Will China Subsidies Save Solar Stocks? (LDK, STP, TSL, CSUN, JASO, FSLR, WFR, SPWRA, ENER, SOLR, CSIQ)

If you saw how solar power stocks ran up today, you might think it was tied to higher energy prices from last week.  But the news that that ran shares is that the Chinese government plans to offer what appears to be some rather high subsidies for solar projects.  Due to the sizes and location of the Chinese companies and the desire for China to help Chinese companies, it seems that LDK Solar Co. Ltd. (NYSE: LDK), Suntech Power Holdings Co. Ltd. (NYSE: STP), Trina Solar Ltd. (NYSE: TSL), China Sunergy Co. Ltd. (NASDAQ: CSUN), and JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) would be the largest beneficiaries.   Today is proof that many others can win outside of earnings news during earnings season.

The Golden Sun program is a solar subsidy that will fund up to half of an investment for on-grid projects and as much as 70% of an investment for remote areas that are not on the grid.  The size of the subsidy could generate another 500 megawatts in as short as two years.  The only problem U.S. as companies that buy cheaper dirty power and continue to cut costs are not eligible for the deal.

As you will see, it is the players with the largest presence in China which performed the best:

• Xinyu City, China-based LDK Solar Co. Ltd. (NYSE: LDK) rose by 15% to $10.88.
• Wuxi, China-based Suntech Power Holdings Co. Ltd. (NYSE: STP) rose almost 10% to $17.80.
• Changzhou-based Trina Solar Ltd. (NYSE: TSL) rose by 9.6% to $28.95.
• Nanjing, China-based China Sunergy Co. Ltd. (NASDAQ: CSUN) rose 14% to $4.93.
• Shanghai-based JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) rose 7% to $4.88.

The US-leader, First Solar Inc. (NASDAQ: FSLR), finally had a solid day as its stock was up almost 6% at $155.40.  MEMC Electronic Materials Inc. (NYSE: WFR) also rose by 5% to $20.31.  SunPower Corporation (NASDAQ: SPWRA) rose by 4.4% to $24.09.

Energy Conversion Devices, Inc. (NASDAQ: ENER) was a dud today as shares were only up 0.6% at $12.84.  Its shares are still very close to 52-week lows of $11.83.  Another laggard was GT Solar International, Inc. (NASDAQ: SOLR), which makes solar making equipment, with shares up 0.2% at $5.34.

Canadian Solar Inc. (NASDAQ: CSIQ) is Canadian but it also implements solar power development projects in conjunction with government organizations for power generation in rural areas of China. Its shares rose 4.75% to $14.12.

We do not want to completely pan today’s developments.  This is a good thing.  But we also do not want to get tricked into believing that major growth is going to come flying back in right as many of these companies tart to report earnings over the next week.  The Obama-subsidy has yielded nothing yet as many companies are waiting for more or are opting for the cheaper prices of dirty energy right now.  As financing is rough and as cap-ex spending is still very week, we expect this earnings season to weed out the men from the boys in the solar stocks.

JON C. OGG
JULY 21, 2009