Photovoltaics

Being able to turn around a troubled solar business is increasingly an asset as the harsh climate for PV continues.

Once upon a time Gehrlicher Solar was a proud exponent of the best the PV industry had to offer. In 2010, for example, the German company bagged four major industrial awards, including being ranked 21st among the fastest-growing companies in Europe.

Three years later and it is a very different story. The latest official communication from the company, co-signed by law firm Muller-Heydenreich Beutler & Kollegen (MHBK), talked hopefully of the search for an investor after Gehrlicher had filed for bankruptcy protection.

Shortly after, M+W Americas confirmed it had snapped up the German company’s US subsidiary, Gehrlicher Solar America Corporation.

But despite MHBK administrator Oliver Schartl’s assurance that “major parts of Gehrlicher Solar AG can continue”, at the time of writing the PV company’s web site was down and the business was not responding to emails.

Alas, such developments are far from unique in today’s desperate global PV market. Last month, for example, the German panel giant SolarWorld announced a restructuring that saw shareholders losing 95% of their holdings.

And even China’s Suntech, branded as the world’s largest producer of solar panels, has been through a difficult restructuring process. “The restructuring will allow us to cut our costs and optimise our margins and production,” said company president Zhou Weiping in a statement.

Share price

While the restructuring has led to an upswing in Suntech’s share price, the jury is still out on how effective it may prove.

“This requires a detailed analysis with sharp management skills and adequate technological report,” opined Hiro Chandwani, chairman and managing director of Hiro Energy-Tech in a heated LinkedIn debate. “All this appears to be lacking in the current management team.”

What is clear, however, is that what is happening at Suntech, SolarWorld and Gehrlicher could happen in any PV business right now.

“Depending upon where a company is in the value chain and its size, the situation can vary considerably,” says Ernst & Young Europe, Middle East, India and Africa cleantech senior manager Thomas Christiansen.

“If a company has made it this far through the crisis, the risk should be somewhat reduced, but generally, there have been a considerable amount of insolvencies over the past two years.”

It probably does not help business owners that the current industry downturn is being accompanied by a shift in market dynamics, he adds.

Marketing risk

“As the industry moves from mainly from an investor-centric model based upon guaranteed returns to an energy-producer model with marketing risk or self-consumption, the industry is changing accordingly.”

In the current climate, Christiansen says upstream business owners need to strive for cost leadership.

And for manufacturers and project owners whose profitability is under threat, “good working capital management, good risk controls and good cost accounting are key ingredients to success.”

When the worst comes to the worst, the safest bet for survival will usually be to sell out to a competitor. And in this scenario the value of your intellectual property will be critical, says Matthew Feinstein of Lux Research.

That explains why a number of thin-film PV companies, including Miasole and Solibro, have found buyers after running into trouble. Crystalline-silicon module makers, by and large, have not been so lucky.

“Companies with no advantage have been shaken out and bankruptcy is the only way out there,” Feinstein says.

Intellectual property

However, even a truckload of patents is unlikely to fetch much from a buyer in today’s depressed market, he warns. “Intellectual property has been bought for pennies on the dollar. Whichever buyers are still in the market are waiting for the price to come down.”

As well as having an innovative, viable technology, Feinstein says being a downstream operator has been shown to have advantages at the present time. Building partnerships can help strengthen your business, too.

Conversely, he comments: “Competing head to head with the Chinese is not a good strategy. You need some level of technology that is proprietary and holds an advantage. It can’t just be a market play.”

For companies that have the financial resources, it could pay to hunker down and focus on research and development until the current oversupply of Chinese products blows over and the market returns to some semblance of normality. This might not take too much longer.

Last month, the analyst firm NPD Solarbuzz predicted PV demand from China and Japan could top 9GW in the second half of this year, a 100% increase over the demand in the first six months of 2013.

“The record level of PV shipments to China and Japan coincides with corporate margins returning to positive territory and the final shakeout phase of uncompetitive manufacturers nearing completion,” said Finlay Colville, vice president at NPD Solarbuzz, in a statement.

“Having entered 2013 with a highly cautious outlook, tier-one suppliers are poised to exit the year with restored confidence, ahead of optimistic shipment and margin guidance for 2014.”