Alternative Energy Investor Discussions

[sleepyhead]

First article is very important.

Second article is very good. That means poly is cheap. We want oversupply in poly!

Yup, poly over supply will lead to lower raw material cost, which in turn will lead to cheaper panel production, which will lead to more affordable solar panels, which will lead to quicker global adoption of solar energy as it becomes even more cost competitive.

Low poly costs might hurt GCL, DQ, and even SOL. But it will benefit module manufacturers.

 

[Jerpo]

Here is my one concern about CSIQ. (I typically invest with a several month to several year horizon, no day trading or weekly options) -- please weigh in with opinions,

They have the very lucrative high margin deal with Transcanada in Ontario, which has been providing them with nice margin projects. They are booking some this quarter, and I believe they have now completed 5/10 of the total deals they had originally signed.

My issue is, it is very unlikely they will ever have deals with such margins again, definitely not in China, and as the Ontario subsidies wind down, I doubt they will find companies to sell such lucrative projects to in the future. So although they have a very sunny looking next earnings or two, what happens after that? Although their topline might continue to grow, and their MWs might continue to grow, their EPS based on my thesis, will not, and their margins certainly will not.

I think they will continue the upward momentum for the next little while, but this is a big risk towards the middle/ end of 2014. Anybody have opinions on this?

Thanks!

 

[Convert2013]

Yup, poly over supply will lead to lower raw material cost, which in turn will lead to cheaper panel production, which will lead to more affordable solar panels, which will lead to quicker global adoption of solar energy as it becomes even more cost competitive.

Low poly costs might hurt GCL, DQ, and even SOL. But it will benefit module manufacturers.

My initial thought was it may affect margins in a negative way. However consolidation in the industry may help margins with lower poly costs.

 

[sleepyhead]

In the short run poly has been going up and that will hurt margins possibly, but in the long run poly should go down and that will benefit the entire solar industry. It will make solar more affordable, while allowing companies to keep margins and/or even expand them in periods of high demand. Of course every solar company has a slightly different business model, so each company gets affected differently.

 

[Norse]

Jinkosolar Increases Fully Integrated Capacity from 1.5 GW to 2.0 GW

http://thecontrarianinvestor.com/in...ement-to-take-over-assets-of-zhejiang-topoint

 

[Convert2013]

Jinkosolar Increases Fully Integrated Capacity from 1.5 GW to 2.0 GW

http://thecontrarianinvestor.com/in...ement-to-take-over-assets-of-zhejiang-topoint

Thanks Norse.
This is just what I was expecting and it agrees with the Chinese consolidation article above- The profitable Chinese solars will take over the busted ones selectively. I expect Canadian Solar, Yingli, Trina, and JA will participate as well..

 

[sleepyhead]

Thanks Norse.
This is just what I was expecting and it agrees with the Chinese consolidation article above- The profitable Chinese solars will take over the busted ones selectively. I expect Canadian Solar, Yingli, Trina, and JA will participate as well..

I agree. Those are the 5 companies that will benefit most. SOL is now probably out of the running with their crappy balance sheet.

YGE is bloated with debt, but all the means is that the built in financial leverage of the company is double its competitors. If the company is able to turn things around then the stock will blow out the CSIQ's and JKS's of the world as well. It is a lot higher risk though due to this financial leverage and all of the other solar stocks already provide plenty of leverage to begin with. I might buy YGE, for the first time in a long while, if it dips below $6.

 

[PeterJA]

I agree. Those are the 5 companies that will benefit most. SOL is now probably out of the running with their crappy balance sheet.

YGE is bloated with debt, but all the means is that the built in financial leverage of the company is double its competitors. If the company is able to turn things around then the stock will blow out the CSIQ's and JKS's of the world as well. It is a lot higher risk though due to this financial leverage and all of the other solar stocks already provide plenty of leverage to begin with. I might buy YGE, for the first time in a long while, if it dips below $6.

