Wind Energy | Green World Investor

China Rules the Wind Market with 40% of Global Demand and Market Leading Companies

18 Feb, 2012

China continues to rule the global wind energy market generating around 40% of the global demand in 2011 with 18 GW of wind turbine installations. The dominance of the Chinese is underlined from the fact that they installed 3 times more wind energy than USA which is a bigger electricity market. China also dominates in supplying wind equipment to the global market. Its companies like Sinovel, Mingyang and Goldwind are starting to win marketshare in overseas market .These companies which are trying to grow outside to escape the glut in the domestic market have won some major overseas orders.

China will continue to install massive amounts of wind energy in the coming years and its domestic companies will benefit the most .Even as the earlier dominating companies like Vestas, Gamesa and Sulzon fight to survive, Chinese wind turbine markets are thriving with 7 of the top 15 global wind energy companies from China. The other major rising power India is 3rd with 3 GW of installations in 2011 . Brazil has become one of the fastest growing markets with 1.5 GW of isntallations. With most of the European markets saturated and not growing , focus has shifted towards wind markets in Africa, Asia and South America. USA will see a strong 2012 as well but non renewal of tax breaks in 2013 might mean a sudden stop there.

The Chinese have not only captured most of the top rankings of the biggest solar panel producers in the world,they have extended their lead into Wind Energy as well.7 of the top 15 positions in Global Wind Turbine Producers are Chinese according to a new ranking.Sinovel and Goldwind have become the No.2 and No.4 rankers in the world with more than 10% global marketshare each.Dongfang is the other top Chinese wind power company with a 7% marketshare.United Power is at 10.Other top Chinese wind energy companies are Mingyang,Sewind and XEMC China.

The slowdown in the Western Markets has led to huge problems for dominant Western firms like Gamesa and Vestas.It has led to painful restructuring for Vestas which has fired thousands of workers from its domestic manufacturing base in Denmark.Gamesa has also seen management and ownership turmoil as WTG Orders have evaporated and its competitive position has eroded.GE,Suzlon,Gamesa and Vestas are all investing in the Chinese market which has grown exponentially in recent times and which is expected to form 50% of the Wind Energy Demand till the next few years.

How China will install 25 GW on average for the next 38years

China adds around 100 GW of Electric Power Capacity each year to meet the growing energy demands of its population. Most of it is thermal power which is becoming costlier besides the dangerous disadvantages of coal. China has been trying to increase its hydro and nuclear power capacity, but nuclear energy has received a setback with Fukushima. Solar Power in China is also increasing but it will take time as well to satisfy the electricity deficit. China is already the largest wind power market in the world installing almost 50% of the wind capacity in 2010.I t intends to keep up the furious pace of wind turbine installations at around 25 GW per year for the next 35 years to reach 1000 GW by 2050. China already has around 7 of the top 15 wind turbine producers. However a vicious price war has thrown a lot of the wind producers into bankruptcy.

Wind Power Market Rose to 41 Gigawatts in 2011, Led by China

The global wind power market rose 6 percent to 41 gigawatts last year, led by China, which captured more than two-fifths of the total, the Global Wind Energy Council said today in a report.

China installed 18 gigawatts of turbines in 2011, followed by the U.S. with 6.8 gigawatts and India’s 3 gigawatts. Germany, the U.K., Canada and Spain followed, according to the Brussels- based industry lobby group.

Renewable Energy Jobs become Less Attractive with Crashing Profits and Stocks

17 Feb, 2012

Renewable Energy,Solar Energy,Wind Energy

Renewable Energy Industry is going through some of the toughest times yet with profits and share prices of Green Companies crashing. 2011 was a horrendous year with the biggest solar company by value First Solar being the worst performer in S&P 500. Many of the biggest wind and solar companies were mired in red ink as competition and oversupply from China led to green indicies falling by more than 50% . Many of the biggest companies collapsed and many others are on lifeline.

2011 also saw the top executives of companies leaving the companies as stock options became worthless and bonuses disappeared. With another tough year expected in 2012 many of the C level executives left to search for greener pastures. In some companies like Q-Cells, First Solar replacements have not been found as companies faile to lure good hires as they lack both monetary firepower and good short term growth. Chinese companies too have not gone unscathed with some like A-Power crashing under accounting problems. The Green Industry without good leaders will face a harder time in seeing over this decline.

