|January 10, 2012|
The Year Starts With a Solar Scramble & Trade Friction
|A hectic start to January in the clean energy sector saw a mix of exciting news on project development, another sharp fall in the share price of turbine maker Vestas Wind Systems, encroachments by Chinese companies into mergers and acquisitions in the West, and discord over international trade and airline emissions.|
Clean energy share prices have yet to show signs of recovery from recent sharp losses. The WilderHill New Energy Global Innovation Index, or NEX, closed last year at 127.06, almost 40% lower than where it began and 73% below the all-time high of 468.75 reached in November 2007.
It was a volatile 2011 for the index, as well as a depressing one. After surging to a 15-month high at the start of April as the Fukushima nuclear disaster unfolded, it lost 46% in six months as the eurozone debt crisis hit and credit markets dried up. The collapse of solar companies Evergreen and SpectraWatt in August, and Solyndra in September, also affected sentiment.
The NEX started 2012 brightly, closing on a three-week high on the first day of trading of the New Year, but sank back to end little changed last week. In contrast, new energy investments continued apace in the early days of January.
The stand-out deal in wind was the acquisition by a unit of Warren Buffett's MidAmerican Energy Holdings of three projects in Iowa, a combined capacity of 405MW, following its solar purchases last month. Meanwhile, Exergy announced it was building 152MW of new wind parks in Idaho and Minnesota, while Enel won a tender to build a 99MW wind farm in Chile. However Vestas shares lost 11% last week, falling to their lowest since 2003, as it cut revenue and profit forecasts for the second time in two months.
Nowhere is the contrast between company performance and investment clearer than in the solar sector, where a crowded marketplace, oversupply, falling subsidies and plummeting prices have seen module makers struggle even as installations continue to surge, leaving the sector ripe for consolidation.
In Germany, the world's largest PV market, a rash of solar panel installations in December kept total installations in 2011 near the record 7.4GW achieved in 2010, according to BSW-Solar, a lobby group. Meanwhile, Germany-based Solarhybrid was in talks last week to buy collapsed rival Solar Millennium's US assets, which include the 1GW Blythe project in California.
Germany is also the focus of interest from Chinese companies looking to buy market access and new technology on the cheap. LDK Solar, China's second-largest solar panel maker, bid EUR 24.2m for Sunways, which would be the first Chinese solar purchase in Germany. Another German solar module maker, Solar-Fabrik, rose 35% last week on speculation it is a takeover target for Chinese producers.
The solar consolidation may see more Chinese companies dying than being bought, the chief financial officer of Shanghai-based JingkoSolar told Bloomberg News. According to the Beijing-based Energy Research Institute at the National Development and Reform Commission, the oversupply of solar panels may see Chinese manufacturers whittled down to 15 within five years, from 330 in 2008.
In the meantime, trade friction is increasing as competitors claim that Chinese companies are receiving unfair government support. Having ruled in early December that Chinese imports were harming solar equipment makers, the US Department of Commerce last week delayed its decision in the next step of the case brought by SolarWorld. A similar case has also been brought by US wind tower companies.
Chinese firms are getting plenty of home support, even in the US market. LDK Solar secured USD 64m in construction financing facilities last week from the state-owned China Development Bank for projects of up to 300MW in New Jersey and California.
International argument is heating up even more quickly over the inclusion of airlines in the European Union's cap-and-trade scheme for the first time last week.
The European Union is finding itself under attack from all sides. An association of leading Chinese airlines said "China will not cooperate" with the emissions regime. An Indian official said airlines may be asked to withhold emissions data to undermine it. The US House of Representatives has already passed a bill prohibiting US airlines from participating in the scheme, and that bill is now lodged in the Senate.
However, Europe has remained steadfast, after the European Court of Justice ruled just before Christmas that all airlines flying to and from EU airports will have to buy permits.
The Obama administration was reportedly considering options for possible retaliation last week. However, as the scheme took effect, American airlines announced new fees to pass costs onto consumers. Delta led the way with a USD 6 fee on return flights to Europe, which was matched later in the week by American Airlines, United Continental and US Airways.
CARBON STARTS THE YEAR WITH RECORD LOWS
Carbon prices sank to new lows in the first week of 2012 as concerns over the eurozone's debt crisis lingered on. European carbon allowances, or EUAs, for December 2012 delivery lost 9.8% last week to close at EUR 6.60/t, compared with EUR 7.32/t at the end of the previous week. EUAs touched an all-time low of EUR 6.38/t on Wednesday afternoon. United Nations Certified Emission Reduction credits, or CERs, for December 2012 plummeted by 14.7%, closing at a record low of EUR 3.60/t, compared with EUR 4.22/t the previous Friday. Concerns over the eurozone's ongoing debt crisis weakening industrial productivity, and hence demand for carbon permits, were exacerbated by the euro dropping against the dollar last week as Spanish and Italian bond yields climbed, and figures released by Berlin showing that factory orders in Germany had fallen in recent months.
VEOLIA FACES US LAWSUIT AS EUROPEAN HYDRO FIRMS GET BUSY
France's Veolia, the world's leading water services provider by sales, faces a class action lawsuit in the US over alleged 'misleading' statements about its finances, the Financial Times reported. Meanwhile, Vattenfall will partner with ArcellorMittal, Rhodia and SNCF to bid for 2GW of the 5.3GW of hydropower tenders to be renewed in France this year, the company said in a statement. Alstom was awarded a USD 64m contract by utility Hydro-Québec to refurbish Canada's Centrale Robert-Bourassa hydropower plan, the world's largest underground generating station with a capacity of 5.6GW, the Montréal Gazette said. UK-based 3Power Energy announced that it had agreed to buy 75% of the concession rights for a 127.6MW hydropower project in Albania. China's Harbin Electric signed a deal to build a USD 477m hydropower plant with 275MW capacity in Ecuador, Bloomberg News said. In Peru, USD 47.7m of a USD 2.1bn rural electrification programme will be invested in hydropower plants, the Ministry of Energy and Mines announced.
SAFETY FOCUS IN EUROPE AND JAPAN AS NUCLEAR RISKS EXAMINED
Japan's government will consider taking control of nuclear power plants unless private utilities take more responsibility for risks, the Yomiuri newspaper reported, citing Japanese industry minister Yukio Edano. The country also plans to introduce new requirements to prepare for worst case scenarios and to limit the lifetime of reactors to 40 years, with extensions only under stringent conditions, the Wall Street Journal reported. Similarly France's nuclear watchdog ASN introduced new requirements to improve safety systems, with EDF CEO Henri Proglio telling Le Monde they would cost 'less than' the EUR 10bn thought and ruling out closing down plants to meet them. Elsewhere in Europe, Slovakia and the Czech Republic both dispatched reports to the European Commission saying their nuclear reactors had passed safety tests, the Czech News Agency reported. Bulgaria wants to add 120MW capacity to the 2GW Kozloduy plant, which supplies 40% of the country's electricity and also last week passed stress tests, Bloomberg News said. Areva is reportedly lining up a bid for Urenco, which is jointly owned by the UK and Dutch governments and German utilities Eon and RWE, according to Financieele Dagblad. Areva also signed a USD 500m contract to supply nuclear fuel and services to Xcel Energy from 2015, the company said in a statement.