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Have the European Solar companies (REC,Solarworld,Q-Cells) really returned from the dead?

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The European Solar Companies had found things going tough in 2009 as the solar market changed radically with the Lehman crisis.As the prices of the raw material Polysilicon crashed and Chinese competition increased,these companies started bleeding red ink in a prodigious manner.The high cost structure of these companies with factories in Europe stood naked against the competition.With high debt loads,there was a high chance that these companies would go bankrupt.Most of them like Q-Cells,REC started to move manufacturing to Asia while Solarworld moved to Europe.Other smaller companies muddled through.However a spectacular 2010 growth in world solar demand has brought new life into these companies.With capacity constrained,even their higher prices could be absorbed by solar installers.These companies have reported much better 2010 results with Solarworld and REC leading the way.

However prospects for these companies remain bleak as the Chinese have expanded greatly in 2010 and will do so more in 2011.These companies which were world leaders now find themselves uncompetitive in both cost and scale.While a booming market in 2010 provided a reprieve,another market downturn would expose these companies to losses again.Its like they say that When the tide goes out,you can find out who is swimming naked and who is not.The Taiwanese Solar Companies are too vulnerable to sharp price drops.The strong 2010 results might just prove to be a temporary blip in the eventual demise/diminution of these companies.

PG

Abhishek Shah

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