Yingli Green Energy (YGE)

While the United State has dithered over how, when, and whether to invest in the energy industries of the future, solar cells and panels have become a commodity business. And that gives a huge edge to China’s solar manufacturers with their significantly lower labor costs. Morningstar estimates that it costs 20% to 30% less to produce a solar panel using traditional solar panel technology in China than in Europe. (Notice, please, the word “traditional.” Thin-film solar technologies are an entirely different ballgame.)

That has led to a global price war at a time of an uncertain level of demand for solar panels as companies try to grab or maintain market share. For investors, price wars over market share always present the danger that competitors will cut their prices so far that they sacrifice profit margins in an effort to grow market share. That’s not a formula that investors want to buy into.

So the best news from China’s Yingli Green Energy Holding’s (YGE) third quarter earnings report Friday, November 19, was that gross margin stayed extraordinarily healthy at 33.3%. Gross margin beat the company’s guidance for 31% to 32% for the quarter. Gross margin in the second quarter of 2010 was 33.5% and in the third quarter of 2009 22.5%. Operating margin came in at 22.4%.

Guidance for the first half of 2011 was not as downbeat as that from other solar panel producers—that’s either a reflection of Yingli’s strong market position or a bit of wishful thinking. (My suspicion is some of both.) The company forecast that average selling prices would be flat in the first half of 2011 and show a slight decline in quarters three and four. It would surprise me if prices were that strong in 2011. Germany, the world’s largest market for solar panels because of generous government support, has said it will cut subsidies by 13%. Spain and the United States, other big solar markets, are under extreme budget pressure. All this as the global solar industry, including Chinese solar producers, is expanding capacity.

This is where a second Yingli advantage comes into play. Read more

I’d say the actual dimensions of the positive surprise—13 cents a share—were less important than the gain in credibility that came for SunPower (SPWRA) with making third quarter numbers after the market close on November 11.

The company faced credibility issues after second quarter earnings missed estimates of a penny a share loss by a very large five cents a share. And the stakes have gotten much higher recently: The stock of the solar cell producer had climbed 40% from its August low. It didn’t help that the company’s guidance set an extraordinarily large range for earnings of between eight and fifteen cents on revenue of $450 million to $490 million.

(And speaking of credibility, the day after the earnings release, the company announced plans to sell about $320 million in euro-denominated bonds. Debt offerings for solar companies have been extremely rare and SunPower’s ability to get one done would be a sign of investor comfort with the company and the industry. )

Investors know that the company doesn’t bear total responsibility for that high degree of uncertainty. Read more

Update Maxwell Technologies (MXWL)

It looks like Maxwell Technologies (MXWL) is making a successful transition to a company built around its newer ultracapacitor BOOSTCap products. In a June 22 post on the company I wrote that 2010 marked a very important transition for the company. Maxwell really runs two businesses. One business is composed of the older microelectronics (radiation hardened components and computers for use in space) and transmission (capacitors used in high-voltage electrical transmission lines) product lines. Back in 2006 these product lines accounted for two-thirds of the company’s sales. The other business is composed of the company’s ultracapacitor BOOSTCap products. These fast-charge, fast-discharge energy storage devices are gradually winning design competitions and getting built into products from auto, truck, and bus electrical systems to wind turbines. In the first quarter of 2010 sales from the BOOSTCAP business finally exceeded sales from the microelectronics and transmission business. In the long-term, I wrote, this transition is exactly what investors want to see since BOOSTCap revenues are projected by Needham to grow by 52% from 2010 to 2011. But in the short term, the transition could be tough on the company because one of Maxwell’s biggest customers for the BOOSTCap product is the depressed global auto industry.

Well, second quarter results reported on July 29 and news from the company since then say that transition is going well. Read more

Update Maxwell Technologies (MXWL)

2010 marks a very important transition for Maxwell Technologies (MXWL), one that unfortunately, won’t make life easy for the company given the state of the auto and alternative energy industries. You can see the results of that transition in the company’s somewhat disappointing earnings for the first quarter of 2010.

Maxwell really runs two businesses.

One business is composed of the older microelectronics (radiation hardened components and computers for use in space) and transmission (capacitors used in high-voltage electrical transmission lines) product lines. Back in 2006 these product lines accounted for two-thirds of the company’s sales.

The other business is composed of the company’s newer ultracapacitor BOOSTCap products. These fast-charge, fast-discharge energy storage devices are gradually winning design competitions and getting built into products from auto, truck, and bus electrical systems to wind turbines. In the first quarter of 2010 sales from the BOOSTCAP business finally exceeded sales from the microelectronics and transmission business. And, according to estimates from Needham & Co., BOOSTCap will account for 55% of sales in 2010.

In the long-term this trend is exactly what investors want to see. Needham estimates that BOOSTCap revenues will grow by 52% from 2010 to 2011.

In the short-term, however, this trend is a problem for Maxwell Technologies for two reasons. Read more

You knew this was coming once BP (BP) admitted that the top kill effort to stop the flow of oil in the Gulf of Mexico had failed.

On Tuesday June 1 U.S. Attorney General announced that the Justice Department has opened a civil and criminal investigation into BP and other companies involved in the Deepwater Horizon disaster. Holder’s announcement came just hours after President Barack Obama promised in a 10-minute White House address to prosecute any parties found to have broken the law.

What comes next? More politicians who can tell which way the wind is blowing and feel that they need to do something before the storm blows them away. I think the need to be seen doing something might even result in action in Washington to move the country away, even if only so slightly, from its dependence on oil.

Stranger things have happened when politicians are running scared.

There’s no quick end in sight to the flow into the Gulf. BP doesn’t have a real solution—the oil company is next going to try a new version of the containment dome that failed to work before the top kill failed to work. And the truth is that the federal government is completely dependent on the oil company and its service and drilling contractors for any equipment that might stop the flow.

But that hasn’t stopped the buildup of political pressure on the Obama administration and other elected officials in Washington to do something—or at least to sound like it is doing something. So an angry President Obama, sounding like a prosecutor himself, said “My solemn pledge is that we will bring those responsible to justice.”

The potential consequences for BP are huge. Read more