Tags: Hanergy | solar | energy | stock

Hanergy's Implosion Raises Questions on Solar Industry's Outlook

Thursday, 21 May 2015 06:32 AM

Hanergy Thin Film Power Group Ltd.’s stock market plunge in Hong Kong raises the question of whether the broader solar market in China will be hurt by the shock.

Hanergy fell 47 percent before trading was suspended on Wednesday, wiping out $19 billion in market value in less than half an hour. The maker of solar panels reached a peak valuation before the crash of more than HK$300 billion ($39 billion), exceeding Sony Corp. in Japan.

The following are some points to consider:

1. Solar Market is Looking Good

Solar panel production is forecast to grow by almost a third this year, according to data compiled by Bloomberg.

While an oversupply in years past caused panel prices to tumble, demand is surging as solar technology is able to compete head-to-head on price with fossil fuels in many places.

China is one of the hottest solar markets. It has 33 gigawatts of solar farms installed, and policy makers are targeting 100 gigawatts by 2020. In the first quarter alone, China connected 5 gigawatts of solar to the grids, the National Energy Administration said in April. That’s France’s entire supply of solar power.

Japan is another hotbed. It has been offering some of the world’s most generous incentives for clean energy and is forecast to add about 11 gigawatts of solar in 2015, according to Bloomberg New Energy Finance.

2. Trigger for Hanergy’s Drop is Still Unknown

What caused the decline in Hong Kong-listed Hanergy’s shares is still unknown. Hanergy released several statements to regulators on Wednesday. The first asked for trading in the shares to be suspended. The second added that the shares were halted “pending release of an announcement containing insider information.” On Thursday, the parent company put a statement on its Chinese language website saying operations were normal. That didn’t mention the stock drop.

Charles Yonts, the CLSA Asia-Pacific Markets analyst in Hong Kong who asked rhetorically of Hanergy in December “Are they really that good,” released an e-mailed Wednesday in which he speculated that Hanergy’s decline may be related somehow to Yingli Green Energy Holding Co. Yingli, the second-largest panel maker, fell the most in more than seven weeks in New York on May 19 after raising concerns about its own financial health.

Besides both companies being in the solar industry, Hanergy’s link to Yingli is tenuous, Yonts said in his e-mail. Yingli uses a different technology that’s widely accepted in the industry.

Hanergy had short-term borrowings of about $1.6 billion at the end of last year and long-term debt of $460 million, according to a filing. It hasn’t reported a profit since the second quarter of 2011.

3. Hanergy Has Other Businesses Outside of Solar Products

The Hanergy Holding Group Ltd. was founded by Li Hejun in 1994. It started on its first hydropower project, the Mujing Hydropower Station, on the Dongjiang River in Guangdong province, China, in August 2000.

Today, Hanergy has about 6 gigawatts of hydropower projects — enough for 6.5 million homes in China — and 131 megawatts of wind power, according to the company’s website.

Hanergy doesn’t disclose earnings from these businesses because they don’t fall under the listed company.

4. Thin Film Solar Cells are a Niche Product

The thin-film technology Hanergy is backing isn’t widely used. More than three-quarters of all solar panels are currently crystalline silicon-based, like the stuff sold by Yingli.

In 2014, new solar installations globally totaled 45 gigawatts, according to London-based researcher BNEF. Of that, the majority — or about 42 gigawatts — used crystalline silicon solar technology. Thin-film technologies accounted for the remaining 3 gigawatts.

Little movement is expected in the coming years. According to BNEF, about 70 gigawatts of solar modules will be produced annually by 2017. Of the total, more than 95 percent of the modules will be based on crystalline silicon, with the remainder comprised of thin-film silicon and thin-film non-silicon production.

5. Issues at Hanergy and Yingli May Be Company-Specific

The surge in Hanergy’s market value raised concerns long before Wednesday’s implosion. Besides Yonts’s note in December, the Financial Times published several articles investigating the solar manufacturer’s reporting of sales, trading patterns in its stock and borrowings.

Hanergy issued a statement in March saying it’s not aware of anyone who’s manipulating its stock, including its billionaire chairman.

Yingli is another story.

“The firm’s reputation is for very low cost at its manufacturing base well away from the major cities, and for compromising on margin to sell volume,” Jenny Chase, lead solar analyst for Bloomberg New Energy Finance, said of Yingli. That “makes it popular with project developers, but has obvious consequences for the balance sheet.”

Other analysts agree with Chase. According to CLSA’s Yonts, Yingli has never managed to recover after overextending and loading up on debt in 2006 and 2007.

© Copyright 2018 Bloomberg News. All rights reserved.

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Hanergy Thin Film Power Group Ltd.'s stock market plunge in Hong Kong raises the question of whether the broader solar market in China will be hurt by the shock. Hanergy fell 47 percent before trading was suspended on Wednesday.
Hanergy, solar, energy, stock
Thursday, 21 May 2015 06:32 AM
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