Debt
July 1, 2011
Solar Thin Film Companies are coming under siege again due to the relentless fall in the prices of crystalline silicon panels in recent months of 2011.Note large number of thin film companies went bankrupt the last time polysilicon prices fell off a cliff in the post Lehman crisis period in 2008 end.Applied Material the biggest solar equipment company killed off its SunFab Division which has a large customer list.Applied Materials saw the writing on the wall and concentrated its efforts on crystalline silicon equipment buying HCT Shaping and Baccini to become a billion dollar supplier of solar equipment.A number of weaker hands in solar thin film went out of business.However the prodigious growth in solar demand in 2010 saw large investments being made again.The biggest failure (not complete yet) seems to be the DOE and Obama darling CIGs startup Solyndra which has already used up a billion dollars with nothing much to write home about .Now Republicans are investigating whether the more than $500 million US government loan was done improperly.Abound Solar a CdTe startup has also managed a $400 million loan and I doubt whether it will manage to ever pay off the loan given that the lowest cost manufacturer of solar panels First Solar itself is under pressure from sharp cost reduction by integrated solar panel companies like Trina Solar.
July 1, 2011
Australia has seen a big increase in solar panel installations due to generous subsidies given by individual states in Australia like New South Wales and others.Unlike other parts of the world where solar installations have started with large solar farms,residential rooftop installations have powered Solar Energy in Australia.The sharp growth in solar power has attracted most of the largest solar panel manufacturers in the world like Suntech, Canadian, REC, Kyocera, Sharp, Sanyo, Yingli, Suntech, Trina Solar and others.The major Solar Panel Suppliers in Australia are foreign manufacturers as Australia does not have a local content policy to promote manufacturing of solar cells or solar panels.Only a few handful of companies have manufacturing operations in the country.Almost all of the solar panels sold in Australia are imported.
June 30, 2011
Financing of Solar Energy Projects in India under JNNSM is proving to be a huge problem for the winners of Phase 1 auction under the federal subsidy scheme.Solar Energy in India has huge potential and attracted a number of companies to the first phase of the government tender under the 2020 plan to install 20 GW of solar energy.Note 620 MW of projects in the 5 MW and above category were awarded to 37 solar companies.Many of these firms had no background and had bid irrationally low to win these projects.With little experience and no established financial infrastructure it was an accident waiting to happen.MNRE offical has revealed that 18 of the companies have failed to achieve financial closure and would probably lose their license by the July 9 deadline.Note most of these bids were irrationally low and would not have made profits.Indian Banks and power financing institutions have refused to lend quite prudently.Note these companies are not putting collateral using their parent company's assets which means that they too doubt the feasibility of their projects.Only huge penalties will deter future non serious participants as at least half of the solar power capacity won't get installed in JNNSM Phase 1.It remains to be seen how this affects the future of the Indian Solar Mission.
June 30, 2011
Note the cost of Hydropower at $1-3/watt are quite large and if not planned and implemented correctly can lead to huge time and cost escalation.The Inga 3 Dam being proposed to be built on the Congo River in the DRC faces tough choices.The Hydro Dam on the Congo which will become the biggest hydro power project in Africa is wresting over design issues.The major choice is between tunneling through rock structures or keeping open channels.Note the total cost of the 7 GW Power Plant will be around $14 billion making it the biggest investment in Congo and the 5th largest Hydro Power Plant in the world.Note Africa suffers from chronic power shortages which will become more acute with rising cots of fossil fuels and increasing per capita electricity demands.Making correct decisions on energy is vitally important for the development of the African continent.China is the country with the largest hydro power capacity at 200 GW which it wants to further increase to a massive 400 GW by 2020.
