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Cowen’s Rob Stone Says HOKU (Nasdaq:HOKU) Poly Plant Delays Likely

Small Cap Pulse — Thu, 29 Jan 2009 21:23:00 +0000

January 29, 2009 ndash; Analyst Comments ndash; Cowenrsquo;s Rob Stone weighed in on Hoku Scientific (Nasdaq:HOKU) this morning, stating that its polysilicon plant is progressing but with uncertain financing he expects the stock will track the market. Hokursquo;s poly plant is being largely paid for by a series of pre-payments for long-term take-or-pay contracts from customers, an attractive strategy which can limit dilution and debt ndash; if the customers maintain their schedule on pre-payments. The problem is that poly prices have declined substantially from pre-negotiating pricing while mid-stream customers in the solar sector are facing project delays of their own, as well as tighter credit markets and this increases the risk to Hokursquo;s plan and ability to rely on pre-payments. Stone noted that Hokursquo;s second-largest customer (Solargiga) has defaulted on a pre-payment. Too much of this will cause delays in its progress to getting the poly plant completed and online. Stonersquo;s takeaways: middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Expects poly plant ramp to slow ndash; contracted prepayments now total $216 million, of which $106 million has been received to date (Solargiga and Jinko have defaulted) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Cut FY10/11 estimates to a loss of $0.50 per share on about $83 million in revenue (prior expectations of $0.36 loss per share on $142 million in revenue) nbsp;and $0.87 on about $227 million in revenue (prior $1.37 per share and $241 million in revenue). Pushed out poly production targets. Cut poly GM targets. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Noted that stimulus bill should boost solar activity in Hawaii, which should benefit Hoku. Stonersquo;s rating on Hoku is NEUTRAL pa href="http://feeds.feedburner.com/~a/smallcappulse/feed?a=gWw5JN"img src="http://feeds.feedburner.com/~a/smallcappulse/feed?i=gWw5JN" border="0"/img/a/p

Aspire Talks with Hoku’s (Nasdaq:HOKU) Darryl Nakamoto

Small Cap Pulse — Mon, 15 Dec 2008 22:37:00 +0000

December 15, 2008 ndash; We recently had the opportunity to ask Darryl Nakamoto, CFO of Hoku Scientific some questions about what he is seeing in the solar sector: Aspire: What surprised you about the solar markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you werenrsquo;t anticipating? Nakamoto: We were pleasantly surprised by the extension of the Federal Renewable Energy ITC. We did not foresee its inclusion in the legislation aimed at stabilizing the credit markets. In our local market, we were also very pleased by the progress represented by the Hawaii Clean Energy Initiative, which lays out a specific plan of action for the broad and rapid deployment of renewable technology throughout the state.nbsp; Aspire: Solar/PV energy costs between 21 and 38 cents per kWh to produce. We are still a ways off from reaching grid parity. When do you think that happens? And do you think this will be the key inflection point that will need to be reached to see solar production and consumption become a more significant part of the U.S. (and global) energy pie? What are other key factors?nbsp;nbsp; Nakamoto: By virtue of geography, Hoku Solar, our PV integration and installation business in Hawaii, is already operating in a near-grid-parity environment. (Grid electricity costs in Hawaii range from $0.20 per kWh to more than $0.40 per kWh in some areas.) This effective price parity certainly helps drive demand, but from our perspective, it seems that prices must still continue to come down before the PV market reaches a true inflection point.nbsp;For example, even with high electricity prices in Hawaii, we find that the market still requires government intervention to drive growth in PV consumption. Both State and Federal tax credits continue to provide a meaningful incentive for individuals and corporations to invest directly in their own PV systems. However, it is also worth mentioning that the tax credits do not seem to have inspired a corresponding amount of third-party investment into PV generation capacity. Based on the results achieved in other markets, it seems that a feed-in tariff may create the most favorable conditions for PV investment financing. To this end, we are again encouraged by the Hawaii Clean Energy Initiative, which includes a provision for a clean energy feed-in tariff.nbsp; Aspire: Conventional views in the industry expect polysilicon prices to plunge this next year with all of the new production coming online which will help supplies double while demand is only expected to increase about 30% to 40%. As a result, manufacturers of poly will see margins erode. Meanwhile, expectations are also for module oversupply to create ASP erosion in the midstream channel. At some point, shouldnrsquo;t all of this price erosion ultimately benefit the end consumer and stimulate demand? From a manufacturerrsquo;s perspective, what is your outlook on this dynamic, and what measures can you (and other manufacturers) take to adjust and protect your margins? Do efficiencies created by newer technologies at the poly plant level help compensate for erosion in poly prices?nbsp;nbsp; Nakamoto: We anticipate prolonged and extensive downward pressure on pricing (and margins) throughout the PV value chain. Notwithstanding current market externalities, the falling prices should eventually help stimulate market demand. And, considering the heavily fragmented nature of the solar manufacturing marketplace, this pressure could also create a compelling case for consolidation and vertical integration throughout the industry. nbsp;In any case, we believe that companies who have good controls and stabilized COGS will succeed in passing cost efficiencies along to their customers while still maintaining healthy margins. The recent volatility in polysilicon pricing poses a severe challenge to producers whose businesses were focused on spot market sales. This, in turn, could cause some new market entrants to delay initial production and create a situation where much of the planned new capacity is unlikely to come online when promised, if at all.nbsp;nbsp; Aspire: Some industry experts and analysts have lowered their expectations for solar growth in 2009 based on lower demand as a result of less government support in Europe. How big of an impact do you think that will have on overall growth, and to what extent do you think renewed support in Japan, as well as increasing legislative support in the U.S. will offset the situation in Europe?nbsp;nbsp; Nakamoto: We believe demand in the U.S. remains relatively untapped, and are optimistic that continued emerging domestic demand will offset potential reductions abroad.nbsp;nbsp; Aspire: What are the key issues, challenges and opportunities that you see storage playing in the progression of solar energy as a more meaningful energy source in the overall energy ecosystem?nbsp; Nakamoto: While distributed generation and storage will continue to play an increasingly important role in defining firm and resilient renewable power grids, near term strategies include the removal of net energy metering (NEM) limitations and/or the introduction of feed-in tariffs, like the ones contemplated by the Hawaii Clean Energy Initiative. Taking the cap off NEM addresses the local storage issue by allowing property owners to sell extra power back to the grid. At scale, this is useful ndash; particularly on a grid with low-renewable penetration ndash; because it encouraging the installation of large-scale PV systems at suitable locations and guarantees corresponding savings to the property owners in the form of credits for power fed back to the grid.nbsp; nbsp;Over time, as utilities approach RPS goals and the grid penetration of distributed renewable generation systems increases, more sophisticated distributed storage systems may be required to firm up the clean power during the peak/off-peak cycle.nbsp;nbsp; Aspire: What is your broader outlook on the solar industry in 2009 and for the next few years? Navigant Consulting, in a research report it provided the SEIA, said it expects that the 8-year extension of the ITC could ldquo;unleash $325 billion in private investment in the solar industryrdquo; over that time frame. To be sure, this would bode well for the industryrsquo;s growth ndash; but do you think that we should temper expectations based on the current financial crisis, and if so, how much?nbsp;nbsp; Nakamoto: We concur with many analysts who believe the fundamentals for the industry are intact and that the demand for clean, renewable energy will continue growing in 2009 and beyond.nbsp; nbsp;We expect the extension of the ITC will help inspire this continued growth, and that the impact of the current credit market constraints may be too slow, but not stop, market expansion. nbsp; pa href="http://feeds.feedburner.com/~a/smallcappulse/feed?a=InFRbv"img src="http://feeds.feedburner.com/~a/smallcappulse/feed?i=InFRbv" border="0"/img/a/p

