Europe’s three largest renewable companies said that they are being badly hit by the fall in price caused by over-supply and insignificant government incentives. The same has been said by renewable companies in the United States and in China.
Renewable energy companies around the globe have been hit by a mix of high inventories and slower demand after ramping up production last year to meet a surge in demand from Germany and Italy. Customers virtually rushed to buy solar panels before governments cut subsidies.
The feed-in tariff was reduced in Italy and Germany, so as to make the solar industry more effective. However, there is a paradox in profit and cost of solar technology. Recently, both the price and subsidies on solar technology have been decreasing faster than the cost of manufacturing. As a result, it has rendered the outlook for solar companies such as SolarWorld (German’s second largest solar company in respect to sales) into great difficulties. The profit level of solar companies has been downgraded significantly.
Frank Asbeck, Chief Executive of SolarWorld says that the entire market has experienced a shock after falling prices. A further reduction in the cost of solar modules by 10 percent in 2012 will bring profit down to single-digit margins. For 2011, the profit of the company is expected to reach 1 Bn Euros. This is aligned with the figured projected by analysts such as reuters( estimated 1.17 billion)
According to Marion Helmes, the finance chief of Q-cells says that figures are even worse. Q-Cells were known to be the world’s biggest solar module manufacturer but this is no longer the case.
The outlook for 2011 was a three-digit figure but profit levels have been falling by 25 percent since the previous year. For 2012, things look worse with prices of solar systems falling.
CFO, Marion Helmes, is leaving the company and this makes the situation even more alarming. In other words, the balance sheet of the Q-Cells is going through a stormy wind, and the ship is about to sink.
The situation is the same for other peers in the solar industry such as Yingli, First solar and Suntech, which have been equally badly affected by the 40 percent drop in the price of solar cells.
On the Frankfurt Technology index, SolarWorld and Q-cells have been leading the fall, with 6.4 and 18.5 percent, respectively.
Nordex, a wind-turbine maker has also been forced to reduce its expected earnings for 2011 due to the European debt crisis which is delaying several projects. Nordex is some of the companies that are blaming the Europe Crisis as being the main cause for poor business performance. They saw their sales dropping from the 2011 outlook of 1 billion down to 920 million euros.
Source: Business Financial Post