Company Results: Solar Shines On While Wind Blows Hot & Cold
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Share Warnings of a 'double-dip' recession in the US and elsewhere, notably the UK, have done little to undermine confidence in the renewables sector. Venture capital investment in cleantech companies, according to analysis firm Ernst & Young, topped US$1.5 billion in the second quarter of the year. Industry observers are keen to see if the momentum can be maintained for the remainder of the year.
E&Y reports that some 65 financing rounds for the period saw a 63.8% increase in capital and a 4.6% increase in deals compared with the same quarter in 2009 (Dow Jones VentureSource). The figures represent the highest level of venture funding for cleantech since Q3 2008.
Solar projects were among those receiving higher investment than previously, and made up five of the top-10 VC deals with $438.8 million in investment, a rise of 182.6% from Q2 2009. BrightSource Energy, a developer of utility-scale solar thermal energy plants, received the second-largest deal of the quarter, a $180 million later-stage round.
Earlier this year the US Department of Energy conditionally committed to provide $1.37 billion in loan guarantees to support the financing of the company's Ivanpah Solar Electric Generating System. The 392 MW Ivanpah project, which was given the green light by the California Energy Commission in August, will be the first large-scale solar thermal project built in the state in nearly two decades.
Elsewhere, there is no shortage of companies putting on a brave face, however adverse the wider market conditions. SunEdison, a leading solar energy services provider, has announced an agreement with J P Morgan Capital to fund an estimated $60 million in project financing for deployments across key markets in the US.
The J P Morgan commitment will be funded through SunE Solar Fund and used to help fund solar installations for both commercial and government projects. It is the first distributed generation solar programme in which J P Morgan has been involved. Meanwhile, SunEdison confirmed that Bank of America Merrill Lynch has committed to financing the final two phases of its 17.3 MW solar farm project in Davidson County, North Carolina. The solar farm is being deployed through solar power purchase agreements between Duke Energy Carolinas and SunEdison. The solar farm will be expected to generate more than 510 GWh of energy over a 20-year period.
Yet despite these successes, companies with particular exposure to the North American markets will take little comfort from the failure of the US Senate's proposed energy bill to include a Federal Renewable Energy Standard (RES) provision. The expiry of the treasury grant programme after 2010 means that renewable energy projects will lack any real effective incentive mechanism. Accordingly, the US has fallen from the top spot of E&Y's renewable energy country attractiveness indices, a position it has held since 2006, allowing China to take the crown. For more on the latest E&Y investment attractiveness index see the News and Analysis section starting on page 9.
Yingli Green Energy
Yingli Green Energy, also known as Yingli Solar, is one of the world›s largest vertically integrated photovoltaic manufacturers, recently reported its unaudited consolidated financial results for the quarter ended 30 September, which saw total net revenues of RMB3.284 billion ($490.9 million), an on-quarter increase of 21.7%, and a gross profit of RMB1.094 billion ($163.3 million) - giving a gross margin of 33.3%. Gross profit in Q3 was up 20.9% on Q2, while the gross margin saw a minor downtick from the previous 33.5%.
Operating income for the three month period was RMB735.8 million ($110 million), up 30.1% on the previous quarter and 203% up from the same period in 2009. Its Q3 operating margin was 22.4%, a 20.9% increase on Q2 and 10.9% growth against Q3 2009, said the company.
Net income closed the quarter at RMB456.1 million ($68.2 million) while its diluted earnings per ordinary share and per American depositary share value was RMB3.57/share ($0.53/share).
Announcing the results, chairman and CEO of Yingli, Liansheng Miao, said: 'The third quarter was another exciting period for us with strong operating results. PV module shipment volume increased by 25.2% from the second quarter and [the] gross margin was 33.3%, higher than our previous estimation in the range of 31%–31%.'
Continuing, he said: 'The demand for our Yingli Solar modules continues to grow rapidly in the global market.'
The CEO said there had been a 25.2% on-quarter increase in PV module shipments in Q3 which he also attributed to 'broader recognition of our premium brand, supported by the expanded manufacturing capacity from the new 400 MW production lines'.
'As of today, we have entered into sales contracts under which a total of 721 MW of PV modules are expected to be delivered in 2011, and this figure is expected to increase to 1000 MW by the end of this year.'