Thanks, Sleepy. Commenters on Seeking Alpha said the following about Yingli's debt:

Peter, YGE's debt is 100% on shore, as opposed to STP and LDK which are all bankrupt due to off-shore debt default. You know, on shore debt is so much safer in China, because basically local banks have to make bigger effort to support this largest solar company that employs most people. Also, China's installation is gonna be huge, and YGE will likely turn profitable in Q2 thanks to project sales, so I guess market will be less concerned down the road.

Peter ; I think bigsean628 gave a precise view on why the chinese debt is the best thing to have. One additional comment is the china debt cost as per yingli is around 6% and this is unlikely to be impacted by either the Fed tapering or the interest rate going up in the rest of the world.

Chinese Solar Manufacturer Pick [Yingli Green Energy Hold. Co. Ltd. (ADR), Trina Solar Limited (ADR), JA Solar Holdings Co., Ltd. (ADR), LDK Solar Co., Ltd (ADR), Canadian Solar Inc., JinkoSolar Holding Co., Ltd.] - Seeking Alpha

 

[Convert2013]

The reason I bought some YGE this week is because they specifically announced they will be profitable first or second quarter of this year. Plus they are the largest Chinese solar company. So they will most likely get backing from the Chinese government for as long they have can continue to show an improving balance sheet. The next potential catalyst is mid next week- Jan 15th - CSIQ conference. Let's see what they have to say... maybe they will pick up one or two broken solars too..?

Large Scale Solar exceeds 26 GW globally in 2013. Australia reaches 2 million installations. Waiting for China total numbers. Looks like approx 9 GW for large scale in China and the balance could push totals up through 12 to 13 GW?


Large-Scale Solar PV Market Exceeded 26 Gigawatts in 2013 | Solarbuzz

http://www.solardaily.com/reports/Australias_small-scale_green_energy_installations_reach_2_million_999.html

VC Chrysalix Predicts 5 Sustainable Energy and Cleantech Trends for 2014 : Greentech Media

 

[mershaw2001]

hey sleepyhead, I saw on contrarian you were talking about the SCTY lockup expiration.

You have the information correct, the 90 day lockup from oct 15 for the executives is monday, jan 13th. This is trivial because the executives have very few shares. However, the 51 m shares don't have lockup expiration until 120 days because those are "other investors", so i guess that's 30 days from jan 13th.

You can find the relevant information on page 41 and 82 of the following document:


http://www.sec.gov/Archives/edgar/data/1408356/000119312513399784/d553628ds1a.htm

Upon completion of this offering and the concurrent offering of 3,400,000 shares of common stock, we will have 81,678,355 outstanding shares of common stock

24,836,844 shares will be eligible for sale immediately upon completion of these offerings;

50,594,568 shares will become eligible for sale upon the expiration of the “lock-up” agreements described under “Underwriting” below, subject to the provisions of Rule 144 or Rule 701 under the Securities Act, as well as our insider trading policy;

AND HERE IS THE LOCKUP, BOLDED BELOW, FROM OCTOBER 15th.... 90 DAYS FROM THEN IS 1/13/2014:

We, our directors and executive officers, and funds affiliated with Draper Fisher Jurvetson, DBL Investors, AJG Growth Fund, Valor VC, LLC and Valor Solar Holding, LLC have agreed, during the period beginning the date hereof and continuing until, with respect to us and a group of “specified executive officers” consisting of our executive officers other than our chief executive officer, chief operating officer/chief technology officer and chief financial officer, until the date 90 days after the date of this prospectus, and with respect to the other stockholders agreeing to a lock-up, until the date 120 days after the date of this prospectus, and subject to limited exceptions, not to offer, sell, contract to sell or

82 ​

Table of Contents

otherwise dispose of any shares of common stock, any securities substantially similar to the notes or the common stock or any securities convertible, exchangeable or exercisable for common stock or substantially similar securities, without the prior written consent of the Representatives.

 

[sleepyhead]

hey sleepyhead, I saw on contrarian you were talking about the SCTY lockup expiration.