Analyst Comments – Cowen’s Robert Stone Weighs in on Solar Stocks

Small Cap Pulse — Wed, 10 Dec 2008 22:36:00 +0000

December 10, 2008 ndash; Analyst Comments ndash; Cowen amp; Companyrsquo;s Robert Stone weighed in this morning on several solar companies including Hoku Scientific (Nasdaq:HOKU), Evergreen Solar (Nasdaq:ESLR) and Ascent Solar Technologies (Nasdaq:ASTI), downgrading each of the stocks to NEUTRAL. Here are his takeaways: Hoku (reduced from OUTPERFORM to NEUTRAL) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Prepayment delays and potential difficulty obtaining additional financing in 2009 may slow startup of poly plant; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Cut FY09, FY10 and FY11 revenue and earnings estimates based on slower ramp, lower ASPs and reduced GMs; Evergreen Solar (reduced from OUTPERFORM to NEUTRAL) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Uncertainty in the PV market increases Evergreenrsquo;s execution risk in its capacity ramps; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Concerns about increased expenses in the current environment which Evergreen will need to launch its string-ribbon technology; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Further capitalization in 2009 is going to be tough; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Cut FY09 modeling lower ASPs and reduced GMs; Ascent Solar (reduced from OUTPERFORM to NEUTRAL) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Weaker Euro lowers ASP and margin assumptions; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Funding capacity expansion will be more difficult in current environment; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Widened expected losses for FY08/09, lowered revenue for FY10/11/12 on ASPs, lowered BIPV estimates and gross margins Other analysts targets on these stocks: middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; HOKU: Adour Capital rates HOLD with $3 price target (11/20/08) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; HOKU: AmTechResearch rates BUY with $6.50 price target (10/10/08). middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; HOKU: Broadpoint Capital rates BUY (9/17/08). Broadpoint previously recommended at HOLD (6/24/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: JP Morgan rates UNDERWEIGHT (11/18/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: UBS downgrades to NEUTRAL (10/28/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Stanford Research rates BUY with $6 price target (10/17/08); Stanford previously rated at BUY with $12.50 price target; middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Wedbush Morgan rates at HOLD with $5 price target (10/17/08); Wedbush previously rated at BUY (7/18/08); HOLD with $13 price target (6/20/08); $11 price target (4/21/08); and $13.50 price target (1/23/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: RBC rates at HOLD (9/24/08); RBC had previously rated at SELL with $9 price target (1/31/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Ardour rates at BUY with price target of $9 (9/17/08) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Citigroup rates at HOLD (9/17/08); Citigroup had previously rated at SELL with $8 price target (5/9/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Caris amp; Company rates ABOVE AVERAGE with $8 price target (9/16/08). Caris previously rated ABOVE AVERAGE with $11 price target (8/11/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ESLR: Janco rates at BUY with $12 price target (7/22/08). Janco had previously rated at BUY with $16 price target (1/29/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ASTI: Wedbush Morgan rates at HOLD with $3 price target (12/3/08). Wedbush had previously rated at HOLD with $5.50 price target (10/7/08); middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ASTI: JP Morgan rates at SELL (11/18/08). JP Morgan had previously rated at HOLD (7/15/08). middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ASTI: Ardour Capital rates at BUY with $8 price target (11/13/08). Ardour had previously rated at BUY with $15 price target (6/4/08). middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ASTI: Cantor Fitzgerald rates at HOLD with $4.25 price target (10/29/08). middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; ASTI: Janco rates at BUY with $17 price target (6/12/08). pa href="http://feeds.feedburner.com/~a/smallcappulse/feed?a=Hxxbhj"img src="http://feeds.feedburner.com/~a/smallcappulse/feed?i=Hxxbhj" border="0"/img/a/p

