| BOSTON, Sept 4
BOSTON, Sept 4 Some notable fund managers are
betting on solar energy shares, expecting a wave of industry
consolidation and lower costs to pay off for the notoriously
The optimists, a mix of specialized environmental managers
and mainstream investors, are going against several trends,
since solar companies have already had a sizeable run-up this
year and more fund managers have been selling the stocks than
That has not deterred Fidelity Growth Company Fund
manager Steve Wymer, who has been talking up the new
competitiveness of solar power and has been steadily purchasing
shares of panel maker First Solar Inc. Among mutual
funds, his is now the largest holder of the stock.
Solar plants coming online in 2019 will generate electricity
for $119 per megawatt hour, according to estimates from the U.S.
Department of Energy. That is still more costly than some new
coal plants, projected to produce electricity at $96 an hour,
but down sharply from the $396 the agency projected for solar in
2016 four years ago.
The U.S. industry has benefited from federal subsidies and
import tariffs, while concentrating on large-scale solar
projects promising regular income. In addition, solar companies
have done several deals allowing them to combine operations like
manufacturing and installation.
"The reason we're bullish is that solar has finally reached
grid parity" in many regions, said Ian O'Reilly, who helps run
the Pioneer Global Ecology fund.
Since last year, O'Reilly's $1.5 billion Pioneer fund has
become a significant holder of equipment makers SunEdison Inc
and SunPower Corp.
Others who have cited falling costs as a reason to invest in
solar stocks this summer include the managers of Royce
Opportunity Fund. Another well-known solar backer is
David Einhorn's closely watched Greenlight Capital hedge fund,
now SunEdison's top investor.
Andrew Cupps, president of Cupps Capital Management in
Chicago, said his firm earlier this year had begun buying shares
of SunPower and residential installer SolarCity Corp,
whose largest shareholder and chairman is Tesla Motors Inc
Chief Executive Officer Elon Musk.
Cupps praised the efficiency of SunPower's solar panels and
said SolarCity's recent purchase of panel maker Silevo should
help drive down costs.
Shares of SunEdison tripled over the 12 months ended on Sept
3. The Market Vectors Solar Energy ETF is up 84 percent
over that period, although the sector has been volatile and
still remains below pre-financial crisis highs.
Skeptics cite setbacks like the 2011 bankruptcy of U.S.
government-backed panel maker Solyndra LLC, plus soaring North
American oil and gas production that could diminish interest in
The stocks also may be expensive. SunPower, for example,
trades at 25 times expected earnings, about twice the multiples
of some oil companies.
As solar stock prices rose over the last year, U.S. mutual
funds sold some of their shares of SunPower, SunEdison and First
Solar, according to Thomson Reuters' Lipper unit. But the value
of their stakes still increased, likely because some managers
held steady the percentage of solar in their portfolios, said
Lipper Americas Research head Jeff Tjornehoj.
Lower solar costs reflect new technologies as well as cheap
panels from Chinese manufacturers that have led to expanded U.S.
Kevin Landis, manager of the Firsthand Alternative Energy
Fund, expects the tariffs to offer only marginal
benefits to the companies he owns, SunEdison, First Solar and
A bigger help, he said, is that public utility commissions
often allow electric rates to creep up to cover the costs of
fossil fuels. That should bolster the competitive position of
solar electric plants that do not have to buy costly fuel once
they are built.
For most solar stocks, Landis said, "it's still right place,
(Reporting by Ross Kerber; editing by Linda Stern)