June 28, 2011
REC is looking to invest more than $600 million to set up 300-400 MW capacity in India and is already talking to the Himachal Pradesh government to set up plants there.REC has said that it is looking for power plants with a PLF of more than 50% which automatically rules out wind and solar energy.Its interesting that REC is concentrating on small hydro and biomass power capacity unlike other PSUs which are mainly concentrating on solar energy.India needs massive amounts of investment in renewable energy in order to meet its 15% Renewable Energy Obligation by 2020 from 5% at present.Its instrumental for the large government companies to invest heavily into clean sources of energy.Power Finance Corporation Green Energy has been set up by PFC to become one of the biggest lenders in Green Energy and now REC has also decided to directly invest in Green.More such initiatives will have to be taken to increase the cleantech energy capacity.
June 23, 2011
GoldPoly,SunOasis,China Technology Development Group Corplto invest $10 billion in European Solar Projects using Financing from China Development Bank and Merchants Bank.Note these 3 companies have integrated facilities from processing of polysilicon into wafers to making solar panels.Its the first time that 3 Chinese companies have combined to promote such a massive project.The 3 companies are not listed in the US stock or HK stock exchange unlike other major Chinese solar companies like Trina,GCL,Suntech,LDK and others.Note China Development Bank (CDB) which is owned by the Chinese government has already extended billions of dollars in credit to Chinese solar panel companies like JA Solar,LDK and others.
June 23, 2011
Solar Industry Mergers and Acquisitions (M&A) have picked up pace in recent times with a number of companies in distress with supply exceeding demand as Italy suddenly changed its solar subsidy policy in April 2011.With high inventory levels and prices crashing only the biggest and best solar panel manufacturers are managing to thrive.Note the Solar PV Industry has not seen too much M&A unlike the Solar Thermal Industry which has always been a hot area for M&A activity as giant industrial groups like Siemens,Areva,Alstom and GE have bought startups to improve their technology offerings.With the Solar PV industry having crossed more than $50 billion mark in 2010,more and more MNC conglomerates have now starting buying solar companies at cheap valuations.Here is a list of the recent buyouts,stake buys and mergers in the Solar PV Industry that have taken place recently.
June 21, 2011
India's JNNSM on the other hand has seen the first phase marked by a number of teething problems like debt financing,absurdly low bidding by noname companies,poor electricity infrastructure.The Second Phase is supposed to ally these problems but the first plans do not seem to be too great.The support for large solar farms will be increased from the current 5 MW cap to 20-25 MW cap.This will lead to only large investors,utilities and companies being left in the fray and lead to lesser competition.Also there is no support for rooftop solar which will help to broadbase the reach of solar energy.A Policy which helps distributed solar like Germany will do much more to boost solar in the country than supporting massive solar plants that will only help large companies making the most of the taxpayer subsidies.Note Delhi is the only state in India which is giing primacy to rooftop solar systems and is in the process of announcing a capital subsidy soon.The reason may be that Delhi mostly consists of urban homes and they have little option.
June 21, 2011
Bangladesh like India is a massive power deficient country with peak power shortage of aroudn 25% and more than 60% of the people in the country lacking access to the power grid.As prices of coal,oil and gas increase it has become harder to provide electricity to some of the poorest people in the world.Solar Energy is an ideal solution as it can provide gridless power,is totally clean in terms of pollution,health hazards and is economical as well since it saves money for building the electricity transmission.The Bangladesh government has itself realized this as the Prime Minister has put up a 21.6 Kw solar power system to power her office.The World Bank had put up $130 million in funding in 2003 which has resulted in more than 1 million homes being powered by solar energy.Note the requirements of power are very small almost 1/10th that of a Western home.Government owned Infrastructure Development Company (IDCOL) has been providing the financing for these small solar panel projects in the country.
June 20, 2011
The Indian Stock Market saw a flash crash on the morning of 20th June at 10 am.The market which started weak at 9 am fell by almost 3% in 10 minutes.The main index Nifty which was trading at around 5350 crashed to around 5200 in around 10 minutes.The market recovery by 1% but is again starting to go down to the low levels fo 5200 .Note the Indian stock market has been hammered due to worries on inflation,massive endemic corruption which is facing protests from the civil society.The FIIs which are the main buyers of Indian equities in the last year or so seem to have abandoned the Indian stocks as QE2 starts ending and global risks like Greece,US slowdown,inflation and interest rates worries in emerging markets come to the fore.Note Indian stock markets are not the easiest to invest in with scams and scandals happening regularly and it at best remains a market in which you have to choose between the bad and the ugly.
