First up, Focus on Funds:
Solar ETFs Jump On Promise Of Tax Incentive Extension
Solar-industry exchange-traded funds are flying on Wednesday after lawmakers reached an agreement to extend a key solar tax credit as part of deal on spending that will avoid a government shutdown.
The Guggenheim Solar ETF (TAN) raced up 5.7% in recent trading, while First Solar(FSLR) SunPower (SPWR) jumped 8.4% and 12%, respectively.
The spending deal was tied to a package of of tax-cuts and extensions, including a five-year extension of the so-called Solar Investment Tax Credit (ITC). This 30% tax credit was extended through 2019, and would allow solar projects to qualify when construction begins (rather than when they produce energy). The language specifies that the credit will gradually wind down from 2020-2023. Congress is expected to vote on the final bill by the end of the week......MORE
And a bit deeper dive at Tech Trader Daily:
Solar City, Sunpower et al. Rip Higher on Tax Credit Prospects; JASO Upgraded
Shares of solar energy technology names are zooming today following an extension of tax credits in the Federal budget bill unveiled this morning by the U.S. Congress.
As described in an article by The Wall Street Journal‘s by Kristina Peterson and Richard Rubin, the $1.15 trillion budget bill for fiscal ‘16 lifts caps on exports of oil in exchange for “extending wind and solar tax credits.”
Mind you, this all still has to be passed by Congress, but with indications of accord by both parties, solar names are on a tear, with Solar City (SCTY) up $10.48, over 26%, at $50.53;Sunpower (SPWR) up $3, over 12%, at $27.43; First Solar (FSLR) up $5.13, or almost 9%, at $64.96; SunEdison (SUNE) up 96 cents, or 19%, at $5.91; and JA Solar Holdings (JASO) up 20 cents, or 2%, at $9.38.
Deutsche Bank’s Vishal Shah writes that the tax breaks are positive both to goose demand through 2017 and to avoid the prospect of oversupply:
We believe this ITC extension is important for the following reasons: 1) 5 year extension reduces the risk of oversupply in 2017 – a big concern for several companies and investors in the solar sector; 2) we now expect US demand to continue to grow at a robust pace through 2021 and see increasing number of states to reach grid parity as downstream companies bring costs down and retail electricity pricing continues to increase; 3) while our 2016 U.S. demand forecast of 16GW was anticipating some rush and could now turn out to be slightly lower than expected, we see upside to 2017 growth forecast , particularly in the utility scale and commercial segments; 4) India, China and U.S. could turn out to be the key markets with multiyear growth visibility that investors want to get involved in the sector, especially at currently depressed valuations. Several companies such as FSLR were rushing to complete US projects ahead of the 2016 deadline, which had a negative impact on margins. We now expect these projects to get pushed out into 2017 and see margins improving relative to company’s prior expectations.
Shah’s picks to benefit are Solar City, Sunrun (RUN), and Vivint Solar (VSLR), which is in the process of getting bought by SunEdison.
Likewise, Cowen & Co.’s Jeffrey Osborne, who rates First Solar and SunEdison Outperform, likes the set up as the industry heads toward “grid parity” for solar in 2020:......MORE
Solar Continues Move Higher On Oil Export Deal (SCTY; RUN; TAN; FSLR)