NTPC to build solar plant in India

India’s government owned companies have never been good investments. The main reason is that profit maximization has never been their main objective, but they have mainly been used by the government and its ministers for their own personal reasons. They are highly corrupt organizations with many minsters and bureaucrats milking the organizations. A telecom minister is in the news these days for using 300 high speed lines from state owned telecom company at his residence for providing communication services to his brother’s company for free. There are numerous other cases.

Besides corruption, harebrained schemes are another huge problem for these companies. They do not have focus and go on a tangent making investments without rhyme or reason. NTPC which is one of the better run government companies is thinking of building a 1 GW poly to modules plant in India. Note NTPC is a power generating utility, without much experience in manufacturing of anything let alone solar panels or polysilicon. While the company is making big time investments in solar generation thanks to the government mandate of 100 GW by 2022 from 4 GW now, NTPC has no reason to start building a manufacturing plant for solar equipment. This is same as NTPC building boilers and turbines for its thermal power plants. The company has no competence and experience. It will be better off buying the equipment from firms specialized in this industry. I don’t think they have read Taylor’s rules on specialization.

The ostensible reason given for building the solar factory is that there is going to be huge demand in India and the government wants to bring down the total costs of a solar system from Rs 6/watt to Rs 4.5/watt . I don’t think in a million years will NTPC be able to compete on costs and efficiency compared to the likes of a SunPower or Trina Solar. Also there is going to be a massive demand in road building so should NTPC also start to quarry stones?

Softbank Solar Investment in India

India has become a hot magnet for large massive investment announcements in solar energy by companies, as the country aims to install a very ambitious 100 GW of solar energy by 2022 up from about 3.8 GW now. The company’s government organized a renewable energy conference in Feb 2015 in which companies such as SunEdison, Adanis, First Solar made announcements to set up tens of thousands of megawatts of solar and wind energy. But like the MOUs signed in investment summits, these announcements are mostly hollow and India might be lucky to see a fraction of these investments actually fructifying.

Now Softbank the glamorous Japanese conglomerate has also made a grandiose announcement of setting up a $20 billion investment in India’s RE sector. It has also lined up the Taiwanese electronics OEM giant Foxconn and India’s largest telecom operator Airtel to join it in a JV. What is funny is these three companies have very little experience in solar or wind energy. These companies have hardly done much in solar energy. Softbank’s claim to fame in solar energy is been to invest in Japanese solar farms which every Tom Dick and Harry in Japan has done because of the fabulous returns being given by the Japanese government. Like Softbank, a Japanese gaming parlor company has also invested in solar farms. Airtel does not know shit from a telecom handset and a solar panel, while Foxconn does not have much of a clue either. Foxconn 2-3 years ago has announced plans to set up massive gigawatt solar panel factories but till now has not set up even a 1 MW factory.

These companies now plan to invest $20 billion which seems very funny to me. These companies also plan to set up a panel manufacturing plant in AP. I have no clue why they want to do it, given that they have no experience or expertise. Why not just buy the panels from outside. These companies may build some plants but $20 billion looks like a pipedream and I think that even these companies know this.

This article is written by Sandeep Gupta. Working as a corporate professional, Sandeep has a passion for Solar in India.

Tata Solar Panel Review India

Tata Solar is a tier 1 bankable module manufacturer with 25 years history in India. It has one of the biggest and oldest solar panel manufacturing operations in India, having commissioned 175 MW of EPC projects, 43 MW of solar rooftop projects and exported 600 MW of modules till date. Tata Power Solar has a 200 MW and 180 MW of module and cell manufacturing facility located in Bangalore. Backed by the TATA group, one of the oldest industrial houses in India, Tata Solar is engaged in manufacturing and EPC services. Tata Solar has presence in industrial, commercial, both on-grid and off-grid solar projects and residential segments. Tata Solar is also the best solar lighting provider in India, given the brand name and in-house manufacturing of solar components. It has a range of Solar Lighting Solutions as well.