June 1, 2011
India's policymaker keep making dumb policies to promote agriculture in the country which leads to huge losses for taxpayers and leads to no gains for poor farmers.One such policy is to give a interest rate subsidy of 3% to farmers who have repaid their loans.This means that if you are getting a loan from the banks at 7.5% normally,you will now get it at 4% if you are a farmer who has repaid his loans.Note the condition "repaid his loan" is meant to sound as it he has great thing like saving someone from a burning building.Last time I though all loans were meant to be repaid.But evidently different rules apply to farmers who were in the election year in 2009 were given a loan waiver.The government effectively allowed the farmers to convert their loans to a grant.It was an indirect gifting of billions of dollars to farmers to get votes and it worked splendidly for the ruling Congress party.A winning idea is seldom abandoned even it leads to perverse economic outcomes.
May 31, 2011
India and China are largely dependent on Coal for fueling a majority of their energy needs despite the evident disadvantages of coal.China derives almost 80% of its electricity from coal while India uses Coal for 50% of its Energy Needs.Most of the new power plants being built in India have plans to use thermal power which means that the coal demand is going to skyrocket even as these 2 Asian giants are already suffering from coal shortages.India's Coal Production is falling short as the Environment Ministry makes it tough for the coal miners to dig up virgin forest areas even as private Indian power companies keep on building gargantuan thermal power plants of more than 4,000 MW capacity.Most Indian companies are now racing to acquire coal mines abroad joining the Chinese companies.Seeing the massive potential in coal,international resource giants such as Rio Tinto and others are trying to access coal assets as well.
May 31, 2011
Indian equity investing through offshore funds might not be the best idea as these funds have underperformed the benchmarks by putting too much weight on infrastructure and capital goods sector.Note lured by the $500 billion investment target for Indian infrastructure,an Indian infra ETF INXX was also launched at a ludicrous valuation.However the endemic corruption in India with scams related to major infrastructure sectors like Real Estate,Telecom popping up everyday,its not a surprise that the stocks have tanked.Note investing in the Indian stocks markets is hazardous with issues like insider trading,pump and dump schemes quite rampant.The risks of corruption are huge and even top asset managers like Goldman,GMO have become victims of fly by night operators just like a simple retail investor.
May 31, 2011
According to the Financial Express, a top US Thin Film Based module manufacturer is exploring the possibility of setting up a facility in Tamil Nadu with an investment of $500 million (approximately R2,255 crore) in the coming months.Note the sources have not revealed the name of the company but it is evident from the investment amount,solar technology that the company is First Solar.A a top level team from the company is expected to visit sometime early next week to initiate discussions with the state government officials.Note First Solar has been emphasizing the importance of India for its growth aiming to supply 100 MW of solar panels in 2011 itself which would make it a leader in the Indian solar industry.Other top solar panel companies like Suntech and Trina too have been investing heavily in selling their solar panels in India through partnerships with local companies.
May 31, 2011
DuPont Apollo is a wholly-owned subsidiary of DuPont started a 50 MW thin-film photovoltaic module manufacturing facility at Shenzen in 2010. DuPont Apollo is focused on the China domestic market but seems like that they are not getting too much traction in the hyper competitive Chinese market and now trying its hand in the Indian market where solar manufacturing industry is not too competitive.
Indian Solar Energy Market has seen the entry of many foreign companies eager to tap this huge opportunity.This list of foreign solar companies in India keeps growing on a daily basis with both startups like Abound and large companies like First Solar,Suntech making India as an integral part of their global growth strategy.DuPont the global chemicals giant too has entered the solar energy industry in partnership with Wipro EcoEnergy.DuPont Apollo will supply Wipro with its Thin Film Amorphous Silicon Solar Panels which will be used in the grid projects.Note a number of Joint Ventures in Indian solar industry have been recently formed.
