DONG Energy says reviewing future of oil & gas business
COPENHAGEN, Oct 26 Danish utility DONG Energy said on Wednesday it is reviewing strategic options for the future of its oil and gas business.
April 10 Solar panels prices have kept marching lower this year, extending steep declines seen in 2011 and keeping pressure on hard-hit manufacturers who have struggled to eke out profits, industry experts said.
Average selling prices for the photovoltaic modules that turn sunlight into electricity have dropped to 80 to 85 cents per watt, a decline of more than 10 percent from levels near 95 cents recorded at the end of 2011, a year that saw prices fall by about 50 percent.
Those price drops have helped boost solar sales and made solar power less dependent on subsidies to compete against fossil fuels. But they also have virtually erased profits at the major manufacturers, such as China's Suntech Power Holdings , Yingli Green Energy Holding, Trina Solar Ltd and U.S.-based First Solar.
Shares in Suntech, the world's largest solar maker, are trading at $2.71 per share, less than a third their February 2011 level, although they have rebounded from their October low of $1.70.
Shares in Yingli and Trina, which had seen a modest rally in January and February, have come under more pressure. Both have slumped to their lowest levels of the year.
First Solar, the largest U.S. solar manufacturer and the world's lowest-cost producer, has seen its shares drop nearly 90 percent from 2011's peak to their lifetime low at $20.02 hit earlier this month.
DEMAND TO FLATTEN
Global demand for solar panels grew by about 40 percent last year, but excess manufacturing capacity has created a glut of supplies that forced companies such as Suntech, Yingli, Trina and SunPower to slash prices.
That glut has come as subsidies have declined in Germany and Italy, the two biggest markets. Analysts have forecast total market demand will be near steady with last year's levels around 27 GW.
"I think that the difficult period is apt to last for a couple more quarters at least," said Rob Stone, analyst with Cowen & Co in Boston.
Steady growth in solar panel demand over the last decade has attracted many large conglomerates to the industry, such as Japan's Kyocera and Korea's Hanwha Group, which entered the market with the purchase of Solarfun Power in 2010.
Those conglomerates have been hurt by the steep drop in panels, but have strong financial positions and are likely to hold on until the market consolidates around a smaller number of companies, unlike the Chinese players, who are carrying heavy debt loads.
"Most of the competitors, these standalone companies, they don't have any backup," Hee Cheul Kim, president of Hanwha SolarOne, told reporters on Thursday.
"I don't think they will survive with the cash-constrained environment for more than three years. That is why I'm expecting restructuring of the industry."
Earlier this month, Germany's Q-Cells, once the world's largest solar maker, filed for insolvency. That followed last year's demise of Solon AG. Several small U.S. companies have also folded, including Solyndra, whose collapse triggered sharp political criticism of U.S. government support for the industry.
Prices for solar panels, most of which use polysilicon as the key material, have resumed their downward trend after stabilizing in January and February following stronger-than-expected December demand in Germany, according to GTM Research analyst Shyam Mehta.
"It seems like there's been another inventory build-up," said Mehta, who put prevailing spot market panel prices at between 80-85 cents per watt.
Some industry watchers said panels had been offered at 75 cents or below, although that equipment was made by lower-quality "tier 3" companies in China, who are appear to be clearing out inventories to raise cash, even if they are selling products at a loss.
"Those are essentially going-out-of-business sales," said one solar company executive.
Still, the trajectory is likely to send panel prices to new lows in the coming months.
"It's fully possible that at some point in the year we get to the 70-cent a watt range," Mehta said. "The balance between supply and demand right now is very fragile. There's still a massive amount of capacity."
RACE TO CUT COSTS
The persistent pricing pressure has prompted Chinese solar companies to reverse their strategy of seeking to control production of polysilicon wafers in-house, and instead buy those wafers from lower-cost producers.
That move to "vertically integrate" their manufacturing operations and raise production of their own wafers started in 2009, but many of the companies locked in prices for polysilicon at levels well above the current levels for the key material.
Those Chinese producers can pay about 5 cents less per watt by sourcing wafers from third parties, according to Sam Wilkinson, a senior market analyst at IMS Research.
"You are looking at an about 10-15 percent saving by buying wafers. One of the reasons is that, while polysilicon prices have reduced significantly in the spot market, some companies are stuck with higher-priced long-term contracts," Wilkinson said by telephone.
Buying those cheaper wafer could help protect panel makers' gross profit margins in the first half, even with the declines in module prices.
"The big challenge for cells and module companies is to try and keep their inventories as lean as possible to prevent them from write-downs," said Thiemo Lang, a senior portfolio manager at Sustainable Asset Management AG.
Given the steep fall in the prices of polysilicon that are used to make wafers, some companies could also pressure suppliers to renegotiate long-term contracts.
"There are some very competitive prices in the market," Lang said.
* Stock jumps as much as 3.8 pct to highest in 14 months (Add details of results)
LONDON, Oct 26 The Australian dollar was an outperformer on Wednesday, bucking a broad risk averse environment in global markets, helped by a better-than-expected inflation reading that dented chances of an interest rate cut in the near term.