Doug Young
The new year has just begun, and already we’re getting signals
that 2014 will be full of new twists and surprises for the solar
panel sector as it struggles to emerge from its downturn dating
back nearly 3 years.
A clash involving Chinese panel makers
accused by western rivals of receiving unfair state support looks
set to enter a new phase, based on an announcement of new action
in the US by SolarWorld (Frankfurt: SWV, OTC: SRWRF),
the German panel maker that has led the charge against the Chinese
companies. Meantime, a separate new
joint venture announcement from Yingli Green Energy
(NYSE: YGE)
looks smart, and reflects the new reality that China will become a
major driver of solar plant construction in 2014.
The solar sector’s prolonged downturn is the result of massive
oversupply, following a build-up in China that has the nation now
producing more than half of the world’s solar panels. That
build-up has led to resentment from western panel makers, who say
the Chinese build-up was largely the result of unfair state
support via incentives ranging from tax breaks to cheap bank
loans. Both the US and European Union conducted probes into the
matter, and the US imposed punitive tariffs against the Chinese
manufacturers last year after determining the claims were true.
Now SolarWorld, which made the original complaint in the US, is
saying it will file a new complaint with the US
International Trade Commission (ITC) to close a
loophole that has allowed many Chinese panel makers to avoid the
punitive tariffs. (company announcement) The loophole allows
Chinese-made modules to avoid the tariffs if they contain solar
cells made in countries outside China. Solar cells are the key
component used to make modules, which are the finished product
used to generate solar power.
This particular loophole was widely discussed when the US first
announced its tariffs last year, and many of China’s solar panel
makers said they would be able to avoid the punishment by using
solar cells manufactured offshore. I find it difficult to believe
the US was unaware of this loophole when it announced the original
sanctions, since it was so widely discussed at the time.
Accordingly, I doubt SolarWorld’s new complaint will result in any
new action by the ITC. Still, the issue is likely to make
headlines during the year, and there’s a small chance we could see
some new punitive tariffs to close the loophole.
Moving on, Yingli’s newly announced joint venture with Datong
Coal Mine Group is much less controversial and looks
like a smart business model as China gets set to embark on an
ambitious construction program to build solar power plants with 35
gigawatts of capacity by 2015. We’ve already seen a number of major
new projects announced recently by other panel makers,
including Trina (NYSE: TSL)
and ReneSola (NYSE: SOL).
But unlike most of the previous tie-ups that involve partners
with little or no experience in the energy sector, this new
venture looks a bit smarter because Datong is China’s third
largest coal producer and thus should have quite a bit of
experience in the sector. (company announcement) Equally important,
Datong’s status as a company with a real business means it should
have a strong cash flow to pay for new projects. That contrasts
with many other new project developers, which look mostly like
special entities set up by state-run organizations to execute
Beijing’s ambitious solar construction program.
For all those reasons, this new tie-up looks like a smart move
that could serve as a template for other panel makers to follow.
I’ve previously said there’s a real danger that many of these new
projects could run into difficulties because plant developers may
lack financial resources and operating expertise needed to
succeed. But on the surface at least, this new Yingli partnership
looks like it should have a good chance of success and could lead
to a major new source of reliable business for Yingli.
Bottom line: A new anti-dumping complaint by
SolarWorld in the US is unlikely to succeed, while Yingli’s new
joint venture looks like a smart template for new solar plant
construction in China.
http://www.altenergystocks.com/archives/2014/01/china_solar_tariffs_round_ii _yinglis_smart_jv.html
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