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Hey, solar fans. You may or may not have noticed that I've been away from my post for the past two and a half months. I missed you, even if you didn't miss me.
I'm very excited to get back into the thick of things, and I hope you don't mind me stretching out a bit in this dispatch. There's plenty to talk about.
A solar player steps into the spotlight
This week, Solarfun Power (Nasdaq: SOLF ) made a series of notable announcements. The company secured an RMB6 billion ($885 million) credit facility from Bank of Shanghai. That borrowing capacity exceeds Solarfun's entire market capitalization. In case that wasn't overkill, the company also announced an RMB 7 billion ($1 billion) "framework" credit facility from Bank of China.
The message is pretty clear: Leading Chinese solar companies have access to unlimited capital. How do you compete with that level of government support, if you're an American firm like SunPower or Energy Conversion Devices (Nasdaq: ENER ) ? The answer may be reflected in the relative share price performance of these three stocks year to date. Solarfun is up more than 30%, which Sunpower is off more than 40%, and ECD has lost more than half of its market value.
Of course, the situation is more complex than that. Shares of Canadian Solar (Nasdaq: CSIQ ) and Suntech Power (NYSE: STP ) are slumping this year, while First Solar (Nasdaq: FSLR ) is hanging in there. My point is just that unlimited government backstops come in pretty handy in a cutthroat competitive environment such as the rapidly growing solar sector.
As far as deploying some of that freshly available capital, Solarfun announced that it plans to squeeze an additional 50 megawatts of capacity out of its existing production lines through process improvements, and will convert 160 MW of its cell lines to produce higher conversion efficiency solar cells. Perhaps the biggest news was slipped in toward the end of the press release, which stated that some brand new manufacturing complexes are being erected that will ultimately add 500 MW of cell capacity and 1,200 MW of module capacity. That represents a doubling of cell capacity and an even bigger increase in module capacity.
Solarfun has tended to reside in the shadow of shops such as Trina Solar and Yingli Green Energy (NYSE: YGE ) , but the company appears to be making big strides. I'm not at all surprised that Solarfun caught a significant price target bump from Auriga this week.
A thin-film platform goes poof!
Back in April, we noted that Applied Materials' (Nasdaq: AMAT ) SunFab line was in trouble. One customer of the amorphous silicon PV manufacturing equipment went bankrupt, and another was passed over for Department of Energy funding, resulting in insolvency in June. I'm happy to know that the DOE didn't throw tax money at a company on the brink of financial ruin.
In April, Applied was said to be reconsidering its support for the business unit, and there was arguably some upward movement in the stock as a result. Well, this week the plug was officially pulled. The company is laying off 400 to 500 global employees and restructuring the Energy and Environmental Solutions segment, which will now focus on crystalline silicon PV and other technologies like LED lighting. When the rumor became news, there was no notable reaction in the stock price. That may spell opportunity.
Putting my thumbs where my mouth is
As a result of this week's review, I'm going to give Solarfun and Applied Materials "outperform" calls over in Motley Fool CAPS. If you feel strongly about either stock, I hope you'll follow me over and make a pitch of your own.