Monday, March 1, 2010

"China’s ‘Overcrowded’ Solar Sector Faces Lower Demand, More M&A" (SOLR; TSL)

GCL is the major supplier to both Trina And GT Solar, among others.
From Bloomberg:
China’s “overcrowded” solar power industry faces lower demand this year from Germany, the biggest buyer of the technology, and an increase in the number of mergers and acquisitions, according to Yuanta Securities Co.

Revenue may fall 40 percent in the second half of 2010 after the German government agreed this month on draft legislation to reduce subsidies to renewable energy users, said Min Li, a Hong Kong-based energy analyst at Yuanta Securities.

China, which supplies about half the world’s solar modules, is likely to feel the effect of German law changes after expanding capacity, analysts said. The number of mergers and acquisitions in 2010 will probably exceed that of 2008, Li said, without giving an estimate. The 16 deals in 2008 were the most since Bloomberg New Energy Finance began compiling data in 2003.

“This sector is already overcrowded,” Li said in a phone interview. “In order to survive you have to have manufacturing scale. You either acquire someone or get squeezed out.”

So far this year there have been two acquisitions, including GCL Poly Energy Holdings Ltd.’s planned purchase of Konca Solar Cell Co. Nomura International (HK) Ltd. analyst Ivan Lee said he expects more deals industrywide because mergers are a “cost-effective way for vertical integration.”

“We do expect solar companies across the globe to take similar moves,” Lee said in an e-mail reply to questions....MORE