* Buffett's SunPower deal to have limited spillover effect
* Consolidation could be delayed by China efforts to help
* Solar module prices down 66 pct in last two years
* Solar stocks, businesses could start to recover late this
By Nichola Groom and Christoph Steitz
LOS ANGELES/FRANKFURT, Jan 8 Solar stocks kicked
off 2013 with a sharp rally, prompted in part by last week's
news that a company controlled by Warren Buffett's Berkshire
Hathaway Inc would pay up to $2.5 billion for two
SunPower solar projects in California.
This week, the stocks retreated after many investors and
analysts called the moves overblown, making the Buffett rally
look more like a short-term bump.
"The Buffett-SunPower deal is good news ... but individual
investors should not interpret it as a buying signal for solar
stocks," said Yves Vaneerdewegh, who manages the
Luxembourg-based 11 million-euro ($14.37 million) Quest
Cleantech Fund. He added that the sector's recovery may take
much longer, and that stocks could tumble dramatically once
The rally, which started in November as China signaled
willingness to prop up its ailing solar sector, was bolstered
last week by the resolution of the U.S. "fiscal cliff" as well
as a slight uptick in the price of polysilicon, the key raw
material in photovoltaic solar panels.
J.P. Morgan analyst Christopher Blansett said in a research
note on Monday that viewing SunPower's deal with Buffett's
MidAmerican as a positive development for the whole industry
"doesn't make any sense ... no other solar PV company will
benefit from this sale." He advised clients that now was "a good
time to take short positions" in solar stocks.
The MAC Global Solar Energy index climbed 17.5
percent in he first three trading days of the year, but has
since slipped 2.5 percent. SunPower shares soared 55 percent
last week, but have retrenched 8 percent since then.
TOO MUCH CAPACITY
Diminishing government support in the world's top solar
market, Europe, and a massive oversupply of panels that sent
selling prices into a tailspin have slammed the solar
manufacturing industry in the last two years. The industry
crisis has forced many players to file for insolvency, notably
former sector leaders Q-Cells and Solon SE
By the end of 2012, there were fewer than 150 global solar
module and cell companies, down from more than 750 in 2010,
research firm IHS said, adding that 2013 would see further
"We need to see more consolidation in the sector to get more
optimistic. There is far too much capacity in the market," said
Alastair Bishop, a fund manager at BlackRock, the world's
largest money manager.
That consolidation could be delayed, analysts said, by
efforts of Chinese provincial governments to support their
cash-strapped solar manufacturers in order to preserve jobs.
Such moves would help individual companies and stocks, but keep
pressure on the broader solar panel market.
Oversupply has sent solar module prices down 66 percent in
the last two years, according to GTM Research, and manufacturers
have struggled to cut costs to keep up with those declines. GTM
estimates that global solar product supply will exceed demand by
about 35 gigawatts (GW) annually over the next three years.
Investors in solar stocks, the darlings of Wall Street five
years ago, have been burned. The MAC solar index slid 80 percent
from the beginning of 2011 until the end of 2012, with many
stocks now trading below book value.
"They have become an easy playing ball for traders and hedge
funds," said Thiemo Lang, who manages $900 million in cleantech
assets at Zurich-based Sustainable Asset Management AG. "I don't
see the profitability of the companies improving much."
But after months upon months of weakness, some in the market
said the solar sector could at least start to recover toward the
end of this year.
"The turn is coming," said Shawn Kravetz, president of
Boston-based Esplanade Capital, which invests in solar stocks.
He pointed to last month's announcement by Hanwha SolarOne
Co Ltd that Bank of Beijing Co Ltd would
provide it with a credit line of about $475 million.
He also cited firming polysilicon prices and
last week's projection by U.S. installer SolarCity Corp
that its deployments would rise 60 percent this year.
Shares of SolarCity have more than doubled since the
company's stock market debut on Dec. 13.
Still, Kravetz called last week's solar stock moves "too
extreme," saying his firm took the opportunity to sell its stake
in SunPower. One solar stock favored by Kravetz is wafer maker
and project developer MEMC Electronic Materials Inc,
which stands to benefit from falling panel prices.
"We love businesses that benefit from pain," he said.
($1 = 0.7654 euros)
(Additional reporting by Geert de Clercq in Paris and Krishna
Das in Bangalore; editing by Patricia Kranz and Matthew Lewis)