Given below are the types TATA Solar panels and applications

I. Standard Solar Modules: These modules comprises of TP and TS series, useful mainly for residential and commercial applications

Applications – Rooftop and utility scale projects

1) TP Series – They are robust and strong to withstand high wind and snowSolar Panel

i) TP 250 –

  • 60-cell multi-crystalline
  • Wattage ranging from 240Wp to 260Wp
  • 10 years product warranty and 25 years power warranty
  • Power output ranging 172.8-187.2 W
  • withstand snow loads of up to 5,400 Pa
  • positive power tolerance of up to 5W

ii) TP 300

  • 72-cell multi-crystalline
  • Wattage ranging from 280Wp to 305Wp
  • 10 years product warranty and 25 years power warranty
  • Power output ranging 201.6-219.6 W
  • withstand snow loads of up to 5,400 Pa
  • Positive power tolerance of up to 5W

2) TS Series – economical choice, designed for moderate environmental conditions

TS 250 –

  • 60-cell multi-crystalline
  • Wattage ranging from 235Wp to 250Wp
  • Power output ranging 169.2-180 W
  • 10 years product warranty and 10 year  90% / 25 year 80% power warranty

II. Speciality Modules

Applications – Indoor & outdoor lighting, street lighting, remote telecom sites and standalone systems for homes in remote locations, offshore installations and lighting billboards

1.Gold – Wide range of Tata Solar Gold series modules include the following: 10, 20, 37, 40, 50, 55, 60, 70, 75, 80, 90, 100, 125, 130, 150 and 190 Wp.

  • Multiple configurations (36, 48 and 72 cells)tata solar
  • Wattage ranging from 10Wp to 190Wp
  • Mono and multi-crystalline cells 125mm and 156mm
  • 5 years product warranty and 10 year 90% / 25 year 80% power warranty

2.Platinum – Wide range of Tata Solar Platinum series modules include the following: 5, 6, 10, 12, 18, 20, 24, 37, 65, 74, 80, 100, 125, 150 and 190 Wp.

  • Multiple configurations (36, 48 and 72 cells)
  • Positive power tolerance of up to 10%
  • Wattage ranging from 5Wp to 190Wp
  • Mono and multi-crystalline cells 125mm and 156mm
  • 5 years product warranty and 10 year 90% / 25 year 80% power warranty

If buying from Indian Solar Panel manufacturers, Tata Solar should be a good option since it is amongst the oldest in the country and also has its parent TATA Group’s support, it becomes a bankable brand in India. Also it offers a wide range of panels for residential, commercial and indoor and outdoor lighting system. I think it will be the company to serve the 25-year service warranty that comes with its panels. The company also provides other solar products like solar water pump and heater. You can buy Tata solar panels through a dealer,  buy Tata Solar online or directly from the company.

Softbank to invest in the hot Solar Market in India

The Japanese Telecom giant Softbank Corp. will now invest $20 billion in the Indian Solar market. India is witnessing big solar commitments, since its target was upgraded to 100 GW by 2022. Softbank Corp. had made history since it invested in Alibaba, the Chinese e-commerce group. The $20 billion investment in 2000 is now worth $86 billion. Softbank had earlier said it would invest ~$10 billion in India over time. It has already bought stakes worth ~30% in India’s Snapdeal and Housing.com. Now Japan’s SoftBank Corp, together with Bharti Enterprises and Taiwan’s Foxconn, will invest about $20 billion in solar projects in India; where Softbank would be the majority stakeholder. This would be amongst the biggest solar commitments that India would witness. Softbank has plans to generate minimum 20 GW of energy. What is favorable for Softbank is that India has high solar radiation and lower costs, when compared to Japan.

“India can become probably the largest country for solar energy,” Son – Founder Softbank said.

Source: Reuters

Softbank has been investing in India’s e-commerce businesses too. In October last year, it invested more than $600 million in the Indian e-commerce retailer Snapdeal and more than $200 million in the online booking cab website Ola. It also has 36% stake in ScoopWhoop along with Bharti Enterprises. India’s e-commerce market is supposed to be amongst the biggest globally. With the rise of income levels in the India middle-class and the increasing usage of smartphones, the Indian e-commerce is booming right now.

India’s solar market is also hot right now and Softbank’s commitments in India prove that. India has suddenly become a solar hub, where bigger companies from abroad are showing interest. As I mentioned yesterday this is the start of “Achhe din” returning to our country. Not only will these investments improve the situation of power-deficiency, but also open the gates for more foreign investment and hence improve macro conditions in India. I remain highly positive of the Indian Solar market.

