Big Solar: Earnings, Expansion, M&A (LDK, SOL, CSIQ, STP, JASO, TSL, SPWRA, YGE, FSLR, TAN)

Chinese solar PV maker LDK Solar Co., Ltd. (NYSE: LDK) reported fourth-quarter and full-year earnings after markets closed yesterday. The company posted earnings per ADR of $1.09 for the quarter on revenue of $921 million, both higher than estimates for earnings per ADR of $0.90 and revenue of $871 million. The company’s guidance for the first quarter of 2011 was generally in-line with estimates, and that weighed on the stock in after hours trading. LDK shares traded down -4% following its report.

If the past is a predictor, other solar makers will feel the pinch today. When Renesola Ltd. (NYSE: SOL) and Canadian Solar Inc. (NASDAQ: CSIQ) reported weak first-quarter outlooks earlier this month, shares in Suntech Power Holdings Co. Ltd. (NYSE: STP), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), Trina Solar Ltd. (NYSE: TSL), SunPower Corp. (NASDAQ: SPWRA), and Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) all felt the pain. Only First Solar Inc. (NASDAQ: FSLR) managed to dodge the pressure on share prices.

Like Renesola and Canadian Solar, LDK is worried about demand from Italy. We outlined the changes in the Italian market for solar PV earlier this month. LDK is also considering spinning off its polysilicon business in an IPO that would help the company pay down some of its debt of $1.5 billion in short-term borrowings, $358 million in convertible senior notes, and $604 million in long-term debt.

First Solar announced its long-expected plan to build a $300 million manufacturing facility in Arizona that would double its annual production capacity to more than 500 megawatts of thin-film solar PV modules. Construction is set to begin next quarter, and the new plant is expected to employ about 600 people when it is fully operational.

More interesting is a report from Greentech Media that First Solar is negotiating an acquisition of solar PV maker HelioVolt.  HelioVolt manufactures and sells solar PV cells and modules using a thin-film technology known as copper indium gallium diselenide, or CIGS. The technology has demonstrated a sunlight-to-electricity conversion efficiency of 19.9%, very close to the 20.3% efficiency rate of multi-crystalline silicon cells. Because thin-film cells are much cheaper to manufacture, an increase in efficiency enhances the cost advantage of thin-film solar PV.

First Solar currently uses cadmium telluride (CdTe) technology in its thin-film process, but the company has been working on a CIGS project of its own. Buying HelioVolt could shorten the development cycle and take First Solar directly to the manufacturing stage of CIGS modules. And HelioVolt, which has been venture funded since its founding in 2001, could probably be acquired for around $200-$300 million or so, repaying its backers who have put in about $150 million.

Whether or not First Solar pulls the trigger on a deal for HelioVolt, the fortunes of the solar PV makers continues to rest on the policy decisions in countries like Italy, China, India, and the US. Many observers expect solar power to get a boost as a result of the nuclear power debacle now unfolding in Japan.

That may or may not happen, but one thing has been clear for at least six months: the low-cost solar providers will have an edge in winning business in 2011. The low-cost Chinese makers are boosting production of their crystalline-based modules, which drives down costs but leaves them vulnerable to over-supply troubles. Thin-film makers, of which First Solar is the leader, already lead in low-cost production and could more easily weather a price war.

LDK shares are off nearly -6% in early trading this morning. Shares in First Solar are also down, about -1.5%, with only Canadian Solar among the others showing a slight gain. The Guggenheim Solar ETF (NYSE: TAN) is off about -0.5%.

Paul Ausick