Brutal Year for Solar and Wind Stocks

Solar and Wind Stocks have been massacred in 2011 mainly due to the following reasons

1) Chinese oversupply which is outcome of its massive industrial overcapacity and investment. This has decimated wind and solar companies in the West while also leading to margins and profits collapsing

China’s rise in solar manufacturing has been nothing short of spectacular.From less than 5% of world marketshare it has gone to more than 50% in the current quarter.Some of its companies like Trina and Yingli are the lowest cost producers of solar modules in the world today.The Europeans like Solarworld and Q-Cells which were dominant until 2 years ago have been swept aside with Q-Cells bleeding red ink . Even in wind energy , China’s growth over the last 2-3 years has been awesome with more than 100% CAGR . It has helped in growing wind turbine manufacturers through domestic content requirements.Now that these companies have sufficient technology and are able to leverage their low cost advantages , China has removed the restrictions in Jan 2010 to attack other markets. Vestas the leading European turbine manufacturer like the solar makers has fallen into the red. The only way for these companies to survive is to move their manufacturing to Asia . Ultimately the technology will also follow ( Applied Materials has also move its R&D to Shanghai). Just like the semi and electronics industry,Europe will start looking like a marginal player in the global alternative energy industry. Despite strong domestic demand and policy support , the European industry has been outsmarted and outplayed by the Chinese

2) Commoditazation of Technology and Erosion of Entry Barriers

3) Massive and Irrational Subsidies by Asian countries to support Green Industry

First Solar-to-Vestas Wind Profit Crash Deters New CEOs: Energy

Renewable energy companies are losing their allure with top executives after profits and stock prices collapsed across the industry, making it more difficult for boards to replace underperforming managers.

First Solar Inc., the biggest U.S. solar company, ousted its chief executive officer in October and is still seeking a replacement. At Vestas Wind Systems A/S, the largest turbine maker, the chairman and finance director are leaving after the company cut sales forecasts twice in three months, and CEO Ditlev Engel said his own job is safe.Q-Cells SE Chief Financial Officer Marion Helmes resigned in November, leaving her duties to Nedim Cen, the CEO, who has concentrated on refinancing the solar company’s debt instead of replacing her. Conergy AG, a German solar company negotiating with creditors, last month named Chairman Philip Comberg to serve as CEO until the end of this year, filling a post open for 15 months.

List of Earth’s Largest Wind Energy Countries – China Leads with 60 GW of Wind Electricity Capacity

16 Feb, 2012

Wind Energy

Wind Energy is the largest renewable energy source in the globe right now (if you don’t count in hydro and nuclear energy). The total installed wind energy capacity exceeds the solar and biomass capacity by quite a margin at over 200 GW . The recent surge in wind energy installations has been from China which put up almost 40-50% of the global wind turbine installations in 2010 and 2011. Now China has surpassed every other country to become the largest wind energy country in the world with over 60 GW. While Europe earlier led by Spain, Denamark and Germany used to lead in wind capacity, they have been comprehensively overtaken by the Middle Kingdom in the last couple of years. USA comes in next but still far below its potential while the rest of the world has started to pick up now. India is the 5th largest country and has been steadily putting up around 2-3 GW of wind capacity each year.

Solar Energy has grown tremendously in the last few years as prices have fallen drastically. At 26-27 GW it is only 40% behind wind and should overtake it in the next few years. Unlike Wind Energy, Solar Energy can be installed on roofs and the prices are falling much faster. China which has the most hydroelectric capacity in the world,leads in wind as well. It remains a matter of time before China overtakes Germany in Solar Energy as well.

Top 10 Countries Wind Electricity Capacity

China 62,733 MW
United States 46,919 MW
Germany 29,060 MW
Spain 21,674 MW.
India 16,084 MW
France 6,800 MW
Italy 6,747 MW
UK 6,540 MW
Canada 5,265 MW
Portugal 4,083 MW.