You have the information correct, the 90 day lockup from oct 15 for the executives is monday, jan 13th. This is trivial because the executives have very few shares. However, the 51 m shares don't have lockup expiration until 120 days because those are "other investors", so i guess that's 30 days from jan 13th.

You can find the relevant information on page 41 and 82 of the following document:


http://www.sec.gov/Archives/edgar/data/1408356/000119312513399784/d553628ds1a.htm

Upon completion of this offering and the concurrent offering of 3,400,000 shares of common stock, we will have 81,678,355 outstanding shares of common stock

24,836,844 shares will be eligible for sale immediately upon completion of these offerings;

50,594,568 shares will become eligible for sale upon the expiration of the “lock-up” agreements described under “Underwriting” below, subject to the provisions of Rule 144 or Rule 701 under the Securities Act, as well as our insider trading policy;

AND HERE IS THE LOCKUP, BOLDED BELOW, FROM OCTOBER 15th.... 90 DAYS FROM THEN IS 1/13/2014:

We, our directors and executive officers, and funds affiliated with Draper Fisher Jurvetson, DBL Investors, AJG Growth Fund, Valor VC, LLC and Valor Solar Holding, LLC have agreed, during the period beginning the date hereof and continuing until, with respect to us and a group of “specified executive officers” consisting of our executive officers other than our chief executive officer, chief operating officer/chief technology officer and chief financial officer, until the date 90 days after the date of this prospectus, and with respect to the other stockholders agreeing to a lock-up, until the date 120 days after the date of this prospectus, and subject to limited exceptions, not to offer, sell, contract to sell or

82 ​

Table of Contents

otherwise dispose of any shares of common stock, any securities substantially similar to the notes or the common stock or any securities convertible, exchangeable or exercisable for common stock or substantially similar securities, without the prior written consent of the Representatives.

Thanks for the info, I understood it a little different than you though; but I could be wrong though - I hate lawyer speak, ugh!

I think it means that everyone can sell on Jan 14th except for CEO, COO/CTO, AND CFO. Therefore most of the shares will hit the market this week and will be in play. I wouldn't be surprised to see the venture capital funds cash out fast; at least a chunk of their shares. The stock has gone up 40% since then and almost 800% since IPO.

If I understand lawyer speak correctly then they will not be able to sell shares for 90 days, and you are correct that the 90th day is the 13th (but they can't sell on the 90th day either). Therefore, the shares will hit the market on Tuesday.

- - - Updated - - -

Thanks, Sleepy. Commenters on Seeking Alpha said the following about Yingli's debt:





Chinese Solar Manufacturer Pick [Yingli Green Energy Hold. Co. Ltd. (ADR), Trina Solar Limited (ADR), JA Solar Holdings Co., Ltd. (ADR), LDK Solar Co., Ltd (ADR), Canadian Solar Inc., JinkoSolar Holding Co., Ltd.] - Seeking Alpha

Thanks a lot Peter. I agree with those comments that on-shore debt is better than off-shore, but I am not worried about YGE going bankrupt. I am worried about the burden that the high interest expense puts on the income statement for the company.

They need 8% of gross margin just to be able to cover interest expense. That is a ridiculous amount of interest expense. They will have to grow their top line rapidly in order to do this, but with a stretched balance sheet it may be hard to expand.

Unless of course they are able to pick up a lot of capacity on the cheap. They were licking their chops and first in line to pickup STP's capacity, but Shunfeng came in a threw a wrench in their plans with their bid.

I think that YGE might be able to pull it off, but there are other names in the sector that already are pulling it off. YGE is a gamble that might pay off big, but can hurt a lot as well. On the other hand there are other "safer" bets in the industry.

