IHS: record 10GW of inverter shipments expected in Q4 2013
They estimated 9.9GW in Q2 and 20.8GW for the second half. They call an average price of $0.17/watt for the year and overall yearly revenue of $6.5B. If you analyze this that is 6.5/.17=38.25GW of AC rated inverters. Fully loaded DC capacity that modules are rated would support 47GW. Since inverters are not loaded 100% you can expect an 90% load factor or roughly 42GW of DC rated modules shipped.
Japan generated 1.7GW at an ASP of 0.26 according to the HIS report. This is on pace for 6.5GW of AC power in 2013.
Calculating 2014 estimates from the HIS report presuming avg price decreases in the 10% range due to China growth at $0.06 per watt and pricing pressure in Japan, one would have an avg price of $0.153/watt. IHS is estimating 6.8B of inverters. This would yield an estimated 44GW AC for 2014 or a DC module demand of nearly 49GW. That is a 7GW DC module growth or a 16.6% growth rate over 2013 shipment levels. At a 5% price decline, they are estimating 42.2GW of AC power wich would be 46.8GW DC rated modules at 90% load. That would be a 4.8GW shipment growth or 11.4% growth rates as the most conservative
The lower rant of near 5 GW falls in line with conservative estimates in which China grows 2.5GW and the rest of the world grows at 2.5GW. The US listed garners 50% of the 2.5GW in China or 1.25GW and they garner 70% of the 70% share China takes globally for another 1.225MW. This is a 2.5GW conservative estimate market growth for the C7.
TSL = 500MW
CSIQ = 300MW
Jaso = 200MW
Note1: SOL is low growth as a result of declining shipments per the article to the Middle East/Europe as SOL is not vested in China which is half the markets.
At the 16.6% growth suggested in some price points, you have a 40% upside in shipments from mentioned numbers. IHS even suggests there is a potential for higher growths depending on Aisa Pac demands including Chin
I do not have clarity on the Chinese ASP for watts sold. It appears some of these projects being announced are partnerships and would not be 100% owned. In general, there are 3 levels of revenue I am presuming for projects sold. Not owned and kept for recurring revenues. That is $5, $3 and $2. You can speculate where the higher values are and the lower values are the EPC incrementals. This is a rough draft that will be tweaked and modified over the year as costs come clearer.
It is presumed that start to finish near term projects are projects that take up to 18 months start to finish. This includes permitting, signing of contractors, work performed and signoff that specs and power production levels are met. If you base the project announcements you can gauge a relative time period for incremental billables and for owned that suggests a larger portion in the second half of 2014.
A yieldco would be used for long term PV that they are planning to hold. This would be I believe would be much of the China pipelines similar to what JKS and TSL are planing. This would bundle the interest into capitalized plant costs and thus not show on the balance sheet as interest owed. This is also what appears to be occuring on the owned projects as the debts interest is capitalized into the project costs. Similar to LDK and the building of the Poly plants.
As for costs CSIQ has not claimed $0.50 costs. JKS is the only company claiming costs around $0.50. For all in wafer to module they identified a cost around $0.21+ $0.34 = $0.55. They require outsourcing of cells for US shipments that adds around $0.05 above all in costs and they require sourcing of half their wafers from outside sources at around $0.21.
All in processing next year is likely around $0.10-$0.11 for wafer, $0.12-$00.13 for cell and $0.17- for module. Poly costs should rise from the $0.09 to around $0.11. That is reflected int he slight blended cost rise.
Here is a Q3 excerpt from Seeking Alpha
Shawn Qu -
Yes, this is Shawn speaking. See, we typically buy wafers rather than buy silicon. So the silicon is -- the cost of silicon in itself is not that -- we are not sensitive to the polysilicon price itself. For wafers, the typical price for the polycyclic -- for the multicrystalline wafers is around USD 0.21 per watt. And then for the cell processing, all workshop is around $0.13, $0.14, around that order. And so the cell cost is our own -- from our own self factory, is around $0.34, $0.35. Module is way -- module is below $0.20. So that's the breakdown for our own cell module productions. Now we also buy the modules from Taiwan for some -- no, sorry, we also buy solar cells from Taiwan and -- to make modules for the shipments to U.S., for example, and those solar cells are typically $0.05 higher than our internal purchased solar cell.
