Roth Capital Sees Downside in Solars Following Trump Win (SCTY) (FSLR) (TSL) (YGE)

November 9, 2016 10:49 AM EST
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Roth Capital is largely negative on the solar sector following Donald Trump's U.S. Presidential election win on Tuesday.

The firm noted the following key points on Wednesday:

  • What is the probability that the ITC extension gets repealed? Meaningful. One of Trump's goals is to pursue tax reform and reduce the corporate tax rate to 15%. With the GOP controlling the executive and legislative branches, there is a meaningful probability that this develops momentum. One of our DC contacts suggested that when the Bush administration estimated the impact of eliminating all incentives and accelerated depreciation from the tax code, it could only get to a corporate tax rate of 29%. As a result, the Trump team will likely have to dig even deeper to get to 15%. We estimate that the value of the ITC is $40-50bn, which is a large number that could pay for a corporate tax cut. Finally, there is precedent. In 1986, the ITC was repealed to help pay for the last major tax code rewrite.
  • Solar likely does not have a seat at the table with Trump's transition team: The fossil fuel industry and utilities do. As a result, there is only bad news or less bad news for utility scale solar. Beyond the risk of the ITC being repealed, the Clean Power Plan is likely dead. Progress that the solar industry and federal government were making to fast track utility scale solar projects and improve the siting and permitting will likely stall. Two positions at FERC are open, and FERC will now likely no longer focus on renewable energy. Monies that had historically been provided to DOE and other soft dollars will likely be ratcheted back.
  • What is the potential impact on solar stocks? The combination of a Trump presidency and GOP legislature could result in a wholesale dismantling of many of the solar incentives and policies at the federal level. This will likely spill over to the state level and possibly embolden utilities and influence PUC decisions on NEM, TOU, and other policies important for resi and C&I. All in, we see another leg down for nearly all of our solar stocks under coverage...


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