 

[sleepyhead]

After looking in more depth into the SEC document that you linked, I think that you are correct, mershaw2001, and only a small portion of the 51m shares will be released this Tuesday:

http://www.sec.gov/Archives/edgar/data/1408356/000119312513399784/d553628ds1a.htm

From page 41:

Upon completion of this offering and the concurrent offering of 3,400,000 shares of common stock, we will have 81,678,355 outstanding shares of common stock based on the number of shares outstanding as of June 30, 2013 and assuming no exercise of the underwriters’ option in the concurrent common stock offering and no exercise of outstanding options after June 30, 2013. Of these shares:

24,836,844 shares will be eligible for sale immediately upon completion of these offerings;

50,594,568 shares will become eligible for sale upon the expiration of the “lock-up” agreements described under “Underwriting” below, subject to the provisions of Rule 144 or Rule 701 under the Securities Act, as well as our insider trading policy;

2,704,898 of the shares included in the immediately preceding bullet point will become eligible for sale during an early release period in accordance with certain “lock-up” agreements described under “Underwriting” below; and

1,485,010 shares will become eligible for sale thereafter, subject to the provisions of Rule 144. ​

Therefore, it looks like 2.7m shares will be released on Tuesday, This is still close to 10% of the public float and can still make a difference if the employees decide to cash out.

edit: added the share counts since table was not visible.

 

[JRP3]

Here is my one concern about CSIQ. (I typically invest with a several month to several year horizon, no day trading or weekly options) -- please weigh in with opinions,

They have the very lucrative high margin deal with Transcanada in Ontario, which has been providing them with nice margin projects. They are booking some this quarter, and I believe they have now completed 5/10 of the total deals they had originally signed.

My issue is, it is very unlikely they will ever have deals with such margins again, definitely not in China, and as the Ontario subsidies wind down, I doubt they will find companies to sell such lucrative projects to in the future. So although they have a very sunny looking next earnings or two, what happens after that? Although their topline might continue to grow, and their MWs might continue to grow, their EPS based on my thesis, will not, and their margins certainly will not.

I think they will continue the upward momentum for the next little while, but this is a big risk towards the middle/ end of 2014. Anybody have opinions on this?

Thanks!

I'd also be interested in hearing the thoughts of our solar experts on this point.

 

[Curt Renz]

Deleted post since my question was answered above.

 

[Mario Kadastik]

Ugh first time someone calls away my short call before expiration date. Had a risk free SCTY spread and the short leg got called away so am now short 100 shares Oh well got to exercise that $35 call now

 

[sleepyhead]

Ugh first time someone calls away my short call before expiration date. Had a risk free SCTY spread and the short leg got called away so am now short 100 shares Oh well got to exercise that $35 call now

What expiration and and strike prices did you have for both legs?

 

[pz1975]

I had a CSIQ delayed bull call spread of 25 calls bought of strike price 20 and sold of strike price 24 for April. I had 9 of the 24's called away last week so I just sold 9 of the 20's to balance it.

 

[Mario Kadastik]

What expiration and and strike prices did you have for both legs?

Long 35, short 52.5

 

[sleepyhead]

Long 35, short 52.5

Is this for January expiration? If so, then I can understand exercising. You actually get more value by exercising vs. selling at full bid price.

I had a CSIQ delayed bull call spread of 25 calls bought of strike price 20 and sold of strike price 24 for April. I had 9 of the 24's called away last week so I just sold 9 of the 20's to balance it.

This doesn't make any sense to me on the other hand, because there is still 3 months till expiration and the seller would have gained an additional $.18 per share if he sold at full bid price (possibly more since ask is another $.70 higher). It makes no sense to exercise early like this for a company who doesn't pay dividends, especially since you have to commit more capital to shares, and there is a possibility that the stock tanks below $24 by April making the exercise a bad decision.

I have some Apr. CSIQ $17/$19 BCS's as well and haven't seen them exercised. I wish someone would exercise though because then I can sell the $17's at a slight time premium to intrinsic value and get my max payout (and then some extra premium) of $2.00 + premium 3 months early. You should be happy that someone decided to exercise your short $24's; their loss is your gain.

 

[pz1975]

Good point. Didn't see it that way!