Some validity to his arguments.
If China hits 10GW and not the 12GW then there is some minor downside risk of around 150-200MW per company or $15-$20M gross to the larger US listed relying on China for growth.
China Capacity still has some 15GW of excess capacity based on rough 2013 Chinese shipments. Based on rough 2014 shipments this should drop to around 5-7GW and by 2015 this excess capacity in China for modules et all should be all but dried up. This should be apparent come the second half of 2014.
My rough 2014 Model appx growth yoy 40% expected market size 43-45GWAC
Module Cost $0.542
GP/watt = $0.107
Margins = 16.5%
20MW Canadian $6/watt
10MW 3rd EPC incremental at $2/watt
10MW other $3.25
MW shipped 475MW
Modules = $308.275M; Gross $51.02; Margins 16.5%
Kits = $19M ; gross $3.14
Projects = $205M ; gross $46.1
Totals = $532.275 ; gross $100.27
Opex and interest $63M
Net after tax before adjustments like Forex = $31.7M
Module Cost $0.544
GP/watt = $0.1016
30MW Canadian $5/watt
20MW 3rd EPC incremental at $2/watt
60MW other $3
MW shipped 500MW
Modules = $322.8M; Gross $50.8; Margins 15.75%
Kits = $20M ; gross $3.147
Projects = $370M ; gross $86.1 ; margins 23.27%
Totals = $712.8 ; gross $140
Opex and interest $66.7M
Net after tax before adjustments like Forex = $62.3M
Module Cost $0.546
GP/watt = $0.09981
70MW 3rd EPC incremental at $2/watt
90MW other $3/watt
MW shipped 525MW
Modules = $339.15M; Gross $52.4; Margins 15.45%
Kits = $21M ; gross $3.25
Projects = $610M ; gross $134.4 ; margins 22%
Totals = $970.15 ; gross $190
Opex and interest $68.6M
Net after tax before adjustments like Forex = $103.2M
Module Cost $0.548
GP/watt = $0.0938
70MW 3rd EPC incremental at $2/watt
90MW other $3/watt
MW shipped 550MW
Modules = $353.1M; Gross $51.6; Margins 14.6%
Kits = $22M ; gross $3.21
Projects = $610 ; gross $107.4 ; margins 22%
Totals = $885.1; gross $162.2
Opex and interest $70M
Net after tax before adjustments like Forex = $78.4M
Modules = 2050MW ; $1323.325M ; $205.825M ; 15.5% GM
Kits = $82M ; $12.75M ; 15.55%GM
Projects = 550MW ; $1695M ; $374M ; 22%GM
Total = 2.6GW ; $3.1B ; $592.57M ; 19.1%GM
Opex and Interest = $317M
Net = $275.57M
Over under on projects at 550MW and over under on modules at 1.8GW not including projects, they should do around $5. If they do 550MW and a total of 2.5GW, they could be pushing well above $5 and potentially $6. It is all about executions. Remember they indicated far more projects for this year than what was actually being delivered. The major amounts of the project flows should be in the second half of 2014.
I think it bottomed at Thursday the 12th. Once Q4 ER comes out with earnings around $15M +/- and 2014 guidance comes out at ~3.4-3.5GW then this will not likely see below Dec 12th lows.
If they shuttered the plant , they should have written off to fair market value which would likely be the used market price they may get from sales of reactors and other items. So yes there should be some intrinsic value left the could sell to generate some cash.
What does that matter what I hold when talking fundamentals. My views on profit scenarios has changed little for 2014 and 215 at this point. I still expect growth rates for most of the C7 at ~30% for 2014 and margin improvements of 2-3% for most. I expect Opex to grow but as a percentage of revenue and as a cost per watt shipped to decline for those focusing within China and Asia Pac for their growth. There are only 3 companies that I view as being fundamentally solid with competitive edges over the rest. SOL is not one of those 3 of the CN7 companies.
