Blog
January 6, 2012
LDK Solar is one of the most insolvent companies in the world right now with billions of dollars in debt,a battered balance sheet,continuing losses and dodgy accounting.However LDK has acquired a German company Sunways and continues to build new solar power plants as the Chinese state owned banks continue to fund it with cheap money without any consideration about losing their investments.LDK has become the poster boy of the Solarworld complaint against Chinese solar panel producers as it continues to run and thrive despite being insolvent.The Chinese government is hurting itself and its other solar companies like Trina,Yingle which are more competitive by continuing to support and increase the global glut of cheap solar panels.These solar panels are being clearly sold at below cost as most of the companies would be bankrupt without these absurd loans which make no free market sense
January 6, 2012
The Indian Private Equity Industry was on a high for the past few years with a new PE fund being opened every few months by PE veterans.The global interest in the Indian economy had been very high given the growth potential.There was a lot of money waiting on the sidelines to take part in the Indian growth story.Most of the PE performance till then had been very good given a rising tide lifts all boats.However the recent year has not been that good.More than one PE manager has had to shutdown given the lack of funding while others have found it difficult to exit given the bad stock market conditions.
January 6, 2012
While the larger stock brokers have seen reduced profits,the smaller ones have had to shut down or sell.This trend has been exacerbated last year with the rise of computer controlled algorithmic trading.Most of these small brokers which used arbitraging strategy to generate profits have seen their main business evaporate.Retail investors in India have also avoided the stock market which has become a corruption landmine.With even top institutions like GMO,Goldman becoming victims of frauds,individual investors have no chance.Also market operators have made the Indian stock market a pump and dump heaven even as SEBI takes a long time to crack down on the abuses.
January 5, 2012
Chinese Wind Turbine Companies have unleashed a global price war in which Western producers are unable to compete.While Solar Panel producers in the West are dying like flies,Western WTG Makers too face survival questions.Vestas which is the world's biggest turbine company in terms of installations announced another revenue shortfall for the nth time in the last couple of years.The company has already restructed ,reduce workforce etc etc.However the price competition from the Asian companies is too severe and too sustained for Vestas to surive too long.Like First Solar,Vestas seems a likely candidate for takeover by one of the big industrial conglomerates.It has become too tough for a renewable energy company in the West to survive on their own.
January 5, 2012
Biomass Plants in India are shutting down as feedstock costs have increased rapidly while government regulated electricity tariffs have yet to increase.60% of India's Biomass Plants have closed down as they are longer profitable.Note India has a massive growth target for biomass electricity capacity up from 1 GW at present (2 GW if you count cogeneration).A number of agricultural companies have set up a number of plants besides dedicated green utilities.However inflation in India has affected the operation of plants specially those who don't have inhouse feedstock supply.
January 5, 2012
Seeing Stocks Markets these days would make one think that the world economy has managed surpass the problems of the European Union Debt Crisis,the slowing of China,India's governance led slowdown etc.However big global companies continue to bunker down reducing job headcount and reducing investment.Despite record levels of cash and big profits,MNCs are not increasing their investment giving a thumbs down to efforts by policymakers to boost growth through record low interest rates.RBS has been rumored to cut 10,000 jobs in its investment banking division while Pepsi which has a mostly recession proof business too is cutting down.India's beleagured airline Kingfisher is set to cut 2000 jobs as well.
January 5, 2012
Satcon the US solar inverter producer has been 0ne of the worst hit solar inverter manufacturers and has seen massive reduction in revenues and profits.With the solar industry in massive oversupply,the photovoltaic inverter market has also seen a big hit.While the bigger solar inverter producers like SMA Solar and Power-One too have seen job reductions and revenue hits,Satcon has been worse hit due to its small scale.The company has now decided to slash 35% of its workforce consisting of 140 solar jobs due to the ongoing solar crisis.Note other solar companies in the USA such as Solyndra,Spectrawatt have completely closed down while the smaller ones are on the verge of closing as well.
January 5, 2012
China has announced a new solar subsidy for BIPV systems of 9 Yuan per Watt ($1.4/watt) and CNY 7/watt for PV systems for home.Note China has already become a top 5 market in the world in 2011 after announcing a $1.15/kwh Feed in Tariff for utility scale solar power instalations.This new subsidy by the Chinese ministry of finance should boost the home and commercial segment.Note China had recently raised the target of solar energy to 15 GW by 2015 from 10 GW as solar energy has grown amazingly fast in the recent past.
