Energy

Solar Stocks Brighter on Chinese Plan to Pick the Winners

Solar rooftop installation
Thinkstock
When China sneezes, the world economy gets a cold. Likewise, when the world’s most populous country feels better, at least some parts of the global economy get well. Today, it is solar panel makers’ turn to get better.

According to a report at Bloomberg, the government now plans to increase its solar PV capacity to 35 gigawatts (GW) by 2015 by adding 10 GW of capacity annually through 2015.

Now we do not want to be curbing today’s enthusiasm for shares of First Solar Inc. (NASDAQ: FSLR), SunPower Corp. (NASDAQ: SPWR), Trina Solar Ltd. (NYSE: TSL) and Canadian Solar Inc. (NASDAQ: CSIQ), all of which are up as much as 13%, but we have seen this story before. What may be new is that the government finally is getting around to making it official.

The interesting (and to us, at least, new) thing in the Bloomberg report is this:

China will provide credit support to profitable photovoltaic manufacturers and encourage restructuring and overseas investment, according to the statement, which didn’t specify what period the government will consider to measure profitability. … China will also offer tax breaks to solar companies that acquire others, merge or reorganize their operations, the State Council said. The government encouraged makers of polysilicon, the raw material used to make solar panels, to form partnerships or combine with “advanced chemical enterprises.”

This indicates that caution should be an investor’s watchword. The government, through some unspecified process at some unspecified date, will declare its support for “profitable” companies and, presumably, allow unprofitable companies to be merged or to expire. Do you really want to be making a wager on where China’s favor will fall and where it won’t?

 

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.