Continuing, Miao said: 'In order to meet the growing market demand and increasing interest in our products, we have recently launched a total of 700 MW of new capacity expansion projects, which are expected to start initial production in the middle of 2011 and increase our nameplate capacity to 1.7 GW in late 2011.'
'To support the financing needs of the fast expansion I'm delighted that through one of our operating subsidiaries in China, we have become the first China-based solar company to have completed a successful registration of [RMB] 2.4 billion and [the] issuance of [RMB] 1 billion [of] medium-term notes on the PRC inter-bank debenture market,' he added. 'We have always been committed to bringing state-of-the-art technology to our customers to drive down their balance-of-system cost,' he said.
'Our Panda cell conversion efficiency has achieved 18.5% on the commercial production lines and we expect to increase the figure to 20% towards 2012. Currently we have achieved a new record cell efficiency of 19.5% on Panda trial production lines with third party verification from the Fraunhofer Institute for Solar Energy System ISE in Germany.
Solar Millennium
Solar Millennium recently released its interim results and earnings forecast for the full year, adjusted to take account of a relatively weak position in the first half of 2010. The company recorded sales of €37.1 million ($51.6 million) for the period 1 November 2009 to 30 June 2010, compared with €48.5 million the previous year.
Solar Millennium said that although the interim results fall short of the previous year's respective performance, it had reached important milestones in the current fiscal year. The approval process for power plant projects in the US, in particular, was on schedule, it said. However these achievements were not be shown in the interim financial statements as they could only be recognised in the balance sheet after an approval phase was completed, said the company. Its executive board said it still plans to generate respective sales and earnings in the current fiscal year with both the US projects and Ibersol.
Sales in the first eight months of the current fiscal year were largely generated in its technology and power plant construction sectors for the Andasol 3 parabolic trough power plant in southern Spain and through the work being finished for the Egyptian hybrid power plant in Kuraymat, as well as in its project development sector. The negative interim result was attributible to one-time charges in connection with former CEO Utz Claassen's signing fee as well as to consistently high pre-investments in projects and the company's growth, particularly in the US, it said.
Gamesa
In the recent publication of both its third-quarter and year-to-date results covering January through September, Spanish engineering group Gamesa reported a strong recovery in orders in Q3 with 1186 MW of firm orders placed – split into 584 MW for delivery this year, and 602 MW for delivery in 2011. However, despite this late upturn its nine-month net income slipped by almost 71% to €25 million from the €86 million reported in the same period of 2009.
The value of sales for the same period also tumbled, this time by almost 28% dropping to €1.786 billion from the previous €2.478 billion. But the company still claims to have a strong balance sheet position and 'sound profitability' in what it described as a 'highly competitive market'. The company's wind turbine division reported a 5.4% EBIT margin and a 58% annual increase in O&M service sales – reaching €227 million in the nine month period. For Q3 the figure was 39% up year-on-year. Net debt at the company also dropped year-on-year by more than €400 million to €297 million at the end of September.
In its outlook, the company said it was 'steadily moving forward' and the results showed it has achieved financial soundness and profitable delivery in the periods concerned. At the same time it also launched its 2011-2013 business plan, which it said would strengthen the company's industry leadership in three ways – cost of energy, growth and efficiency.
Capital expenditure in the period will amount to €250 million/year with no need to resort to the capital markets, while offshore activities will account for 20% of total capex, it said. The company also plans to double the amount of installed capacity under maintenance by its services arm within three years to 24 GW.
With an eye on reorganising its manufacturing arm to boost its footprint in growth markets such as China, India, Brazil and the US, the company plans to reduce its exposure to the Spanish market by halving current capacity.
Those active in the wind sector continue to cast their net to the East to grow market share and Gamesa, too, has obtained new contracts in China to supply 197 turbines with a combined capacity of 251 MW. Gamesa's wind turbine division signed the contracts with two of its largest customers in China, Guangdong Nuclear Wind Power and Datang Renewable Power, and a new customer, Henan Weite Wind Power, a mid-sized independent power producer. The deals underscore Gamesa's commercial strategy for expanding into new markets and customer segments.
Gamesa will supply Guangdong with a total of 48 of its G90 2 MW turbines, representing a combined capacity of 96 MW. The agreement with Datang Renewable Power covers 25 Gamesa 2 MW turbines, with a combined capacity of 50 MW, supplied to the Chinese power company's wind farms in Liaoning Province.
