Solar company Day4 Energy looks on bright side
VANCOUVER, British Columbia (Reuters) - Day4 Energy Inc, like other solar panel makers, has been pummeled by the recession, but the small Canadian firm says it is starting to see light in the economic gloom.
A steep drop in the price of silicon, the chief raw material for solar cells, will help to bring down the cost of solar systems, says John MacDonald, chairman and chief executive of Day4.
"That will encourage some investment in the not too distant future," said MacDonald, who in 2001 co-founded Day4, which says it makes solar panels that have less electrical resistance than traditional panels so that less energy is wasted.
Prices for polysilicon have fallen to about $70 a kilogram from their peak of $400 a kg in 2008 as sales of solar panels, which turn sunlight into electricity, dried up as the recession took hold.
"The people who make the silicon were making a killing. I call them the robber barons of the industry," MacDonald told Reuters in an interview.
With the drop in the price of silicon, along with resulting lower prices for the solar cells and panels that are made from it, returns are improving for people who buy solar-related products.
"We will end up with pricing that will be much closer to cost parity than (it was) prior to the onset of a recession. That's all good in the long run, even though everyone's margins get squeezed," he said.
The 2008 collapse of top solar industry financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the industry to slash prices as inventory piled up.
Demand from the residential market also dried up as homeowners, concerned about losing their jobs in the harsh economic climate, deferred home improvements.
"We were going gangbusters in 2008. You couldn't make enough modules (panels). Then the guillotine fell on sales," said MacDonald, who is also the co-founder of MacDonald Dettwiler, Canada's chief space company.
Day4's stock has slumped 80 percent over the past year. It was trading at 73 Canadian cents on the Toronto Stock Exchange on Wednesday, a long way from the C$7 it hit in January 2008.
MacDonald said Day4 will let the market know "quite shortly" how it plans to stimulate demand for its solar panels, which are sold mainly in Germany and Italy, countries with subsidy schemes for solar energy.
Day4's revenues plunged 68 percent year-on-year in the first quarter to C$4.3 million ($3.7 million) due to the economic downturn as well as bad weather in Germany. It laid off workers in January and has shut its manufacturing plant in Vancouver, raising concerns about its financial health.
"Fortunately we have raised enough money so the company is not in any financial danger," MacDonald said.
At the end of March, Day4 had C$22 million in cash and near cash.
"Management has done a good job communicating the business plan and product, now they have to execute," said Michael Willemse, an analyst at CIBC World Markets.
(Editing by Peter Galloway)