January 5, 2012
Pakistan is a energy deficit country like most other South Asian countries with inadequate investment in the electricity sector and the distribution infrastructure.The cause of the energy crisis in the country is due to massive corruption and misgovernance , a theme which will be familiar to citizens of India as well.Pakistan has been looking at investments from the Chinese power companies in the hydro and wind sectors to boost electricity generation.However these investments take time and some may never come to fruition.However Pakistanis are now turning towards cheap Chinese solar panels to beat the high electricity tariffs and dependence on expensive diesel generators and UPS systems.
January 4, 2012
Coal India the monopoly producer of Coal in India and responsible for providing almost half of India's Energy Requirement is a very inefficienct organiazation is well know.Corruption and pilferage of massive amounts of coal is a well known fact to all industry participants.In fact stealing of coal is a major livelihood for lakhs of poor Indians in coal belt areas.What is not well known is that Coal India has flouted all norms of environment and conservation.It has not restored sites of open cast and underground mining leading to massive losses for the local environment and citizens.Sand meant to fill up the old mines has been sold in the market for profits.RTI application has shown that this government maharatna has been negligent towards it duties in a huge scale.No wonder there are so many protests for land acquisitions by industry and the government given the degradation and pollution that these companies do.
January 4, 2012
South Korean Conglomerates LG,Samsung,Hyundai and Hanwha have made massive investments in solar energy production in the last couple of years.Encoraged by the Korean government to become a force in the Green Energy area in the future,Korean giant chaebols have invested in almost all areas of cleantech like Electric Vehicles,Wind Energy,Solar Energy,Energy Storage etc.While Western companies fall like flies in the face of the Chinese onslaught of super low pricing,Koreans are holding their own and want to take fight into the Chinese camp.
January 4, 2012
Adani Power,which is a leading Indian electricity company and part of the Adani Group is set to invest big money in the solar power in India.The company plans to set up 140 MW of energy capacity according to news reports with an investment of $600 million.Given the current costs of solar equipment and solar panels ,the price tag looks high at almost $3.5 million/MW when the current prices are more like $2 million/MW for large power plants in low cost locations like India.
January 4, 2012
JNNSM Phase 2 recieved almsot 8 times the bids with 2500 MW worth of bids out of which around 350 MW was selected for providing Feed in Tarifffs with the average tariff of Rs 8.77 or 17.5c/Kwh .Note India's execution record has not been great with only 400 MW solar capacity reached in 2011 against a target of more than 1000 MW.However weaker and unknown players have gone out of this business and the winners this time look more likely to construct these solar power plants.No doubt a massive glut of solar panels in the world with prices as low as 80-90c/watt helping .Compare that to prices of solar panels which were more than $2/watt last time.
January 4, 2012
This new plan has following features
1) Reduce the Power Purchasing Agreement Tenure to 5 years from 25 years.This would make it easy to change the prices of power purchased to reflect the changed realities
2) Some sort of fuel cost indexation for electricity tariffs .The reason is that prices of imported coal has risen dramatically which has made the large UMPP get stuck because the revenues don't meet the costs.
This plan will take 6 months to be implemented as the government talks with stakeholders like states which are reluctant to change the power prices decided in the PPA with the earlier UMPP being built by Tata Power and Reliance Power in Gujarat and Andhra Pradesh.
January 4, 2012
Telecom Companies in India are in general an unscrupolous lot with the 2G Scam showing the whole telecom industry of India in a Bad Light.While a number of top executives of telecom companies spent time in jail,it seems that these companies have learned nothing.They continue to find loopholes to take both their customers and government for a ride.Indian Broadband and Telecom companies have made defrauding customers an art by illegally adding value added services and charging for them.They also burn millions of dollars in subsidized diesel to power their telecom towers since there is no restriction on that.Now these comapnies have been caught again in another manipulation trick in 3G services.
January 4, 2012
Smaller Polysilicon producers with small sizes and higher costs are going bust almost everyday.With poly prices falling below $30/kg even bigger producers with inefficient plants like MEMC have been forced to curtain capacity.The smaller poly producers with 2000-3000 tons capacity have virtually no future.With poly expansion still taking place by big producers even in an oversupplied market the small fish are having the capitulate.
January 3, 2012
India faces a Long and Dark Summer in 2012 with its Electricity Industry in Shambles.The list of woes is almost non-ending and the government is the biggest culprit.Locked in a policy paralysis due to its corruption taint,the authorities have failed to move.Indian Electricity Companies too are facing losses and may even default on some project debt.The state distribution companies already have racked up billion of dollar in losses due to total mismanagement of tariffs and power theft.So the whole supply chain is in trouble with the Indian Banks also in trouble as they have lent billions to the power producers.