The next wave of wind energy growth is expected to come from

a) Offshore Wind Energy growth in Developed countries particularly in Europe

Offshore Wind Energy has been foretasted from around 3 GW to 75 GW by 2020 as countries in Europe,Asia and North America heavily support this industry.Onshore wind energy growth on the other hand is expected to slow down as 38 GW of Wind Capacity were installed in 2010 with Western Markets showing a sharp slowdown.Offshore Wind is seeing increasing growth as government heavily subsidize and support Offshore Wind Energy.Though the costs of offshore wind parks are much higher today,they will decrease as the installed offshore wind capacity increases from around 3 GW today to around 75 GW which is being foretasted globally by 2020.

b) Further development of Wind Energy in Developing Countries particularly South America and Asia. China intends to keep building around 25 GW of wind capacity each year to keep up with its skyrocketing energy demand growth

China adds around 100 GW of Electric Power Capacity each year to meet the growing energy demands of its population. Most of it is thermal power which is becoming costlier besides the dangerous disadvantages of coal. China has been trying to increase its hydro and nuclear power capacity, but nuclear energy has received a setback with Fukushima. Solar Power in China is also increasing but it will take time as well to satisfy the electricity deficit. China is already the largest wind power market in the world installing almost 50% of the wind capacity in 2010.I t intends to keep up the furious pace of wind turbine installations at around 25 GW per year for the next 35 years to reach 1000 GW by 2050.

Electricity Generating Capacity by Country

The world’s total electricity generating capacity is around 4500 GW (2007 figures) which is expected to increase by 1.7% each year to rise to 7000 GW by 2035 according to EIA.USA is still the world’s largest electricity producing country with more than 20% of the world’s power capacity with around 1 Terawatts of Electricity Capacity.China has been rapidly adding capacity in the last decade and the second biggest electricity producing country with more than 700 GW

USA 995 GW
China 716 GW
Japan 279 GW
Russia 221 GW
India 159 GW
Germany 140 GW
Canada 125 GW
Brazil 100 GW
South Korea 79 GW

Chinese Kangaroo Courts to be Tested in American Superconductor Wind IP Theft by Sinovel

7 Feb, 2012

China,USA,Wind Energy

Chinese Legal System is mostly a joke with the communist party running the world’s most populated country with an iron hand. The courts are mostly for show as dissidence against the Party is not tolerated and human rights are non-existent.Also most of the major companies are run under crony capital rules rather than free markets. Most of the rulings are done which favor the ruling party mandarins with little respect to whatever Communist Party laws are. IP Theft has been a big problem for overseas companies operating in China with Google existing the country sometime ago after it was hacked. With the world’s largest Internet companies having to run because of IP theft, smaller companies have no chance.Sinovel is the biggest wind company in the world right now because of Chinese government support and policies. It commands huge influence in the corridors of power as it is unlikely to have become this big without major government and bank support.

American Superconductor’s Tragic Story

American Superconductor (AMSC) which is one of the top rated wind stock in the US crashed by more than 40% as its largest customer AMSC is mainly a seller wind turbine core electrical components and full wind turbine electrical control systems (ECS).It has also made pilot sales of high capacity super conducting equipment to some customer like TresAmigas.Sinovel refused to take contracted shipments of wind turbine core electrical components and spare parts.The reason given was high inventory levels but the company failed to explain why Sinovel which is a multi billion dollar company has refused to pay AMSC for certain contracted shipments made in fiscal year 2010.Note $56 million in payments related to Fiscal 2010 quarters have been not paid to AMSC ( which would have been recognized as revenue).None of this was disclosed till now leading to a class action shareholder lawsuit against the company.It is quite perplexing why your largest customer will not pay you for past shipments and then cancel shipments as well.Is it because of some acrimony or is just Sinovel using its massive size to squash a small supplier.

American Superconductor has filed 3 cases against the biggest wind energy company in the world Sinovel for stealing its software and not honouring its contracts. One of its employees was arrested for corporate espionage while passing secrets to Sinovel. Note Sinovel was the biggest customer for AMSC’s wind power systems and software before abrutply terminating its contract. This led to a meltdown of AMSC stock and business. Now AMSC is trying to get back $1.2 billion from Sinovel. Given the quality of the Chinese legal system this looks unlikely.

US wind energy company AMSC said Monday it had filed three civil lawsuits in Chinese courts against rival Sinovel Wind Group Co., which it accused of stealing industrial secrets.

