Solar Stocks Plunge as Germany Vows to Quicken Subsidy Cuts

Solar stocks plunged around the world after Germany, the largest market for panels, said it will make quicker cuts to subsidized rates and phase out support for the industry by 2017.

Chinese manufacturers listed in New York fell for a second day, with Trina Solar Ltd. and JA Solar Holdings Co. skidding 17 percent over the two-day period. GCL-Poly Energy Holdings Ltd., which makes the raw material for most panels, fell the most since November in Hong Kong. In Europe, Meyer Burger Technology AG, Solarworld AG and SMA Solar Technology AG dropped at least 5.3 percent each today.

German Environment Minister Norbert Roettgen said last night that he planned to reduce feed-in tariffs providing above- market prices for solar power every month instead of twice a year as he does now. He said he's working to curb an “unacceptable” surge in installations last year.

“It was clear that Roettgen would accelerate feed-in tariff digressions which would remove the bloom from the rose,” Jesse Pichel, an analyst for Jefferies Group Inc., said today. “This will remove the ability for the German market to materially upside estimates.”

Yesterday's decision indicated ministers are speeding up efforts to restrain the boom in installations after developers added 7.5 gigawatts of panels last year, surpassing the 3 gigawatts that Roettgen said would be acceptable.

Government Concern

Economy Minister Philipp Roesler has said spiraling costs linked to solar subsidies are a threat to the economy. Roettgen on Jan. 18 indicated concern that the funds are benefiting Chinese companies.

“The increase in installations in the past few years has gone far beyond what we had targeted in our legislation,” Roettgen said yesterday. He said the subsidy overhaul would be handled “quickly.”

Gordon Johnson, the Axiom Capital Management Inc. analyst who last week removed his “sell” recommendation on First Solar Inc. for the first time since 2008, cut his guidance again, giving five other solar companies a “sell” rating too.

“That was short,” he said in a note to clients. “We believe a severe cut in global demand is near.”

The higher frequency in cuts will do away with the year-end rushes of the past and may help bring installation “closer toward” the government's target, Solarworld Chief Executive Officer Frank Asbeck said by phone yesterday.

Meyer Burger, SMA

In Zurich, Meyer Burger skidded 6.6 percent to 17.80 francs, the largest drop since Dec. 1 by Europe's biggest maker of solar-panel manufacturing equipment.

In Frankfurt trading, SMA, Germany's largest solar company, fell 5.3 percent, the most in a week. Solarworld, the country's leading panel maker, dropped 6.5 percent, the biggest drop in almost two months.

Worldwide, photovoltaic panels installations rose more than 50 percent to a record 28 gigawatts last year, Bloomberg New Energy Finance estimates. Germany added 3 gigawatts in December alone as developers rushed to take advantage of subsidized rates before the cuts take affect.

A surge in output from Chinese manufacturers such as Suntech Power Holdings Ltd. led to a crash in prices, squeezing margins for German and U.S. producers.

Solar-equipment makers in the U.S. are pursuing a trade complaint through the U.S. Commerce Department aimed at curbing what they say is Chinese dumping of goods abroad. Solarworld is seeking to team with European peers to initiate anti-dumping proceedings in Europe.

‘Solar Junk Rally'

“We continue to believe the recent solar junk rally has not priced in the risk of potential anti-dumping and countervailing duties as well as further feed-in tariffs cuts in Europe, Italy is next,” Pichel said in a note to investors.

A slowdown in the German and Italian markets, which accounted for about half of worldwide installations last year, is bound to hurt the industry. Germany targets 2.5 to 3.5 gigawatts a year and seeks to phase out subsidies by 2017, Roettgen said.

The minister will propose aggressive cuts to fend off the “very real possibility” of a cap on installations, Pichel said.

The country was expected to cut tariffs by 15 percent in July, following a 15 percent reduction that took effect Jan. 1. Under the current law, lower rates are imposed automatically by above-target installations.

--With assistance from Stuart Biggs in Tokyo, Christopher Martin and Ehren Goossens in New York, Corinne Gretler in Zurich, Stefan Nicola in Berlin and Ben Sills in Madrid . Editors: Reed Landberg, Randall Hackley

SOURCE: http://news.businessweek.com/article.asp?documentKey=1376-LY3AJ31A74E901-703SIP1EKP1CK27FVGL5LB0GP8