion by 2016, the draft proposes to (1) set a hard annual spending cap for 'large' projects in 2H11/2012 (and a 'soft' cap 2013‐2016), (2) lower FiT rates at an accelerating pace by month in 2011 and 2x/year 2012‐2016, and (3) eliminate the net metering benefit after 2012. While the draft suggests projects in development will not be grandfathered in, it leaves a loophole for 'small' projects to be excluded from the 2H11‐2012 cap. Even with this exception, however, the GSE's pipeline suggests the cap may be close to being hit, leaving a gaping hole in demand in 2H11 and further declines in 2012. While solar stocks may bounce in relief that terms weren't worse, we expect selling pressure to continue given the likelihood of disappointing 2Q11 guidance during earnings season in May and prospects for pricing declines and margin pressure in 2H11." Hapoalim has a Sell rating, and $125 PT on First Solar

. At the time of posting, shares of FSLR were trading at $134.27, up 0.01% from Tuesday's close. Hapoalim has a Hold rating, and $14 PT on SunPower

. At the time of posting, shares of SPWRA were trading at $15.30, up 0.24% from Tuesday's close.