“AMSC is seeking to recover more than $1.2 billion for contracted shipments and damages from Sinovel in these cases, which stem from Sinovel’s contractual breaches in March 2011 and AMSC’s discovery of intellectual property theft by Sinovel employees in June 2011,” the company said in a statement.

AMSC said it believed the former employee illegally used source code to develop for Sinovel a software modification to circumvent the encryption and remove technical protection measures for the technology.

The US company said that because Chinese equipment is being used in wind turbines containing its wind turbine control software, “we believe that our copyrighted software is being infringed.”

Another Brutal Year for Solar and Wind Stocks in Offing Despite Growing Demand

1 Feb, 2012

Solar Energy,Wind Energy

Solar and Wind Stocks have been massacred in 2011 mainly due to the following reasons

1) Chinese oversupply which is outcome of its massive industrial overcapacity and investment. This has decimated wind and solar companies in the West while also leading to margins and profits collapsing

China’s rise in solar manufacturing has been nothing short of spectacular.From less than 5% of world marketshare it has gone to more than 50% in the current quarter.Some of its companies like Trina and Yingli are the lowest cost producers of solar modules in the world today.The Europeans like Solarworld and Q-Cells which were dominant until 2 years ago have been swept aside with Q-Cells bleeding red ink . Even in wind energy , China’s growth over the last 2-3 years has been awesome with more than 100% CAGR . It has helped in growing wind turbine manufacturers through domestic content requirements.Now that these companies have sufficient technology and are able to leverage their low cost advantages , China has removed the restrictions in Jan 2010 to attack other markets. Vestas the leading European turbine manufacturer like the solar makers has fallen into the red. The only way for these companies to survive is to move their manufacturing to Asia . Ultimately the technology will also follow ( Applied Materials has also move its R&D to Shanghai). Just like the semi and electronics industry,Europe will start looking like a marginal player in the global alternative energy industry. Despite strong domestic demand and policy support , the European industry has been outsmarted and outplayed by the Chinese

2) Commoditazation of Technology and Erosion of Entry Barriers

3) Massive and Irrational Subsidies by Asian countries to support Green Industry

Despite both Wind and Solar capacity growing strongly in 2011 the stocks have been punished.

2012 has a good chance to be another bad year for these stocks because

a) Wind Power in China has reached a plateau installing almost 50% of the global wind turbine installations

China Wind Power Market has become the biggest in the world with more than 18 GW of capacity installed in one single year, Note China has managed to double its capacity each year since 2005 and at the end of 2010 Wind Capacity totalled 44 GW which makes China the biggest Wind Power country in the world overtaking the USA.China has now got 7 of the Top 15 Global Wind Turbine Manufacturers and 2 of the Top 3 WTG Companies.China’s Massive Demand for Energy has made power plants mushroom in the country where more than 70% of the electricity is met by Coal.Wind Energy still forms only a small part of the power mix at less than 7% of the total power capacity and serves only a fraction of the Kwh of electricity given the lower load factor of Wind Power.Note Wind Power has grown in China as its Advantages as a Clean Source of Energy far outweigh its Cons.However the rapid demand growth has made a top inevitable as a country can only install that many megawatts in a year.

The 2 Biggest Signs of Trouble for the Chinese Wind Power Industry have been seen in the last couple of days.

1) Sinovel has canceled shipments of Electrical Control Systems (ECS) for its Wind Turbines from American Superconductor due to high inventory levels and refused past payments as well.With the biggest Manufacturer of Wind Turbines reporting inventory problems,the situation of the rest can’t be that good

2) The Chinese National Energy Bureau was considering tighter procedures that would include requiring local governments to get the written approval before going ahead with wind projects with installed capacity of less than 50 MW.Earlier it used to be more than 50 MW

3) Hundreds of Wind Turbines have not been connected to the Power Grid due to lack of capacity or transmission lines.China emphasises on investment without factoring in returns is one cause of these orphan wind turbines.

b) Solar Energy Growth may slowdown as well after a blistering 35% growth in 2011 as European countries slow / kill subsidies under the Debt Crisis.

c) Industries have too many players many of which are small and uncompetitive. Though a lot of solar companies have become bankrupt, there still exist too many.

