A look at the share price charts of some big solar energy firms in China would make any person wary about investing in the sector.
Yingli Green Energy Holding, one of the top Chinese solar manufacturers, lost 66 percent of its market value over the past one year. If viewed over a longer time frame, the current share price of around US$4 is merely a fraction of the firm’s 5-year peak of around US$80 seen in late 2013.
In May, the company warned of bankruptcy risk following a series of write-offs, sliding solar panel prices and declining shipments.
Suntech, which used to be the biggest solar panel maker, went under in 2013. Later, Shunfeng international Clean Energy (01165.HK) acquired Suntech’s assets and enjoyed a flashy rally for a while.
But the party came to an end and the stock sank fast and deep. Shunfeng’s current share price is only one tenth of its peak seen in 2014.
Shares of solar power plant operators have also taken a beating.
United Photovoltaics (00686.HK) has said that its mission is to become a top player in the industry, emblazoning its 2015 annual report with the slogan: “Reaching green world”.
Despite its rapid expansion through acquisitions, the company has not been able to shore up investor confidence. The shares lost one third of its value over the past year. Rival GCL New Energy’s (00451.CN) performance has been just as disappointing.
The Paris climate accord signed by world leaders from 175 countries is often hailed as a big break for renewable energy. Among the bullish factors cited is China’s pledge to cut pollution and boost the share of clean energy in its power mix.
But the industry reality is something different, with the profitability and near-term prospects of many players turning shaky.
For starters, a drastic drop in crude oil prices and coal prices in recent years has discouraged the adoption of more expensive green energy.
Increased solar power installation and capacity does not equate to more utilization and consumption either. Many big solar plants are located in the remote West of China, and the country still lacks enough infrastructure to transmit the power to where it is needed — the densely-populated coastal cities on the east.
Idle capacity is the norm, and the situation is made worse by the slowing economic growth that cut power demand increment to less than one percent last year. The curtailment ratio is said to exceed 50 percent in the first quarter of this year in some regions.
The heavy use of debt by the solar sector also does not help.
Meanwhile, poor utilization and low profitability suggests that solar plant operators will continue to depend a lot on subsidy, estimated to make up as much as 70 percent of the income of some firms.
So, is there light at the end of the tunnel?
Well, according to some optimists, the breakthrough could come when China completes its grand ultra-voltage electricity transmission networks by 2020.
We can only wait and watch.
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