SOLAR BUSINESS BOOMING IN NORTHERN EUROPE

There’s lots of uncertainty about subsidies in the most important solar markets in the world and it’s making investors cautious.

Germany recently settled some incentive uncertainties. Kathryn Richards, market watcher, Forbes: “…proposed cuts in subsidies of up to 30% have been watered down to only 9% to 10% a year until 2011…”

Spain remains in the kind of turmoil that should drive business up in the short term. Nobody is certain what to expect beyond this year. (See SPANISH ADJUST INCENTIVES TO NEW REALITY)

Recent reports on solar industry manufacturers Renewable Energy (Norway) and ersol (Germany) suggest the business is there to support investing. Both companies expect to continue growing manufacturing capacity and sales.

Christian Must, analyst, Fondsfinans: "We would recommend buying into Renewable Energy now…"

Ekhard von Dewitz, CFO, ersol Solar Energy AG: “Revenue and earnings will gradually increase according to plan over the next two quarters of 2008 due to increasing material supplies… We are anticipating even greater profitability in the last two quarters of 2008…”

While Europe - with relatively limited actual solar assets - has courageously tinkered with policy experiments and found its way to a booming solar industry, the U.S. - with enormous solar resources - has been led by craven politicians who have kept the nation addicted to fossil fuels. Most observers believe that is about to change.

The U.S. solar industry, therefore, is moving ahead with plans, and even signing contracts, but money is not yet changing hands. Smart investors are getting in for the long run.

Across Europe, the growing solar industry is seeking the right combination of incentives to sustain growth without creating a bubble. (click to enlarge)

Renewable Energy Gets Energized
Kathryn Richards, August 12, 2008 (Forbes)
and
ersol’s operating result for the first six months of 2008 exceeds result for previous year as a whole
Janina Broscheit, August 14, 2008 (Ersol)

WHO
Renewable Energy (RE); ersol Solar Energy AG (ersol) (Ekhard von Dewitz, CFO)

WHAT
- RE posted a higher than expected 9.5% increase in earnings for the second quarter of 2008 over its earnings for the second quarter of 2007.
- ersol’s revenue for the first half of 2008 increased 86% over its revenue for the first half of 2007.

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WHEN
- RE, 2Q 2007: 812.0 million kroner ($151.47)
- RE, 2Q 2008: 889 million Norwegian kroner ($166 million)
- ersol, H1 2007: € 69.8 million.
- ersol, H2 2007: € 129.9 million

WHERE
- Renewable Energy is based in Norway. Its stock is listed on the Norwegian bourse.
- ersol is based in Germany.
- ersol’s sales outside Germany increased from 50.5% to 72.6%.

WHY
- Analysts are not sure why RE’s stock value is down and believe it is a good buy.
- ersol’s growth is thought to be primarily from planned new supplies of silicon and silicon wafers and processing with the company’s expanded production capacities.
- ersol subsidiary Thin Film GmbH made its first significant contribution to the company’s revenues in the 2nd quarter of 2008.
- The increase in supplies of silicon helped to lower pre-production costs in the manufacture of Wafers and Solar Cells

click to enlarge

QUOTES
- Anders Kirkhorn Rosenlund, brokerage analyst, ABG Sundal Collier: "It is a little bit puzzling that the shares are fractionally down, but our recommendation is to buy…The reported figures are very positive, operating income was 18.0% better than our expectations and net income was 10.0% better than our forecast."
- Alastair Bishop, analyst, Dresdner Kleinwort: "[RE is a] relative preference in solar…"
- Ekhard von Dewitz, CFO, ersol Solar Energy AG: "Even more than in previous years, the first six months of 2008 also give no indication of development to come… The capacity expansions in all segments and the start-up of production and distribution of thin-film technology were successful…"