ITC Extended In Senate – We Like HOKU (Nasdaq:HOKU),LDK Solar (NYSE:LDK) & Premier Power (PPRW.OB)

Small Cap Pulse — Wed, 24 Sep 2008 18:57:01 +0000

September 24, 2008 –The Senate passed a much anticipated tax package yesterday, which, amongst other things, renews the Investment Tax Credits (ITC) for alternative energy. This is a huge win for the renewable and clean tech industry, and frankly, we are surprised it didn’t hit heavier headwinds in the Senate vote – only 2 voted against the broader tax package. Perhaps its passage was a benefactor of a Senate that is focusing itself on the crisis in the financial markets and the proposed $700 billion bailout plan. Regardless, the passage of the extended tax credits will buoy the sector, drive growth and bode well for solar, wind, geothermal, clean tech, and other renewable energy companies. Under the bill, wind will get a single year of tax credit extensions, solar gets eight, tidal gets two. Buyers of PHEVs will get anywhere from $2,500 to $7,500 back. The eight-year extension of the investment credit for solar energy would more than triple investment during that period, to $325 billion, and almost triple employment in the industry, to 440,000 in 2016, according to the Solar Energy Industries AssociationPredictably, solar stocks reacted immediately to the news yesterday, and we expect that they will outperform on the news. Companies that we like in each of the solar segments, and that we think will benefit strongly from the ITC extension include: Upstream (polysilicon manufacturers): HOKU Scientific (Nasdaq:HOKU) – impressive $2.3 billion backlog, strong revenue visibility through 2020, smartly getting significant up-front prepayments on contracts to pay for its plant being built will reduce need to dilute shareholders. Stock closed yesterday at $6.40, with a $130 million market cap and our 12-month target for the stock is in the $15-$17 range. See our previous commentary on the stock. Midstream (wafer and module makers): LDK Solar (NYSE:LDK) – multi-billion backlog, leading wafer manufacturer becoming vertically integrated which will improve margins, expanding wafer capacity to 1,100MW in 2008 to 2,000MW in 2009, wafer backlog of 610MW in 2008, 1,200MW in 2009, 1,512MW in 20010 and 9,160MW from 2011-2018, strong revenue growth ($105 million in 2006, $523 million in 2007 and $1 billion+ expected in 2008) with equally impressive gross profit and net income growth (net income grew from $25.9 million to $139.1 million from 2006 to 2007). Stock closed yesterday at $34.92, trading at 13.49x P/E (ttm), earning $2.59 per share and at a $3.72 billion market cap. Our 12-month target for the stock is in the $63-$70 range. See our previous commentary on the stock. Downstream (integrators): Premier Power (OTCBB:PPRW) – a best-in-class integrator focused on commercial markets in the U.S. and Europe, has growth revenue from $16.7 million in 2007 to more than $48 million contracted this year, unlike so many of its peers, Premier has managed to grow profitably, which we think should put it in a position to demand a premium to peers like Akeena Solar (Nasdaq:AKNS). The stock closed at $5.25 yesterday, holding an approximately $152 million market cap. We haven’t arrived at a price target on this one yet, but we think that with the extension of the ITC, and Premier’s already demonstrated ability for strong revenue expansion while maintaining profitability in challenging market conditions bode well for stock appreciation. Important Disclosure: SCPEditor is LONG HOKU, LDK and PPRW, and is a principal of Aspire Clean Tech Communications, which is the corporate communications advisor to PPRW. It is paid $7,500 by PPRW on a monthly basis for a period of 12 months beginning in September and has been compensated by 30,000 shares for the 12-month period. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.