January 3, 2012
Chinese Solar Panel Producers have become a famous target of an anti dumping petition brought on by Solarworld and other companies.Though US Solar Installers have opposed the move as it will increase the solar panel prices in US,ITC has gone ahead with the investigation.Though the charges of subsidies and efficiency can be debated,the fact remains that US Solar Panel Producers can't compete with Chinese Solar Panles.Massive industrial overcapacity in China has made the prices of products very cheap and made it difficult for Western producers to compete in most areas such as Chemical,Renewable Energy,Textiles etc.The Chinese win because of their low interest rates,cheap labor,free land,massive government support.
January 3, 2012
Airline Ticket Prices are set to go up as European Union implements its ETS Scheme on the Airline Industry from 2012.Note EU as a region has been one of the most active players in the climate change arena and has an active carbon emissions market.Though this market has encouraged fraud and profiteering by unscrupolous players making it a good target for the fossil fuel lobby,the principle to fight against global warming is a good one.Compare that to USA,Canada and Japan who have done nothing to fight climate change despite the wealth of these nations.Canada has been guilty of abandoning the Kyoto Plan after missing its previous target.It has faced no penalties as it is not legally enforceable.The country continues down the pollute as much as you can pushing oil extraction from tar sands which is much more dangerous to the environment than normal oil drilling.
January 3, 2012
Shale Gas Technology has completely changed the Oil and Gas Picture in North America.Natural Gas prices have touched new low below $3/mmbtu as massive discoveries and production of shale gas has led to a glut.With the Technology being exported to other countries,it is expected that Natural Gas may take over from Coal as the preferred choice of electricity power generation.China and India are already taking out tenders for shale gas blocks.However Shale Gas has a nasty side effect which is normally not talked about.The cases have kept increasing though the mainstream media and the powerful oil lobby has tried its best to supress it.The first one is water contamination which I had written about earlier
January 3, 2012
Solar Power in India has been growing at a rapid clip due to a number of favorable factors
1) Big Energy Deficit
2) Lots of Sulight
3) Falling prices of Solar Panels
4) Favorable government subsidies.
Indian Solar Power Capacity in 2012
Many of the small firms have been weeded out and the developers and banks have got some experience in this new solar industry.Expect 2012 to be much better and expect at leas a doubling of the solar power capacity as both phase 1 and phase 2 winners in JNNSM complete projects.Rajasthan,Gujarat and Karnataka state subsidies should also see some projects being complted
Solar Power Capacity in India in 2012 should be around 1 GW which is not bad and will make it one of the top 10 Solar Markets in the world.
January 3, 2012
Income Inequality is a Theme that is getting played across the world in developing as well as developed nations.Most of the turmoil in 2011 in the Middle East and the Occupy Wall Street Movement can be attributed to the growing Income Gap between the Have and Have -Nots.The Great Recession in 2008 can also be looked upon as a fallout of this.Gini's Coefficient which measures the income distribution gap has shown continued deterioration all over the world.The Middle Class is shrinking and growing poor by the day and it is not only the Poor Class that is getting affected.
January 3, 2012
The Indian Energy Sector has seen massive investments by Private Equity and Investment Banking Groups in the West.Green focused utilities like Orient Green Power and Greenko are already listed in the public markets.Big PE firms like Blackstone,Appollo and KKR has put money into Indian electricity companies as well.Despite losses and adverse conditions being faced,this sector continues to attract money.Leap Green Energy which is backed by the family of India's ace motor racer Narain Karthikeyan has got Rs 100 crore in funding from JP Morgan one of the biggest investment banks in the world.
January 3, 2012
Securitization has emerged as New Funding Model for Capital Intensive Solar Energy Projects.In India Welspun Energy which is a solar developer with a solar plant in Gujarat has managed to securitize the project.Securitization in finance refers to pooling of various cash flows generated from different assets such as mortgages,recievables etc.Note Securitization has become a dirty word in finance as subprime property mortgages in the US were sold as AAA security products.However in case of Solar Energy they may prove to be a boon.Note financing of debt has become a big problem in building solar farms.Securitization can be an ideal way forward as it spreads the risks and allows the loans to be given to solar developers.
January 2, 2012
China faces multiple challenges
1) Slowdown in Europe and USA means that their exports are sputtering and manufacturing has already started contracting
2) Protests in cities and villages grows against rampant corruption and land grabbing by Communist officies.Lack of democracy means violent protests at times.
3) Debt is becoming a huge problem with local government vehicles facing trouble as they can no longer raise money from real estate sales which has fallen by 20-25%
4) Massive industrial overcapacity is being exported outside.This has made the other trading nations put duties and curbs.A big trade war with USA cannot be ruled out.Chinese solar and wind products faced countervailing duties and dumping charges.China has already imposed high duties on US car imports.