In addition, Gamesa will supply Henan Weite Wind Power with 124 of its G58-850 kW turbines, for a combined capacity of 105 MW. The turbines are destined for the Henan Weite Wind Power Project, which is being funded by a China Climate Change framework loan from the European Investment Bank, and which will have an annual capacity of 200 GWh and will allow the Chinese company to meet the renewable energy generation targets stipulated in its five-year plan.
Gamesa's share price over the last 12 months, in €
Vestas
Vestas' October-published third-quarter and year-to-date financials were never going to be easily digested because, like many other majors in the sector, it has faced and continues to face a dip in European demand as well as ever-increasing competition and pricing pressure from newcomers, particularly in Asia. Put simply, this giant of the global wind energy market said it plans to stay on track - both financially and in terms of maintaining and growing its market share – by cutting its manufacturing capacity through the closure of five of its sites, four in Demark and one in Sweden, in a move that will see a workforce reduction of approximately 3000.
Speaking from Copenhagen, rather than from New York, as had been planned before the announcement of the job cull, Ditlev Engel, president and CEO, described the market situation as 'challenging'.
'The situation that we experience is unfortunately at a level where we have to reduce our expectation of European demand compared to what we thought a while back,' he said.
'At the same time we definitely also see, on a global level, that competition is increasing. But I would also like to stress that Vestas is more than ready to handle this situation.'
Consultations with those set to lose their jobs was to begin immediately and was expected, he said, to be completed by November 2011.
'We have to be very certain that Vestas' competitiveness is being increased in the years to come, making sure that we can provide the lowest cost of energy to our customers,' he said.
'This obviously does not just come from the development of technology but definitely also from the fact that we have to make sure that the turbines are manufactured at the most cost-competitive level that one can imagine. Otherwise it would, of course, be very difficult for Vestas in the years to come to win, let's say, in this industry – which we intend to do.'
In the Q3 report the company said its 2010 guidance, before one-off costs, remains intact, and that it has an order intake of 7-8 GW for 2011 as well as a positive free cash flow for the year ahead. 'Value proposition pays off,' said Engel.
The income statement showed perhaps why its austerity drive had come to the fore, as almost across the board the year-on-year quarterlies and nine-month numbers showed a fall. Third-quarter EBIT was €185 million from €244 million in Q3 2009. Nine-month to end-September figures swung to a loss of €59 million from a profit of €398 a year earlier.
The picture was similar when broken down specifically into profit both before and after tax in which the third quarter fell to €175 million from €229 million in the same period of last year, and €126 million from €165 million in Q3 2009, respectively.
The nine-month to end-September before and after tax figures show more dramtic swings, closing at a loss before tax of €104 million from a profit of €366 million in the same period of 2009. After-tax profit was wiped out, coming in at a loss of €75 million from a figure of €264 million in the black in the same nine month period in 2009.
Gross profit for the nine month period was down 45% on year at €451 million from the previous year's €816 million. For the third quarter the fall was decidely more subdued at 4% with a showing of €363 million against Q3 2009's €377 million. The EBIT margin fell for the quarter and closed out at 0.7%, well down from the previous figure of 13.5%. But on the positive, the company's gross margin for Q3 was up by 0.3% on year to 21.1% from the previous 20.8%.
However, its net debt had fallen on quarter by €169 million by the end of Q3. Its net working capital, on year at the end of Q3, was down 15%, said the company, at €1.92 billion as of 30 September from €2.25 billion as of the same date in 2009. But its cash flow was up to €300 million by end-September from €291 million a year earlier.
In terms of orders, the company said it is 'on track' for the 8-9 GW estimated for full year 2010, with 6.567 GW of orders in hand by end-September.
The regional distribution of where orders are placed from has been maintained, said the company, with the Asia-Pacific region almost dead on target for its full year estimate, although the Americas and Europe have some way to go in the final three months of the year to meet forecasts.
The company described its decision not to cut manufacturing capacity earlier in the year as a wrong decision from a financial point of view. However it was the view of the company's management that the decision to hold off on the cuts was the right one.
Vestas said 2010 had been an extremely tough year and that in 2011 it would face fierce competition. Furthermore, the company added that 2011 will bring with it a number of weak demand drivers in Europe.
