Update from Solar Power Int'l Conference: Analyst Says Lenders Unimpressed with Tax Credit Extension

October 14, 2008 1:03 PM EDT

Analysts from Hapoalim Securities are attending day one of the Solar Power International 2008 conference (considered the flagship conference for the solar industry), today in San Diego. Hapoalim currently has a Sector Under-Perform rating and Cautious outlook on the solar industry.

Listening to numerous presentations from one of the leading project finance vendors in the world, Milbank, Hapoalim said the vendor's views supported its thesis that the credit crunch is crippling global demand for solar products. According to Hapoalim, these presentations focused on the fact that "access to funding, near-term, is essentially non-existent in the solar arena globally."

Hapoalim mentions Milbank's commentary that the majority of the banks and finance vehicles that fund solar projects were generally un-impressed with the recent extension of the US Investment Tax Credit. The firm said it was surprised to hear this as investors have recently been using the passage of this measure as a catalyst to move the sector higher. However, Milbank points out that while the tax credit is available, many lenders can not execute the credit as they are currently "operating at a net loss (ie, they are not paying taxes, thus there is no benefit from tax break)."

Interestingly, when Milbank was asked the question: "How bad is it going to get for crystalline solar cell demand next year?", it answered "those companies who have not factored a 'significant' pull-back in demand into their forecasts are not being realistic with the market." Hapoalim believes this further supports its view that earnings estimates are still elevated and in need of reductions across the board.

Solar stocks are mixed today: First Solar (Nasdaq: FSLR), often considered the best-of-breed play, is up about 6.5%, Evergreen Solar (Nasdaq: ESLR) is up 6%, SunPower (Nasdaq: SPWRA) is up 4%, while Suntech (NYSE: STP) is down 10%, Canadian Solar (Nasdaq: CSIQ) is down 9% and Yingli (NYSE: YGE) is down 8.7%.

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