Cowen’s Stone Comments on China Stimulus Plan for Solar
Source: http://feedproxy.google.com/~r/smallcappulse/feed/~3/oImXu36jhrk/Posted on Wednesday, April 1st, 2009 | In Small & Micro Cap
April 1, 2009 ndash; Analyst Comments ndash; Cowen amp; Companyrsquo;s Rob Stone weighed in again this morning on the recently announced stimulus for solar from Chinarsquo;s Ministry of Finance. Stonersquo;s headline reads ldquo;China Stimulus Looks Bigger Than We Thought; Japan Details to Come.rdquo; Chinarsquo;s government is working on a $586 billion stimulus package to renewables, with additional programs being planned at the provincial level. Here are Stonersquo;s Takeaways:
middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Believes Chinarsquo;s market could be 500MW this year, and ldquo;about 2x what we first thoughtrdquo;;nbsp;nbsp;
middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Funding is not an issue and there is no cap. Funds will be released at the provincial level, which will approve projects locally, making the process faster;nbsp;nbsp;
middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; In Japan, a new stimulus is also expected to include solar. ldquo;Energy appears to be a common theme as governments develop programs to fight the economic crisis.rdquo;
middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Near term estimate cuts look likely ndash; spot prices have fallen to $80-100/kg and wafers are about $1.20/watt. Module prices are $2.60-$2.80. These contractions will ldquo;crimp revenue and margins in-termrdquo; but ldquo;should help a rebound in demand via even more attractive IRRs for projects.rdquo;
This last point that Stone makes is one that we think is overlooked and has not been priced into solar stocks. Low cost producers that have a strong enough balance sheet to weather the near-term margin pressures will be the winners in this environment which inevitably points to a more self-sustaining solar market as costs come down enough to tip the balance of economics in favor of higher volumes and a model less dependent on subsidies.
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