Now a new wave of bankruptcies are on the way with Q-Cells likely facing a credit event as it needs to roll over convertibles which come due in February. Note Q-Cells has fallen a long way from being the biggest solar cell company in 2008. Miasole and Nanosolar were Private Equity backed CIGs darlings that were supposed to become the biggest thing following Firsst Solar . Now Nanosolar faceds executive exits while Miasole has fired large number of its workforce failing to find a big parent to support it. Note the smaller companies like Ascent Solar have found backers in Asia . Solar Technologies are seeing Darwin Survival of the Fittest with crystalline silicon solar panel technology beating out thin film solar and solar thermal technologies

APPENDIX

Wind Energy Stocks

1) Vestas – Vestas the largest Wind Turbine Company in the World has been facing one setback after another.The Danish Company which used to be a Green Investor Favorite till a couple of years can’t seem to find a buyer these days.Stiff competition from China,Slowdown in Wind Energy Farms in the West and now Wind Blade Problems have formed a perfect storm for this company.

2) General Electric (USA) - General Electric is looking to Invest Heavily in the new Age Green Industry like other Industrial Giants like Siemens,ABB etc.General Electric or GE as it is popularly known is one of the biggest players in the Green Industry globally.It generated $18 billion in Ecomagination revenues in 2009 with $1.5 Billion in Investment.General Electric like other industrial conglomerates like Siemens,Areva and others are in fact low risk plays in the Green Investing sector.GE is strong across most of the Green Sectors today particularly in the area of Smart Grid and Energy Efficiency.GE has a 40-50% marketshare of the US market which is the 2nd largest in the world.Due to its vertical integration,it has one of the highest margins in the industry and remains a formidable player with its acquisition Enron’s Wind Turbine arm proving to be a masterstroke.

3) Gamesa (Spain) - Gamesa the Spanish Wind Turbine Producer and Wind Farm Operator has faced the worst year of its history in 2010.Like Vestas and Suzlon,2010 has been a cruel year for the Wind Industry in the Western Markets and the WTG Players dependent on those markets.Gamesa is one of the worst performing Wind Energy Stocks in 2010.Gamesa is looking to restructure its operations and concentrating on the offshore wind market by focusing on higher megawatt turbines.Gamesa is leading a massive Spanish Research Effort to develop a colossal 15 MW Turbine meant for the fast growing offshore wind sector.But this is a long term plan with 2020 set as the target for the complete development of this new Turbine.Meanwhile Gamesa has become the target of takeover speculation by one of the bigger Chinese Wind Turbine players like Sinovel,Goldwind etc.Gamesa has seen its revenue fall by 28% and profits by 71% with Operating Margins of 4-5%.Things don’t look too good for 2011 either though Orders have started ticking up

4) Suzlon Energy is the biggest Indian Wind Energy Company by far with 4-5 Gigawatts of WTG Capacity per year.However Suzlon has languished in red ink since the beginning of the Global Financial Crisis in 2008.The company started by Tulsi Tanti in 1995 was a shining example of Asian CleanTech with a 10% global marketshare and ranking amongst the top 5 Wind Turbine Makers .Suzlon buoyed by its success had bought controlling equity stakes in Turbine Gears producer Hansen Transmission and European Wind Turbine producer Repower.Suzlon seems to be recovering with increase in orders particularly at its German subsidiary RePower,however a huge debt burden poses problems.

5) Siemens – The largest Green Company in the world,Siemens has a strong presence in the Wind Turbine Segment.The company is strong in Europe and is now expanding to emerging markets like Asia.Given its huge technological strengths in electrical equipment,power transmission and large project construction,Siemens is looking for a dominant role in the growing offshore wind market as well.

6) Goldwind - The Wind Energy Market in China has witnessed the growth of almost 90 companies with little differentiation competing fiercely on prices.This has led to low to zero margins for most of these companies.Goldwind has managed to rise above the competition by becoming the single largest Chinese player and looks to takeover the No.1 position in the world in the next few years.By taking bold risks and with the support of the government,Goldwind has become a threat to the established Wind Turbine Order

7) Sinovel – The 2nd largest Chinese Wind Power Company managed to do a successful IPO in Hong Kong last year despite long delays.The company is looking to expand in the foreign markets particularly the US market and has gotten a local management to help it penetrate the newer market.

