Solar posts big gain (week ending 8/22/08)

Author: Mark Henwood

Emerging markets, EAFA, and the US market (S&P 500) were little changed on the week, commodities (DJP) rose 2.8%. Sustainable energy stocks created some excitement but overall were mixed:

Solar raced ahead for the week rising 9.5% driven by a variety of positive developments. Three of the index components China Sunergy (CSUN), Suntech Power Holdings (STP), and Rensola (SOLA.L) all rose over 25% for the week..

On the cost side silicon supplies are expected to increase in 2009 resulting, according to Suntech Power Holdings (STP), in a potential price drop of up to 20%. This may allow margins to increase while lowering the cost of the final product.

Demand continues to be strong with expectations that Italy, Germany, and other countries will offset any reduction in the Spanish market. Demand seems to also be growing for larger scale plants with announcements for a 10MW plant by Yingli (YGE) and an 800 MW project by Pacfic Gas and Electric in Calornia. Note that this one project is larger than the annual production capacity of most solar companies. Solar companies are also executing well with China Sunergy (CSUN) leading the way with an earnings suprise this week of 125% which drove its 29.%5 increase for the week. The triple play of expected lowering of costs, strong demand, and good financial execution created over USD 9 billion in increased market cap.

Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks.

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