May 30, 2011
Coal has become the hottest energy topic in the world’s fastest growing economies India and China which depend on Coal for a majority of their Energy […]
May 29, 2011
Having good solar radiation data is essential for building solar power plants anywhere.USA and European Union have a well-developed insolation map so that developers and investors in solar energy have no difficulty in getting good data while planning an investment.However Indian developers are at a distinct disadvantage as there is no good primary data to go on.Solar Radiation data makes a huge difference to the economics of a project and no bank will give a loan based on incomplete data.For the inexperienced developers this has become another problem among a host of other problems.With little understanding of the technology and other factors,many of them jumped in and are now in a deep soup.However the prospects of the Indian solar energy are great even with these initial hiccups.The flushing out of the weak hands should help in strengthening the solar energy industry in India in the best traditions of capitalism.
May 12, 2011
The Chinese Wind Industry has around 80 wind turbine companies many of which are quite small and don't' have the money and expertise to compete in the international markets.Though the Chinese dominate the top global wind turbine companies list with 7 of the top 15 WTG companies Chinese,many are not competitive.Sinovel which has become the largest wind turbine company has recently canceled order for Electrical Control Systems from American Superconductor citing high inventory.Other Wind Turbine companies are in even more trouble as the industry suffers from huge overcapacity.The Chinese Wind Capacity has grown at 100% CAGR to reach 18 GW in 2010.However this strong growth has led to saturation of the wind market and price wars are being seen in China.Exports to other countries have been difficult as the cost of transportation of Wind Turbines is high.Besides Chinese Wind Companies don't possess strong technology and quality unlike established ones like Vestas,Gamesa,GE and Siemens.Though Dongfang and Shanghai Electric have managed to win some Turbine Orders in India,the export percentage is negligible.Wind Power in India too has reached a stable growth level and a number of wind companes in India are fighting for marketshare as well.
May 10, 2011
Power Finance Corporation (PFC) will raise ~$1 billion through a follow-on-public offer (FPO) which is the first divestment by the Government for FY12.Note the government of India has set a target to raise $9 billion through divestment of public sector (PSU) companies stocks.PTC India Financial Services another company operating in the same segment offering finance to power generation companies came out with an IPO.Despite advantages of growth,a good business model in India’s booming Energy Sector,the valuation of the company had been kept too high leading to 20-30% losses from the IPO price.However PFC does not have a high valuation trading for around 9-10x P/E which is comparable to the competitors like REC.However the valuation is not very low also keeping in mind the rising interest rate environment which is making life tough for the Indian Banks and financial intermediaries.Power Finance Corporation has substantial advantages of growth,a good business model in India’s booming Electricity Sector where the List of Power Companies are growing exponentially.The valuation of the company also has been kept at a reasonable level at a discount of around 5% from the prevailing stock market price.The growth of the company has been impressive but a rising interest rate environment,competition from other power finance government providers like IFCI,IDFC,REC makes the issue neutral.It is always possible to buy the stock later or buy competitors in the same space like REC.The stock is a good buy for the long term given the fundamentals,good business sector,however current short term macro problems does not make it a great buy currently.
May 8, 2011
India has a massive potential in Solar Energy with at least 20 GW of Solar Power to be installed by 2022 according to the JNNSM Plan.This […]
May 8, 2011
Gujarat has been leading Indian states in the Solar Energy sector signing PPAs to build more than 900 MW of power capacity in the next couple of years even as the federal subsidy JNNSM flounders.Gujarat is one of the leading industrialized states in the country and has been looking to boost renewable energy sources like Tidal Energy,Offshore Wind Energy,Geothermal Energy as well.Wind Energy has also been in the radar of the state government which is looking to realize the 10 GW potential of Wind Energy in the state.After a strong 2009 when 295 MW of Wind Power was installed that slowed down to 100 MW.The main reason was the unavailability of the power grid to connect wind power plants.Note Gujarat possesses one of the best wind sites in the country in the western part of Saurahstra.