Dongfang Electric - Dongfang Electric Corporation,China’s largest power equipment producer is also the 3rd biggest Wind Turbine Producer in China as well .The company has managed to grow impressively like the rest of the Chinese and is looking to expand in foreign markets as well.Recently bagged a 276 MW $203 million WTG supply contract with Abhijeet Group.

9) Ming Yang Power- Ming Yang is the only significant non-state owned Chinese Wind Energy Company with a 2009 marketshare of around 4%.The Company has a very short history installing its first Wind Turbine just 2 years ago and has seen an exponential growth riding on the incredible Wind Industry Growth in China.

10) Mitsubishi Heavy Industries , the massive Japanese Conglomerate is looking to overseas market for growing its Wind Energy Division.Mitsubishi like other Japanese companies are looking towards Green Industry for growth.Japan already possesses solid strengths in this area with its traditional focus on resource efficiency.While companies like Panansonic and Toyota looks towards Electric Vehicles and Batteries,Sharp and Kyocera towards Wind Energy,Mitsubishi is focusing its energy on the Wind Sector.

11) Enercon – Enercon is a privately listed German company which has almost 22 GW of Wind Turbine Installations in the world.Enercon was the first company to build a gearless Wind Turbine which is one of the biggest innovation in the Wind Energy Industry in recent times.

12) Nordex - Nordex is another German company in the Wind Turbine Industry which was the first one to build a 1 MW Turbine.The company has not managed to grow fast as the other German companies like Enercon,RePower and Siemens.

13) United Technologies Corporation (UTC) - This US Giant Technology Conglomerate is still a small player in the World Wind Power Market.However it has increased its footprint by acquiring struggling independent US Wind Power company Clipper.

Solar Energy Stocks

Solar Cells Stocks

JA Solar (JASO) ( The Biggest Solar Cell Producer in the World)

Gintech (3514.TW) ( Biggest Solar Cell Supplier in Taiwan)

Motech (6244.TW) ( Solar Cell Supplier in Taiwan with wafer and poly production as well)

E-Ton (3452.TW) ( Survival is in question)

Q-Cells (QCE.DE) The largest solar producer of cells in 2008 faced a horrendous 2009 running losses of as high as Euro 1 billion)

Neo Solar (3576.TW)(Has been one of the fastest growing solar companies)

Del Solar ( Small Solar Cell Supplier)

IndoSolar ( Small Solar Cell Supplier in India)

Emcore (EMKR) ( Small Specialist suppliers of High Efficiency Multijunction Cells)

Solar Panels Stocks

Suntech (STP) ( The biggest Chinese solar panel producer in the world)

Trina Solar (TSL) ( The most valued Chinese solar panel supplier)

Yingli Green Energy (YGE) ( Top 3 Chinese solar panel supplier)

Jinko Solar (JKS)

Canadian Solar (CSIQ) (Despite Canadian in the name is one of the biggest Chinese solar panel suppliers)

Sunpower Corporation (SPWRA)( Makes the Most Efficiency Solar Panels,bought by French Giant Total)

Hanwha Solar One (HSOL) ( Earlier known as Solarfun,bought by South Korean Conglomerate Hanwha)

Sharp ( Biggest Japanese Solar Compan)

Sanyo Panasonic( Sanyo plans to invest more than 70% of its total investment over the next 3 years in its renewable energy and energy storage segment)

Kyocera(Kyocera is Japan’s second largest solar panel producing company)

Mitsubishi( Mistubishi is another old time Japanese solar company which has a low profile solar module and system business)

LG (It is selling solar modules in the South Korean and European markets and has 240 MW capacity)

Samsung ( The company makes silicon solar cells and panels,will start making poly with MEMC)

Hyundai ( The first South Korean company to move int solar panel production)

Solarworld (SWV.DE)- Solarworld is the Biggest German producer of solar panels,the company is one of the few to still have operations in Europe and USA)

Bosch (Automotive company,made expensive acquisitions,now moving production to Malaysia)

Shanghai Chaori Solar Energy (Listed in China,integrated producer of solar panels)

