[This story was first written in Aug. 2008. The final Washington '08 lobbying figures came out, along with Obama fever, so a partial update is now timely.]
What do solar stocks have to do with market manipulation? The following contains a brief overview of some of the factors that influence the price/volume trends we’ve been writing about. We also explore a reason you won’t get this info on CNBC. At SEMICON West, which is one the largest trade shows on the planet, there was not a single US solar wafer or thin film manufacturing company on property. This is a stark lack of showing when 1,121 other companies representing the entire industry were there.
Who Was There?
So where was SunPower. Is it possible they were told/threatened not to come? The other missing big US solar names were FSLR ENER EMC ESLR HOKU WFR and AKNS. Not a single booth representing the United States to do business in. Some of them had a few employees walking around, but no floor space. Here is a list of every PV company exhibiting a product: Photovoltaic Exhibitors at SEMICON West 2008
AMAT was there, but they don’t work on the stuff you dig out of the ground. They make machines. This lack of US attendance is startling when 79% of SEMICON West visitors are involved in product selection and purchasing, and 32% of them were there to talk solar.
What is Holding Solar Back?
This begs the question. Why is solar depressed in the US, and why isn’t Wall Street promoting these companies? There hasn’t been a growth story like this to get excited about for decades. Apparently, it’s politically safer to get excited about ethanol which is a net energy loser and kills people. That is if statistics on starvation linked ethanol deaths ever do surface.
From The Times UK
The rush towards biofuels is threatening world food production and the lives of billions of people, the Government’s Chief Scientific Adviser said yesterday.
“It’s very hard to imagine how we can see the world growing enough crops to produce renewable energy and at the same time meet the enormous demand for food.”
Josette Sheeran, executive director of the World Food Programme, told the European Parliament in Brussels yesterday: “The shift to biofuels production has diverted lands out of the food chain. Food prices such as palm oil in Africa are now set at fuel prices. It may be a bonanza for farmers – I hope it is true – but in the short term, the world’s poorest are hit hard.”
The amount of energy used to commercially produce food is insane. From the mining of potash, to the diesel to plow, then ship, then package, then distribute it. So one of the politically viable solutions therefore is to increase this ratio! The saying goes, “What’s good for Big Oil…”
Who Owns the World? [numbers updated Jan 2009]
This issue is huge and will give us years of information to chew through. However, here is a really fascinating aspect of one of the roadblocks to cheap unlimited energy, Washington, D.C. industry lobbying.
$114,058,794 Electric Utilities are the #3 spender for 2008
$ 94,531,539 Oil & Gas are the #4 spender for 2008
Last year GE spent $15,038,000 in Washington. Over the last 10 years they spent $178M furthering their agenda on Capitol Hill, which makes them the largest single corporate lobbying entity. Guess why wind is so politically popular compared to overseas solar manufacturing! By the way, that’s a GE turbine in that thing. One theory aligns the United States and the military-industrial complex with the attitude of, “We own the world.” GE used to say, “We bring good things to life.” Close enough for government work. If they can’t own it what are the chances of seeing it grow and develop? Think about their nightmare of a home owner going to Home Depot to buy a Do-It-Yourself Home Solar kit.
Then there are the utility companies that burn coal. What country owns the largest coal reserves in the world? Even kids know this stuff. Yes, it’s the United States. Here is another wild energy dichotomy. Compare the explosive 2008 bull market in coal stocks to solar stocks. Keep in mind coal is not a growth sector.
Companies like ANR had a PE of 52 at the peak of the coal trade. The math doesn’t quite add up. Especially when you consider the coal industry is primarily mining in the same areas they used 150 years ago. Can a 150 year old industry be a growth industry? Don’t mistake demand for growth.
So how is Big Oil going to charge the public for unlimited energy unless they own it?
From The New York Times on Duke Energy’s CEO Jim Rogers
Solar is currently too expensive to make economic sense, according to Rogers, because the cost to put panels on a roof is greater than what a household would save on electricity. But what if Duke bought panels en masse, driving the price down, and installed them itself — free?
“So we have 500,000 solar units on the roofs of our customers,” he said. “We install them, we maintain them and we dispatch them, just like it was a power plant!” He did some quick math: he could get maybe 1,000 megawatts out of that system, enough to permanently shutter one of the company’s older power plants. He shot me a toothy grin.
Even in this era of green evangelism, Rogers is a genuine anomaly. As the head of Duke Energy, with its dozens of coal-burning electric plants scattered around the Midwest and the Carolinas, he represents one of the country’s biggest sources of greenhouse gases.
What they call “green evangelism” is still a system of control with a monthly debt obligation, also known as ownership. They own you.
Do Solar Companies Talk?
This attitude of US corporate ownership was confirmed at SEMICON West. A high profile executive of a large solar company was offended when asked a seemingly innocuous question. He is of Chinese ancestry and was asked if he felt Wall Street has an agenda against Chinese companies.
Anyone who watches CNBC (owned by GE) can see this behavior. However, the trigger words “East/West” were used. This immediately caused a stunning emotional reactionary response. He made it clear that they are not a Chinese company, but an international corporation legally no different than US corporations. The exec was gracious and diplomatic in resolving his anger, but the answer was more than obvious. Yes, there is major US financial leverage being used against international solar companies and they are frustrated by it.
Grow Baby Grow!
Recent estimates project the global solar photovoltaic (PV) market to grow from US$13 billion, to over $40 billion in 2012, when electricity produced by PV technology will reach grid parity in many parts of the world. The chip makers were doing 17% growth in the boom years.
So there were companies like Intel doing 17%. Today companies like LDK Solar are doing 50% year-over-year growth. LDK had the prime spot at SEMICON West. They were right in front at the main entrance with a HUGE overhead picture of the new factory site.
A comparison could be made between LDK and Intel of the early 90′s. That will have to be another article, but LDK on their own merits is growing at an incredible pace. Not just growing, but immediately accretive and profitable. They are ramping to be the world’s largest solar company by every metric. Their mid-2009 capacity is projected at 2.3GW. This should put them in the number three spot.
A brilliant investor who runs Fund My Mutual Fund broke down the recent fundamentals:
LDK Solar (LDK) Crunches Estimates
“By simply putting a “clothing store” P/E ratio on it you are talking mid 50s. But companies growing triple digits generally get higher P/E ratios than companies selling sandwiches, at least in the market I grew up in. But maybe not in this era. If you dared give a company which can grow 30-50% year over year for the next 3-5 years a PE ratio in the mid 20s, you’d dare to dream of $75. I know, it sounds crazy – I come from the old school where earnings actually drove stock prices. Maybe one day humans will win out over computers again.”
Sources:
SEMICON West 2008 Highlights
http://www.opensecrets.org/lobby/top.php?showYear=2008&indexType=s
Semiconductor Growth Is Slowing
by Dan Bloom
July 12, 2006
Rush for biofuels threatens starvation on a global scale
TimesOnline
March 7, 2008
A Green Coal Baron?
by Clive Thompson
June 22, 2008
http://a330.g.akamai.net/7/330/2540/20080725161031/www.semiconductor.net/articles/blog/1590000359/20080717/AMATSolar1.jpg
http://investor.ldksolar.com/phoenix.zhtml?c=196973&p=irol-newsArticle&ID=1240475&highlight=
A-HA! I’ve always wondered why we (the US) don’t have solar out here. Of course I knew it was about money…but damn! Thanks for the details!
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