May 7, 2011
HAREDA which is the state renewable energy development agency akin to MNRE at the centre will put these solar farms under a fast track approval process.Note Red Tape in India is quite notorious especially for small project developers who lack the connections and resources to get things done.Note Haryana gives seperate incentives on its own for solar energy,solar water heaters and solar lighting as well.Haryana is desperately deficient in renewable energy despite being one of the most industrialized and fastest growing states in the country.Haryana cities like Gurgaon and Faridabad have benefited hugely from being part of India’s National Capital Region (NCR).However Haryana only generates 0.5% of its 4000 MW of Electricity from Renewable Energy Sources.The state has negligible Wind or Biomass Energy.Despite a Department of Renewable Energy being setup to specifically promote the use of Alternative Energy Sources,the state has not had much success.Haryana is richly endowed with Solar Energy Resources with 320 days sunny days.The State has managed to win some allocation from the centre’s JNNSM scheme.It is also promoting the use of solar energy through disseminating solar kits amongst 2000 schools and providing solar lighting in around 500 villages.
May 7, 2011
India's Shipping Industry has constantly declined despite the Indian economy growing by almost 8-10% in the past 5 years .Indian Flag Vessel marketshare has reduced to under 10% in 2010 from 37%.It is because the Shipping Industry suffers from a lack of good companies . The largest company is the state owned SCI which has been tardy in expanding capacity to take advantage.Recently SCI has given orders to increase fleet capacity by more than 50%.Government policies have also been not too favorable despite shipping being a very strategic industry from the point of view of defense.Note in times of war the country's merchant fleet forms one of the most important weapons in the arsenal needed for logistics and transporation of war materials and personnel.
Note Shipping is a cyclical industry and currently the industry is facing rough weather as the global shipping industry is facing a supply glut.However that's no reason for Indian shipping industry to face a trough as its marketshare remains quite low.Unlike other sectors like autos,steel,oil and gas,the shipping industry has failed to compete and as a result has become a minnow in its own backyard.
May 7, 2011
India's environment minister Jairam Ramesh has pleaded helplessness as he is too being forced to go along with these environmental destructive projects.This is a characteristic which is peculiar to India and has allowed the culture of corruption to flourish.If you build a large enough project with enough billions in investment you can get away with the murder of the environment as the government could destroy such a large investment.These ad hoc measures which lead to construction of illegal projects has been leading to the destruction of ecology in a large scale manner.Only a blanket demolition of all structures built illegally irrespective of the cost will lead to the lessening of the corruption in the business sector.
May 3, 2011
The Cons of Geothermal Power are winning over the Pros in the last few years due to a number of factors.The main reasons are the long gestation time in building the geothermal energy plants,small developers,financing and regulation problems.Despite geothermal having huge potential these drawbacks have resulted in only 10 GW of geothermal energy being installed worldwide despite almost 30 years of commercial development.Most of the geothermal companies which are small developers have been devastated by the above problems.Canadian companies which are the leaders in consolidating the fragmented industry like Ram Power and Magma Power are facing huge problems.While Ram Power saw its CEO go,Magma is now looking at other renewable energy opportunities.Magma Power has decided to merge with Plutonic Power which is a small hydro and wind company as geothermal energy looks more or less a dead end.
May 3, 2011
Coal M&A is picking up at a feverish pace as the demand and price of coal shoot through the roof.Note Coal is the cheapest fossil fuel and powers most of the world's power plants despite its disadvantages.The abundance and cheapness of coal has managed to hide its deleterious effects.Indian and Chinese companies are gobbling up coal mines and companies globally as they rush to secure raw material for the growing thermal power plant capacity.The Adani Group is one of the leading Indian private power companies setting up gigawatts of new thermal power plant capacity.Mundhra Port the Adani Flagship has been buying up coal plants,ports and building power plants to vertically integrate itself in the whole coal supply chain.It recently bought the Australian Linnc Energy's Gaililee coal project for USD 2.7 billion.It has followed it up by buying Abbot Point Coal Terminal from the Queensland state of Australia for 1.8 billion Australian dollars.