Huawei becomes 2nd largest solar inverter supplier

Like solar panels, Chinese manufacturers have crashed the pricing of solar inverters too through large increases in capacity and reduction in process and raw material costs. Solar inverter prices decreased by almost 20% in China last year, as fierce competition for market share drove down solar inverter prices. As per Digitimes, many of the smaller players have left the field unable to compete in prices with the big boys.

Huawei has been the outstanding story becoming the 2nd largest supplier in the Chinese market after Sungrow. Huawei utilizing its experience and scale in electronics and telecom manufacturing entered the ranks of the world’s top 10 inverter suppliers. It has invested heavily into the solar inverter business through marketing and sales campaigns. Sungrow which is a pure play solar inverter focused company is facing a tough time in keeping its No.1 tag.

All this has been bad news for the dominant European companies which have seen their revenues and margins get decimated by the Chinese entry into the business. Solar inverter prices have declined steeply in the last few years falling by about 60%. SMA Solar which used to be the No.1 company with enviable margins and a couple of billion revenues, has seen continuous declines. I don’t think it will be possible for SMA Solar to retain its position. The company does not have any big strength in technology or marketing to be able to compete with the Chinese who can live with very low margins and are extremely aggressive.

IHS

The overall global PV inverter market shrank more than 4 percent in 2014 to reach $6.6 billion, as intense price competition continued and demand shifted further toward lower-priced markets. Market leader SMA continued to lose share in 2014, and the company’s market share is now half of what it was in 2012 and 25 percentage points lower than in 2009. Despite remaining the largest supplier globally, SMA has lost market share for five consecutive years.

Rank   Change
2013 2014 Company Name 13-14
1 1 SMA Solar Technology -3.2%
2 2 ABB -0.8%
3 3 Omron +0.9%
4 4 TMEIC +1.0%
7 5 Tabuchi +1.2%

“Due to global demand shifting toward Asian markets, if suppliers maintained their current market share in each country this year, it is possible that we would see a new global market leader,” said Cormac Gilligan, senior analyst, solar supply chain, IHS. “In fact, for the first time on record, SMA could be displaced as the leading PV inverter supplier, if not in terms of revenue, then quite possibly in terms of MW shipments.”

Because of the seismic demand shift toward Asia, Chinese suppliers experienced a big gain in megawatt (MW) shipment market share; however, those gains did not translate into increases in global revenue share. Average prices in China averaged $0.07 per watt (W) in 2014 compared to $0.16/W globally, which has slowed Chinese vendors’ revenue share gains.

Google is no stranger to competition as it has faced tremendous competitive threats from much bigger competitors in the past. Microsoft and Yahoo poured billions of dollars into their Internet search, but failed to make a dent into Google’s dominance in this market. Google has used the massive cash flows generated by Internet search to invest money into a wide variety of technology fields. Most of them have failed to become significant cash cows, however some of them have huge monetization capabilities (Google Maps, YouTube etc.). Some of its other initiatives are still in their infancy (Self driving cars, Home energy management, wearables). These spaces are quite huge in terms of potential revenues and if Google succeeds in even one of them, it could lead to a significant upside in the future.

But in the meantime, Google will have to safeguard its dominance of the Internet search and the massive stream of ad dollars that it gets. Facebook is the biggest challenge that the company is facing right now, though there are numerous competitors. Facebook has captured a large slice of the Internet advertisement spending in the last couple of years and that is set to increase over the coming years. Unlike other competitors, Facebook’s origin lies in the Internet domain rather than software or hardware for other major technology companies. Facebook has been effectively monetizing the traffic it gets to its site and is luring major content publishers. Its game changing move of convincing major contract providers like New York Times, BBC etc. to directly publish on its site is a big blow to Google. It will not only get the content, but also provide ad exchange services to these news providers. I think that Google will need to up its game to counter Facebook’s threat to its advertisement dominance.