I might debate that YGE is a good guy. They are not profitable and have not been profitable yet they are large. They have lower margins and the highest amount of Property plant and equipment vs capacity of the ones you mentioned. They pent nearly $0.80/watt on capacity while Trina and others are at $0.50 to $0.60 verticaly. This heavy cost of Capex over the years has lead to large debt that is at $45M per quarter or 7.5 cents per nameplate capcaity. That and the added depreciation per watt due to capex leads to $0.02 higher costs per watt or on a $0.66 ASP 3.3% hit on margins vs those other 3.
uh basic math for dummies.... 6000MT at 5 grams is 1200MW. The are shipping 3000MW. That is not anywhere near their 60% of their requirements.
To affirm strong demand entering Q1, a recent article suggests Q4 in China is between 3 and 4 GW of installs. That is AC rated. Article can be found on guangfu article "Small Business "resurgence" PV industry overcapacity problem persists" in which they state
"According to reports, since the fourth quarter of this year, once again set off a domestic investment boom of photovoltaic power plants, especially in the western region, many of speeding up the progress of construction of photovoltaic power plants. The fourth quarter of this year, China's PV demand or single-season will appear a historic breakthrough, reaching 3 ~ 4GW"
You clearly missed the point, at no time did I say they lost out on 6,000MT production currently, I mentioned they lost out on it over the life of the plant. And those costs mentioned are impacts to shareholder equity and the impact on their costs vs IF they plant was operating as planned.
///Anyone thinking poly is going to rise to $25/kg in the foreseeable future is smoking crack.///
OK great so we are in agreement that Chairman Li is smoking crack as this is what Juliet Yang translated in the Q2 con call. Good luck believing in investing in a company ran by a crack addict. :)
Okay. Mr. Li thinks that the whole market is definitely looking up and there is strong demand. We're seeing strong demand. So for next year, the ASP will definitely grow and so as the poly price. We expect the poly price to reach $25 per kilogram.
Here is the skinny on the Poly plant write down impacts
It was built and expanded for near $300M dollars. It never produced below market rates and has been a negative production cost. The goal was to upgrade and lower costs down to $18/KG on 10,000 Metric tons. They will lose out on 6,000 metric tons of capacity at $18/kg and will have to buy on the markets for $20-$25/kg. That is a negative impact of 6,000,000 kilograms at $5 a kg annually. This impacts earnings by $30M annually . They will not get cash flow from depreciations of near $30M annually. That is a negative cash flow of $60M annually. In 10 years that the plant would have operated if they would have generated $600M in cash flow off the $300M and saved $300M in costs. Instead after 10 years the shareholders will be out $600M in equity or around $7 in shareholder equity.
Instead of an asset that delivers cost savings of $0.025/watt and $0.025 added free cash flow and which when blended would put them at a $0.375 costs disadvantage on every watt shipped of modules, they are now at a cost disadvantage of $0.05 on every watt produced and worse cash flow. On an ASP of $0.70 they will have in general 7% lower margins than peers due to no cell capacity.
As they spent the money on a now written off Poly plant, SOL will generate roughly $0.025/watt in cash flow from depreciation costs while peers who invested in Cell capacity and vertical of wafer to modules will have $0.05-$0.06 cash flow. That cash generation discrepancy per watt sold of $0.03+$0.05 or $0.08 per watt lower than a JKS or a Yingli. Trina and CSIQ that buy half their wafers will generate $0.04 cash per watt or over 50% more cash from depreciations.
If you think of the cash flow returned from depreciation as every $1 returned from Capex of 3 years ago can now buy 1.5 times the same capacity due to costs being driven down. SOL now must borrow to expand
For modules it costs appx 4-5 cents per watt to ship to the US and Europe, other local regions is ground transport. Wafers take up way way less space for international shipping. Most wafer sales are regionall though with negligable shipping costs per watt. Do the math, look at the Sale costs as they increase appx 5 cents per watt of module shipment increases betweem Q1 and Q3.