AUO ( AUO has a JV with SunPower’s to build 1.4 gigawatt third solar cell fabrication facility in Malaysia)

China Sunenergy(CSUN) (A Small China Solar Energy Cell and Panel Supplier)

Arise Technologies (Canadian small suppliers of solar panels)

BP (Outsources production of solar panels,sells under brandname )

GE View

General Electric Co. expects increased competition and a reduction in subsidies by cash-strapped governments to lead to more companies exiting the wind and solar power businesses, but the industrial behemoth still sees growing long-term demand.”There’s going to be a lot of casualties in the wind and solar businesses, there already are in solar,” John Krenicki, who leads GE’s energy division, told Reuters in an interview on Monday.

Wind Industry Oversupply , Sinovel Profits to Halve in 2012

Sinovel Wind Group Co., China’s biggest wind-turbine maker, expects its 2011 earnings to fall by more than 50 percent as heightened competition at home and abroad dragged down prices.

Rivalry within the market depressed prices, trimming revenue and profit margins, the Beijing-based company said yesterday in a statement. “Cyclical fluctuations” in the world economy also delayed some projects, curbing income, it said.

“It’s difficult for these guys to drive costs down at the same pace as revenue, so margins are getting squeezed,” Aaron Chew, an analyst with Maxim Group LLC in New York, said by telephone. Sinovel may still fare better than European counterparts such as Vestas because of lower labor expenses and more advantageous government subsidies in China, he said.

Lower Support

Vestas has cut sales forecasts twice since October after Asian competitors grabbed market share and U.S. and European governments reined in support for renewable power to curb budget deficits.

A tighter government approval process for projects in China has intensified competition further, spurring domestic companies to study expansion elsewhere. “We do not expect growth in wind installations in China in 2012 to 2014,” so growth abroad would allow the main Chinese players to boost sales, McLoughlin said.

Indian Renewable Energy Stocks – Bubble Bursting or Investor Panic

26 Jan, 2012

Energy,Orient Green Power,Renewable Energy,Solar Energy,Suzlon,Wind Energy

Quick quiz. What is common to Suzlon, Moser Baer, Indo Solar, Websol Energy systems and Orient Green Power? All these stocks had successful runs on the stock market and hyped as the next game changers in wind energy, semi conductors, solar power and hydel/geo thermal power. Valuations were more on growth stories than through an hard nosed DCF spreadsheet. But now, they trade at record lows(like other stocks but what is different is the pressing fundamental concerns in each case). Is this a bubble finally bursting, or are investors panicking?

Suzlon cherishes an ambitious vision of being the technology leader in the wind sector, and among the top three wind companies in all the key markets of the world. It expects that by 2015, total worldwide installation of wind energy would cross 442 GW which is almost 2.3 times of the current installation. This will cover about 7.5% of the global electricity supply by then, as opposed to just 4% now. But the solar bubble collapse in Spain, France and Germany(where subsidies were almost withdrawn) has put concerns on the very business model of solar(preferential feed in tariffs at peak hours(morning/noon)), as mentioned by First Solar in its 10K filing. So with gradual withdrawal of subsidies to wind energy generators, will Suzlon be able to regain pricing power for its equipment? Even in India, the most recent round of wind energy purchase tenders, saw bidders discount the CERC approved tariffs of Rs 17.91 by nearly 30%-35%, indicating that new players are willing to slash prices to gain market share. This would impact supplier pricing as well.
Moser Baer, Indo Solar and Websol Energy systems, wanted to capitalize on the boom in demand for solar photovoltaic cells. Indo Solar wanted to take benefit of the 25% capital subsidy scheme for project capex over Rs 1,000 crores( as per the Special Incentive Package scheme announced by the Ministry of Communications and Information Technology, Government of India). But the global over supply(especially from China) backed by costs increases in key raw materials, led to EBITDA margin compressions, and short of domestic protectionism, I do not see a bright future for these stocks. While they are all trying vertical integration, entering into adjacent industries etc, the core business model is facing challenges due to global supply scenario, and price driven market.
Orient Green Power is a slightly different proposition though. In 1H’12(Sep11 half year) alone, it added 80MW of wind energy, and had 300MW generation capacity(250MW wind+50MW biomass) in operation. However, with 250MW capacity wholly in Tamil Nadu and that State Electricity Board being in financial distress, investors seem to have discounted the stock which trades at P/BV of 0.5, despite its aggressive growth plans to reach 550MW capacity by Jun’12! At market cap of Rs 610 crores(with debt of Rs 190crores), the company had an EV of Rs 800 crores(assuming the Rs 170 crores of cash offset the current liabilities of Rs 195 crores, as the loans and advances of Rs 808 crores would presumably not be liquid), which would imply an EV of Rs 2.67 crores/MW, nearly half the estimated Rs 5.3cr/MW replacement cost of that capacity.