May 3, 2011
India's Central Bank has been steadily raising interest rates in 25 bps increments as inflation has raged at more the double digits for more than a year.However it has not stopped the inflation from coming down as high commodity prices keep the inflation at 9% which is much more than the target of 3-5% inflation rates.With Bernake money printing fueling oil and food prices globally,it looked unlikely that RBI's timid measure would bring the inflation down anytime soon.So this time the Central Bank has thrown the kitchen sink at the problem raising the interest rates by 50 bps to 7.25% which is much more than what the market was expecting.The Central Bank also raised the interest rate on savings rate from 3.25% to 4% which was not expected by anyone.Note the low interest rate on savings bank had been a huge money spinner to top Indian banks which have large deposits of this low interest rate savings deposits.
May 2, 2011
Arch Coal is the 3rd largest Coal Company in the USA. During the year ended December 31, 2009, the Company sold approximately 126.1 million tons of coal and operated 19 active mines at 11 mining complexes located in the United States. On October 1, 2009, the Company acquired Rio Tinto’s Jacobs Ranch mine with 345 million tons of coal reserves and integrated it into the Black Thunder mine.International Coal on the other hand is a small producer with a market cap of $2.2 billion previously which has managed a nearly 50% premium.Market Cap of $2.2 Billion is a producer of coal in Northern and Central Appalachia .As of December 31, 2009, the Company operated a total of 11 surface and 11 underground coal mines located in Kentucky, Maryland, Virginia, West Virginia and Illinois.The Company’s mines in Central Appalachia produced 10.1 million tons of coal in 2009, and the mines in Northern Appalachia produced 3.9 million tons of coal in 2009.
May 2, 2011
Lavasa is a story of corruption,looting of the poor and raping of the surrounding environment by the Indian politician-bureaucrat-businessmen nexus in a beautiful cover of a township built for the rich and well heeled.There is little concern for the law as these powerful developers know that they can get away with murder quite literally.The long term sustainability of the township is in doubt which defeats the entire purpose anyway.Any buyer of property in Lavasa should be aware of these problems and should not buy it as their investment will be eroded in the future anyway besides having the taint of being looted from the poor.However the media too has lost interest as a new scandal emerges everyday.
Lavasa Township being constructed near Pune,Maharashtra has been in the media off and on for creating a environmental disaster in the shape of a beautiful township constructed on the hills.The town which has been constructed for 300,000 residents has violated all building and environmental norms of the state and centre.With powerful politicians and businessmen backing the project,its not as surprise that the state government of Maharashtra actively helped the township in bypassing all the laws and regulations.There is no provision for permanent water supply and it would lead to a clash between the water wants of Lavasa and Pune.Note builders in India are notorious for leaving out water and waste sustainability in their plans.The residents of the buildings,apartments and other shelters have to bear the brunt later on when there is no water and problems like waterlogging.Gurgaon the millenium township suffers from both of these problems quite acutely.Note these problems are common to both million dollar homes as well as slums in India.
May 2, 2011
SBI and HDFC Bank which are the 2 of the largest banks in the country have protested against the RBI proposal to free up the interest rate given on savings account in India.Note RBI fixes the rate at which money deposited in saings account earns interest currently for all banks in India.The current rate is 3.5% which is way below the near double digit inflation rate being experienced in India.Most Indians deposit their savings in bank saving and fixed deposit accounts as there is no widespread equity or debt investment culture in the country.This allows banks with a large retail depositer base to earn supernormal profits by paying pathetic interest rates on savings account and lending that money at 12-13%.While the public sector banks have to serve a lot of priority sectors private banks have no such concerns.This leads to high NIM for private banks leading to huge profit growth each year.This has made investing in top banks in India such an attractive proposition.