Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword or section
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Renewable en DrKW 79209 N

Renewable en DrKW 79209 N

Ratings: (0)|Views: 15 |Likes:
Published by forexsupreme

More info:

Published by: forexsupreme on Jul 07, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

10/28/2011

pdf

text

original

 
 
DrKW Equity researchRenewable Energy
| Germany
 
Initiation on sector 
20 July 2005
Solar Industry 
A bright future
Online research:www.drkwresearch.com Bloomberg:DRKW<GO>
Please refer to the Disclosure Appendix at the end of this report for all relevantdisclosures and our disclaimer. In respect of any compendium report covering sixor more companies, all relevant disclosures are available on our websitewww.drkwresearch.com/disclosuresor by contacting the DrKW ResearchDepartment at the address below.
Dresdner Kleinwort Wasserstein Securities Limited, Authorised and regulated by the Financial Services Authority and a Member Firm of theLondon Stock Exchange PO Box 560, 20 Fenchurch Street, London EC3P 3DB. Telephone: +44 20 7623 8000 Telex: 916486 Registered inEngland No. 1767419 Registered Office: 20 Fenchurch Street, London EC3P 3DB. A Member of the Dresdner Bank Group.
SolarWorld (Buy)
Current €78.9
Target €90
Market cap €1bn
Conergy (Hold)
Current €84.3
Target €80
 Market cap €0.8bn
Research Analysts
Alastair Bishop
+44 (0)20 7475 1594alastair.bishop@drkw.com
James Stettler 
+44 (0)20 7475 2357 james.stettler@drkw.com
Price relative
2529162330613202741118APRMAYJUNJUL90100110120130140150160(SOLARWORLD vs. DJSTOXX)(CONERGY vs. DJSTOXX)
 
Source: Thomson Financial Datastream
The solar industry has grown at an average rate of over 30% p.a. over the pastdecade. While a reliance on political support increases industry risk, the longer-termdirection of such support is clear. When combined with solar technologycostimprovements, we expect the solar industry to grow at 25-30% p.a. until the end of the decade. We initiate on SolarWorld with a Buy and Conergy with a Hold.
 
Growth industry:
Environmental initiatives coupled with a desire for energy security anddiversification are driving political support for renewables and hence solar power. Inconjunction with ongoing cost reductions in solar technology, the Photovoltaic (PV)industry looks set to grow at a rate of 25-30% p.a. out to the end of the decade.
 
 
Risks to our view:
Barring a notable shift in political support, short-term supplyconstraints, particularly with regards to the availability of silicon, are likely to be thelimiting factor for industry growth. A sharp interest rate rise could also impact forecasts.
 
Solar vs. Wind:
As balance sheet strength is unlikely to emerge as a notable competitiveadvantage in the PV sector, as it has in the wind industry, we see greater potential for listed PV firms to successfully compete long-term, relative to a wind industry counterpart.
 
Stock picks:
We initiate on SolarWorld, a vertically integrated PV manufacturer, with aBuy recommendation and peer-group derived €90 target price. For Conergy, a solar-specific integrator and distributor, we initiate with a Hold recommendation and €80 pricetarget.
 
 
Solar Industry 20 July 2005 2
Contents
Introduction................................................................................................................3
 
Solar industry overview............................................................................................5
 
Industry growth drivers...........................................................................................11
 
Risks to industry growth.........................................................................................17
 
Equity opportunities................................................................................................19
 
SolarWorld................................................................................................................22
 
Conergy.....................................................................................................................28
 
Appendix – The value chain....................................................................................33
 
 
 
Solar Industry 20 July 2005 3
Introduction
The solar industry has grown at an average rate of over 30% p.a. over the pastdecade. While a reliance on political support increases industry risk, the longer-term direction of such support is clear. When combined with PV costimprovements, we expect the solar industry to grow at 25-30% p.a. until the end of the decade. We initiate on SolarWorld with a Buy recommendation and €90 targetprice and Conergy with a Hold recommendation and €80 target price.
Scientists and politicians broadly agree that the use of fossil fuels is contributing to globalwarming. The current reliance on fossil fuels is also raising concerns over both acountry’s level of energy dependency and the scale of its long-term fuel costs.A greater adoption of renewable energy appears to offer at least a partial solution on allaccounts. While wind power is currently the most economic of the renewable energytechnologies, its intermittency of power production means that it alone is only likely topartially replace fossil fuels. Other renewable energy forms, including solar power, arethus expected to witness significant growth in the coming years.
Solar industry overview
Photovoltaic or solar technology generates electricity through the conversion of lightenergy. According to the International Energy Agency (IEA), the PV industry has grownat an average rate of 33% p.a. since 1993. We estimate annual growth of 25-30% out tothe end of the decade.
Industry growth drivers
Over the medium-term, the PV industry is likely to remain dependent on the level of political support. To date, solar industry growth has been driven by support from just 3countries (Japan, Germany and the US) though the emergence of new markets (Chinaand Spain in particular) offers significant growth potential, as well as reducing single-market risk.Longer-term, the relative success of the PV industry will be determined by the industry’sability to lower costs in order to compete with traditional power generation alternatives ona stand-alone basis. Depending on a PV system’s location, solar technology currentlygenerates electricity at a price of €0.20-0.60/kWh. While multiples above the cost of traditional fossil fuels, it should be remembered that solar power has the advantage of being able to be located at the point of energy usage. As a result, solar power used indistributed applications (roof-top systems, building integrated PV) competes not withcentralised power generation costs but with far higher final electricity prices.As a historical rule of thumb, the cost of solar power has fallen by 20% for every doublingof production, equivalent to an annual price decline of 5% since the mid 1990s. Lookingahead, we anticipate that this rate of cost reduction will continue, driven by a combinationof scale benefits (as plant sizes increase) and technological improvements (in respect tothe size, efficiency and thickness of a solar cell amongst others). We thus expect solar power to move into the realms of competitiveness during the next decade.
Risks to industry growth
Due to the political nature of the industry, a detrimental change in a core market’ssupport for PV is arguably the single biggest risk to our forecasts. Within Germany, themain PV market in Europe, a change in the EEG (renewable energy) law in 2008 is seenas a potential negative for the industry. In our view, while support may be lowered, it islikely to remain at a good level due to the solar industry’s strong job creation potentialwithin Germany and the technology’s limited impact on final electricity prices.

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->