Google has failed in social media

Google has failed in the social media domain, despite being one of the first large movers into the space with Orkut. The company failed to realize the importance of social media and let Orkut die due to negligence. Google once again tried to re-enter the space with Google +. But Google plus has also failed, as people hardly use the service and nobody spends much time on it. Google tried to use its search dominance to push Google plus but that too did not work out. Facebook on the other hand, has become the uncontested king of the social media sphere. Its Whatsapp acquisition was a masterstroke, though the initial price that FB paid made me cringe. Whatsapp has become the preferred mode of communication for vast sections of people around the globe. It is threatening the traditional modes of communication such as telecom and bulletin boards, as people find Whatsapp much more convenient and cheaper. Facebook’s acquisition of Instagram has further solidified its position. The company now has billions of users actively engaging with its social media sites, giving it an unparalleled database of users and their behavior. Google used to be the master of Internet data as most traffic used to go through its search services. However, Facebook has changed the paradigm and nearly 25% of the global internet traffic is now controlled by Facebook. Google has almost no visibility on that 25%. Facebook on the other hand has a very granular understanding of the traffic, while Google still cannot identify the true users of its search that accurately.

Facebook is becoming a powerful mobile force

Facebook has managed to increase the time that people spend on its sites to such a level that almost 25% of all Internet traffic is now being monopolized by Facebook. The company is getting 37% of the mobile share display ads and its mobile ad revenues have doubled to ~$2.5 billion a quarter, as compared to last year. Facebook has managed to increase the price of the ad it displays, because of deep knowledge of the consumer it is serving. Advertisers are paying for the targeting value that Facebook brings to the table. Facebook is also copying Google by opening a mobile ad network. The company’s marketshare of desktop has declined, but it is not a concern as the general move towards spending more time on smartphones and tablets is irreversible. PCs have become less relevant in consuming digital content. Facebook is becoming the gateway to Internet to a lot of people displacing Google. Consumers are using Facebook as the principal delivery mechanism for news, communication (Whatsapp, Facebook Messenger) and product reviews. This is an alarming thing for Google which used to be the principal Internet entry point for consumers. While a lot of people still use Google to get product reviews, information and news, Facebook is definitely threatening Google. Facebook is also threatening Google’s dominance in the Internet video category, with a lot the people watching videos through Facebook.

Thanks, Douglas. So with mobile phones really becoming such a primary way people search the net. Our goal is really to help people search, find the content that’s not just relevant and timely but also really easy to read and interact with on these smaller devices and smaller screens. And it’s important to note that this is just one of over 200 signals we use to evaluate the best results.

Source – Google transcript

GOOGL Chart

What Google can do to stave off this threat

Google does not have the social media skills as repeated failures have shown. Google is using Internet search to provide more information and services to consumers. It is starting to give real time flight information and phone numbers of merchants. It is even planning to allow users to directly buy from its internet search results. But I think that these incremental changes will not help. The company needs to acquire social media skills. Buying other major social media players such as Twitter or LinkedIn is one option. These companies have the skills that Google lacks and will help in creating a social media presence, which can leverage its other services such as email, search and video.

Google’s Stock Price Performance and Valuation

Google’s stock price has stagnated over the last one year and it has underperformed the broader market. The company’s revenue and earnings growth has not been that good and its new initiatives such as Google Glass, Driverless cars etc. have not positively impacted the bottom-line. With tepid growth expectations the valuation has also come down substantially and is becoming more in line with large technology companies such as Microsoft, Apple and others. The company’s forward P/E is 16.5x while its 5 year growth expectations is at 14.5%, which gives it a PEG ratio of ~1.1x.

Summary

Google is no stranger to competition, given that in its short operating history it has succeeded in driving off major technology companies like Microsoft through the sheer superiority of its products. However, Google has remained a one trick pony with Internet search continuing to drive most of its products and revenues. Internet search is becoming less relevant with the increasing popularity of smartphones and apps. A lot of consumers are skipping Google to directly interact with other company’s apps. Facebook has become a dominant Internet force, with American consumers spending almost 42 minutes daily on Facebook using their smartphones. As a result, Facebook is capturing an increasing share of digital ad dollars. It is being able to serve much deeper insights into consumer behavior, as compared to other publishers. Google is facing a threat to its core business segment. I think Google needs to react quickly to stave off this threat. The stock valuation is not expensive, but the growth is tapering down.