So have the factors affecting thermal power stocks(bankruptcy like status of SEBs, increased fuel costs, project execution delays) rubbed off disproportionately on these stocks as investors blindly herd together to sell power stocks? Or is it that the favourable economics may change? For export oriented equipment manufacturers like Suzon, the subsidy withdrawal story may play out, but for domestic generators, the national solar mission and other such plans would seem to give a secure price floor and assured market to sell the generated power. These stocks are worth tracking though, as a hedge against the general power sector decline.

The paragraphs below features previous GWI takes on the above Green Stocks and is not part of Anand’s article

You can read about the GWI List of Green Companies in India

Previous GWI take on whether Suzlon is a falling Knife

Suzlon History

Suzlon,the Indian Wind Turbine making company has languished in red ink since the beginning of the Global Financial Crisis in 2008.The company started by Tulsi Tanti in 1995 was a shining example of Asian CleanTech with a 10% global marketshare and ranking amongst the top 5 Wind Turbine Makers .Suzlon buoyed by its success had bought controlling equity stakes in Turbine Gears producer Hansen Transmission and European Wind Turbine producer Repower.Suzlon wanted to leverage Repower’s technological expertise to enhance its own product offering.Like other Indian companies with global ambitions like Hindalco,Tata Steel and Tata Motors,it took on a lot of debt to buy these companies at the peak of the global economic cycle.The GFC resulted in a twin whammy for Suzlon.On one hand its end markets collapsed as project financing disappeared and on the other hand its huge debt burden became unsustainable.The company has failed to recover from the GFC as competition in the Wind Turbine industry has increased with the rise of Chinese players like Sinovel,Goldwind and A-Power.With the 2 biggest markets of USA and China dominated by domestic players,Suzlon has become a shadow of its former self.While other Indian companies have recovered strongly with the Global Economy,Suzlon continues to lose huge amounts of money.Its recent 2Q10 results were quite bad resulting in the share shedding 6% to Rs 50.This is almost 90% below its peak price in the heady days of 2008 .So is Suzlon a Fallen Angel which could turnaround to become a multibagger or a Falling Knife luring investors into further losses.Here are the pros and cons of the argument.

Orient Green Power IPO Analysis

Orient Green Power Ltd (OGPL) is India’s Largest Green Utility and is one of the areas that is a good way to invest in India’s Green Energy Sector.The company is owned by the Shriram Group and a couple of PE Players will issue around Rs 900 crores (~$180mm) which will result in a market cap of $450mm.OGPL is a relatively new company setting up and acquiring most of its 200 MW capacity in the last year which comprised of 152 MW of Wind Energy and the rest is Biomass Energy.The company plans to increase this capacity 4 fold to around 1000 MW in the next couple of years with Power Plants in India,Europe and Sri Lanka.The centerpiece of this expansion will be a 300 MW Wind Energy Plant in Tamil Nadu for which $10 million has been already been spent.The company’s past profits and cash flow have been negative which is not exactly a concern given that most of the capacity was set up in the last year or so.I like the company’s growth plans and the sector in which it operates.India suffers from a huge power deficit and Renewable Energy is being heavily promoted through Government Subsides and Renewable Energy Mandates by the CERC.Trading of Renewable Energy Certificates (RECs) should start in a year or so giving additional revenue streams to Green Energy Producers.Here are the pros and cons of the issue

(The author Anandh Sundar is from the IIM Ahmedabad 2010-12 batch, and a ranker in CA/CS/CWA exams. He blogs at http://financeandcapitalmarkets.blogspot.com/, and http://specialsituationsindia.blogspot.com/ and has a keen interest in investing)

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