Low economic growth, low demand for energy, modest short-term political possibilities due to changes in fiscal agendas and uncertain project approval processes would result in lower than expected demand in Europe next year.
The firm's solution would be, according to the report, to align its capacity and costs to 2011 demands. The report added that, no matter where the company sells its products, it would have to be competitve. In conclusion, it said fierce competition in the market would be answered by its global presence.
Vestas' share price over the last 12 months, shown in DKK
SeaEnergy
The marine energy specialist also recently published its six-month results for the period ending 30 June. Operational highlights included a start to offshore activity on the company's UK Round 3 Zone 1 site in Scotland's Moray Firth. Geophysical, met-ocean and bird surveys for the site all got underway during the period and a consent application along with an Environmental Impact Assessment (EIA) is due for submission in 2012.
The company said arrangements with UK's Crown Estate to advance the Inch Cape project off Scotland's eastern coast were close to being concluded and, importantly, had allowed offshore work to commence. Work on the Beatrice Offshore Wind Farm in Scottish territorial waters had also progressed well during the period with geophysical survey work completed and geotechnical work on the site set to commence shortly.
Elsewhere, it signed a strategic cooperation agreement with the Nantong COSCO Ship Steel Structure Co, a subsidiary of China's COSCO Group.
The company reported a loss from continuing operations after tax of £4.2 million ($6.6 million) for the first six months of 2010 compared with £2.5 million for the same period in 2009.
Group cash balances at stood at £1 million as of 30 June against a figure of £1.8 million for the same period of 2009. The company also reported that a financing agreement with LC Capital Master Fund had been extended until the earlier of 31 December 2010 or the completion of the SERL sale process.
On the current status of its divestment of SERL, which is being coordinated by Ernst & Young, it said it was progressing well and that its board had been encouraged by the level of interest shown to date. Further announcements concerning the sale would be released in due course, it added.
SeaEnergy executive chairman Steve Remp said he expected the sale process to be complete by the end of the year, after which the company would refocus its attention on opportunities elsewhere in the business.
'We believe the supply chain and service industry for offshore wind farms will be a rapidly growing and profitable sector and our marine team has done a terrific job over the past year in developing a business model surrounding turbine access and servicing,' he said.
'We now look toward generating orders, and ultimately cash flow, by providing the solution to what we believe is a key issue for offshore wind constructors and operators.'
SeaEnergy's share price over the last 12 months, shown in £
Other Results in Brief
Ocean Power Technologies' recently published its financial results for the first quarter of its fiscal year, which ended 31 July, revealed its contract order backlog had increased to $6.5 million compared with $5.7 million as of 20 April, and $6.4 million as of 31 July, 2009.
Revenue grew by 5% to $1.4 million for the quarter, compared with $1.3 million for the same period in 2009. In addition it reported cash, cash equivalents, restricted cash and marketable securities of $60.8 million as 31 July against 30 April's $66.8 million.
Operating loss for the three months ended 31 July was $6.3 million compared with $3.2 million for the same period in 2009. Net loss attributable to OPT was $6.3 million for the quarter against $2.1 million in the same period of the previous year. The increases in fiscal 2011 operating loss and net loss attributable to OPT were primarily due to costs incurred in its product development programmes, principally for the PB150 system, it said.
In October the US Navy awarded $2.75 million in additional funding to OPT for a second stage under its existing contract to provide an autonomous PowerBuoy wave energy conversion system for the Navy's near-coast maritime surveillance programme.
Meanwhile, Acta, the clean energy products company, announced its interim results for the six months ended 30 June, with an increased operating loss of €2.4 million ($3.2 million) from €1.3 million the previous year reflecting, said the company, an increase in commercial and production activities, including materials, staff resources, operating expenses.
Despite this, the company said it had benefited from the rapid exploitation of the highly favourable, cash-generative Italian solar photovoltaic market.
During the reporting period the company's hydrogen generator won the prestigious Qualitec Technology Award for innovation and CE certification and it also launched its so-called hydrogen village in Viareggio, Italy, in which its integrated PV panels, a hydrogen generator and fuel-cell powered bikes and boats feature. Furthermore it received a €780,000 grant award from the Tuscan regional government to develop a wind power storage system.
Chris Webb is a correspondent for Renewable Energy World magazine. Additional reporting by David Beattie.
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