January 2, 2012
Note Chinese companies too would have shut down but the state owned Chinese banks are keeping them alive with loans at ridiculous interest rates.LDK which is buying Sunways is almost insolvent as well with its convertibles trading at less than 50c on the dollar in Singapore.It has more than n$3 billion in debt compared to its market cap of around $600 million.It faces massive losses in the coming qtrs and can't serve the interest payments much less expand.The strong support of the Chinese government for its green companies is keeping them alive.Chinese solar panels have become super cheap due to companies selling at below cost and massive scale.Note all the cheap solar panel brands in the world are Chinese with the exception of First Solar and some Asians.
LDK has managed to spend 22 million Euros despite burning hundred of millions of dollars in cash because it has got the Chinese government trillions backing it.So while Western companies burn and crash,the big crony Chinese companies can expand and acquire.
Most of the German solar manufacturing industry is finished and it is unlikely that except a couple of them like SM Solar or Wacker will live to see 2013.Q-Cells too should go bankrupt or get consolidated .Note despite European companies shifting factories to Asia ,they just can't compete.Some of the smaller module makers with 20 MW plants have seen huge losses with the equipment not selling for 10 cents on the dollar
January 2, 2012
Gujarat solar energy has been massively promoted by the state government led by Modi which has announced numerous incentives and subsidies.The state has an ambition of becoming the Germany of solar energy in India with more than 1 GW of capacity in the next 2-3 years,but the solar energy developers has missed the deadline.29 solar companies in India now want an extension which add up to 450 MW of capacity.The 300 MW of capacity target has not even been half covered with only 140 MW installed.However the problem is that on Jan 29 2012 new feed in tariffs will be announced which will be lower.This will benefit the older developers if they get the older higher tariffs with much lower equipment prices.The State has already implemented a clear and forward looking Renewable Energy Policy with emphasis on Solar Energy.It has signed PPAs with a number of solar project developers under its State Solar Subsidy Scheme.While other states are looking mainly towards the federal subsidy scheme JNNSM to push Solar Energy Generation,Gujarat is looking to push Solar Energy on its own.Gujarat now has reportedly acquired 3000 acres at Charnaka village in Patan District which it will give to solar project developers to install solar panels.
January 2, 2012
Ladakh,one of the most beautiful hilly regions lying near the Chinese border has one of the highest potentials in generating solar power in India.Note under JNNSM,India is targeting more than 20 GW in the next 10 years and already large solar farms are coming in the desert areas of Rajasthan and Gujarat.However,Indian policy has mostly neglected the less inhabited region of Ladakh.Most of the policy initiatives have been low key in nature and mostly to provide the region with off grid solar power,solar cookers and solar lights.What has been missed is to build massive solar panel farms and connecting them with a transmission line to the power hungry states of the North.Just like Himachal Pradesh has become a masssive hydro power exporting state,Ladakh can do the same trick with solar power.
Solar Panel prices have fallen by 50% in 2011 and now solar energy can be profitably be generate at Rs 7/kwh.While this is more expensive than coal at Rs 4/kwh,the thing to be remembered is that this power value is constant for 25 years and it has no coal disadvantages which kills thousands each year.Also it increases Indias 'energy security and reduce imports of expensive coal.It also will provide more employment and generate economic value internally beside supporting the Indian construction and EPC companies.
January 2, 2012
The Chinese solar panel producers too are facing tough times with many companies running at low utilizations and almost everybody running losses.Some companies with huge debt burdens like LDK are running because of government largesse as they are effectively insolvent for all purposes.Expect more bankrutpcies in the coming year .It will take a very foolish or a very brave company to expand solar capacity this year.
Only USA Solar Installers are having a good time with below cost solar panels availabe increasing the returns and leading to massive increased.It looks like 2012 will be a good year for US solar installers who are expanding rapidly to take advantage of the falling solar module prices.Even Buffett is going all into solar development space acquiring billion dollar project in a classical case of vulture investing.
January 2, 2012
2011 has been a bad year for emerging markets with high inflation,slowing growth and rising interest rates.Most of the problems are a consequence of the 2008 Financial Crisis when emerging countries increasing fiscal spending and reduced interest rates to reduce the affect of the Lehman crisis.Now the Bill is coming due with slowing growth and higher inflation.Most of the BRIC countries have heavily increased interest rates in 2011 to slow inflation as their poor population can ill afford the damaging effect of inflation.
Brazil has reduced its 2012 Budget by $32 billion to control inflation drawing howls of protest from politicians who always want to spend more as if money grows on trees.The country has reined in spending in both 2011 and 2012 to reduce the fiscal deficit and spend more money on productive sectors like infra.
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