Solar energy has been the energy source of tomorrow for decades
now, but there always seems to be something standing in the way of
For many years, the biggest obstacle was simple economics; solar
cost more per watt than coal. But rising oil prices, increasingly
efficient solar cells, and environmental considerations began to
narrow the gap, and solar installations began to get support from
Governments initiated feed-in tariffs-payments for energy delivered
to the grid that are based on cost-to encourage wider adoption.
Germany, which had set ambitious goals for renewable energy as a
percentage of total power usage, was especially active in
The Great Recession put pressure on economies everywhere, and
support for solar installations was reduced sharply. Solar stocks,
which were superstars seven or eight years ago, fell prey to
overcapacity and demand constraints.
It has taken a long period of retrenchment via both bankruptcies
and M&A activity for solar companies to regain their vigor, and
for demand to rebound, and that process is continuing.
And the Chinese government's program to encourage consolidation
among producers (or the exit from the market of second- and
third-tier producers) is improving supply/demand balances.
), a Chinese integrated solar manufacturer that's been around since
1997, is enjoying a confluence of several factors that are working
in its favor.
First, the Chinese government has initiated a program of feed-in
tariffs and low-cost loans for new solar projects. This is only
partly to support the solar industry; the government, under the
direction of the new five-year plan, also sees increased solar
production as a way to reduce air pollution.
Second, strengthening national economies are renewing incentives
for new installations.
Third, on September 30, Deutsche Bank upgraded two Chinese solars
to a buy rating. Trina was one of them.
With a market cap of just over $1 billion, and annual sales of $1.3
billion, Trina Solar is a healthy business with excellent prospects
for returning to profitability by the end of 2013.
The company expects to ship 2.4 gigawatts of solar cells this year,
which is near the high-end of its total capacity. Capacity
increases are likely next year.
While Trina Solar is a very sound company, it's the solar story
that's creating headlines. We like Trina for its strong global
sales force, including its record of success in Japan. We rate the
stock a buy.
Editor's Note: This
Cabot China & Emerging Markets Report
article by Paul Goodwin was originally syndicated by
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