Solar Weekly Notes: First Solar’s Community Solar Play, Yingli’s Thai Projects

10.37
Trefis
TSL: Trina Solar logo
TSL
Trina Solar

The solar sector has had a tough week, with most large solar stocks posting declines on the back of plummeting crude oil prices. In other news, First Solar (NASDAQ:FSLR) is taking a shot at the U.S. residential solar market by investing in Clean Energy Collective – a Colorado based company that develops community solar projects. Additionally, Yingli Green Energy (NYSE:YGE), one of China’s largest solar players, partnered with a consortium of companies to develop solar projects in Thailand.

See Our Complete Analysis For Solar Stocks Trina SolarYingli Green Energy |First SolarSunPower

Solar Stocks Fall On Weaker Crude Prices

Relevant Articles
  1. Do PERC Panels Pose A Threat To First Solar And SunPower?
  2. Key Takeaways From Trina Solar’s Q3 Results
  3. How Will The Slowdown In Chinese Installations Impact Trina Solar’s Q3 Results?
  4. Trina Solar Posts Solid Q2 Growth, But Downstream Projects Remain A Key Factor To Watch
  5. Why The Solar Industry Could Face Headwinds In The Near Term
  6. Going Private Is A Good Deal For Trina Solar Shareholders

NYMEX crude oil prices declined by over 7% through Thursday, testing fresh 5-year lows, prompting a sell off in solar stocks. Crude oil prices have fallen by over 40% since mid-June, amid concerns of sluggish oil consumption growth, strong supply from North American shale fields and OPEC’s recent decision to maintain its production output. The Guggenheim Solar ETF (NYSEARCA:TAN), a popular exchange traded fund comprising of solar stocks, has fallen by over 20% since mid-June. Solar stocks have historically responded to fluctuations in oil prices despite the fact that crude oil and solar energy are not direct substitutes – crude oil is primarily used to produce transportation fuels, while solar power is used to generate electricity. However, the markets count oil prices as a proxy for the cost of energy in general, and lower prices reduce the urgency to invest in energy sources such as solar. That said, we do not expect low oil prices to meaningfully impact solar panel shipments or earnings for the solar stocks we cover – since solar demand is likely to be determined by government policy, environmental standards and possibly by the price of fuels such as natural gas and coal, which power a bulk of global electricity generation.

First Solar Takes A Gamble With Clean Energy Collective Investment

First Solar, the largest U.S. solar company, is looking to extend its presence into the residential solar market by picking up a stake in Clean Energy Collective’s community solar business. Clean Energy Collective allows customers to invest in jointly owned solar projects which are typically ground mounted in a common location, rather than on the customer’s rooftop. The electricity from these projects is typically fed onto the grid, and the customer’s utility bills are credited with a certain amount based on their stake in the solar project output. Consumers can also earn state level renewable energy credits. The investment should allow First Solar to increase its presence in the distributed solar market while also helping to drive panel sales. Although the business seems straightforward, the execution and scalability of the model could prove complex since the company will need to navigate various regulatory issues – including securities and tax issues – and also manage areas such as utility-bill crediting. [1]

  • Trefis has a $64 price estimate for First Solar, which translates to a market cap of $6.4 billion.  Our price estimate represents a 50% upside to the current market price. We are projecting the company’s FY 2014 EPS at around $2.78, which compares to a $2.72 consensus estimate according to Reuters. We estimate the company’s FY 2014 revenues at around $3.7 billion.
  • First Solar stock has declined by about 9% through Thursday.

Yingli Green Energy’s Thai Projects

Yingli Green Energy, one of China’s largest solar panel manufacturers, signed a Memorandum of Understanding (MoU) to develop distributed and utility-scale solar projects in Thailand as part of a consortium that includes Chinese telecoms major Huawei, Thai finance institution KBank and system integrator, Solventia Solar.  The move should allow the company to expand into the fledgling Thai solar market. While solar installations in Thailand remained strong through 2012 and early 2013, installations have slowed down since, owing to political unrest. However, the long term prospects of the industry look positive, since the country has set a target of installing 3 GW of solar capacity by the year 2021 and intends to derive 20% of its energy demand from renewable sources by 2022.

  • Trefis has a $3.60 price estimate for Yingli, which translates to a market cap of around $660 million. Our price estimate is about 50% ahead of the current market price. We estimate the company’s FY 2014 loss per share at around $0.60. We estimate the company’s 2014 revenues at around $2.4 billion.
  • Yingli stock was down by about 9% through Thursday.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. First Solar Jumps Into Financing Residential PV With Investment in CEC’s Community Solar, Greentech Solar, December 2014 []