PHOTON International The Photovoltaic Magazine

Three years of the PPVX: Sun outstrips oil

Shortly after the start of the PHOTON Photovoltaic Stock Index three years ago, it appeared that a lot of its listed companies had been valued too highly. Therefore even after colossal growth over the last six months, the PPVX hasn't managed to achieve the initial issue value of 1,000 points. But it is developing brilliantly at the moment and under such favorable conditions, one can soon count on more PV companies going public.

At first glance, the Amex Oil index seems to outperform the PPVX: The AMEX value has been standardized so that both curves start at the same level of 1,000 points on Aug. 1, 2001, when the PPVX was launched – and since then the solar index constantly has remained under the oil index. But solar grows faster than oil, and in the last one and a half years the gulf between the two curves has been narrowing.

Just as the PHOTON Photovoltaic Stock Index (PPVX ) was started with an initial issue value of 1,000 points on Aug. 1, 2001, the solar euphoria within the financial markets started to wane as did the overall mood at international stock markets. By Jan. 2002, the PPVX lost 27 percent of its value and only then did the downswing really begin. When the year 2002 was over, the share value found itself 61 percent lower at 281 points.

Upswing from 2003 onwards

No one could really celebrate the recovery in 2003 in which the share value increased by 19 percent to 334 points – it wouldn't have gone much further downwards anyway. By the end of last year there was a better mood, brought about in particular by the potential of higher feed-in tariffs coming into effect in Germany. Also, good prospects for market incentive programs, which have arisen in the meantime in other countries, enabled solar energy technology to be seen in a new light. And let's not forget that increasing competition within the fossil fuel sector with, for example, ever-mounting oil price records is contributing to the growing number of analysts discovering renewable stocks.

The direct comparison of the PPVX and the AMEX Oil Index, which incorporates a good dozen large oil concerns and was chosen as a reference index, reiterates the same findings. In the first half of 2004, the solar index shot up by nearly 100 percent and thereby far outpaced AMEX. Since the beginning of 2003, the PPVX has been over 80 percent ahead of the oil index. In the first seven months of 2004 alone the PPVX rose by 84.6 percent, whereas the AMEX oil index only rose by 21 percent (currency adjusted).

The balance sheets for the 14 PPVX-listed companies were consistently negative despite predominantly positive development in the market value. Only two companies were able to record profits last year – and both joined the PPVX in 2004. The Taiwanese cell manufacturer Motech Industries was included in February, and US-headquartered Solar Integrated Technologies, which above all plans to use the income from its initial public offering to set up a production site for its solar roof sheets in Germany, came onboard in May (see PI 6/2004, p. 18). The third newcomer during 2004 was California-based company Daystar Technologies, which recently announced plans to start its CIS production in New York State (see PI 8/2004, p. 30).

Spire Corporation also managed to obtain a positive outcome for 2003, but this was due to activities in other sectors. The Bedford, Massachusetts-based company, a pioneer in module manufacturing equipment, was excluded from the PPVX in July, as they failed to comply with the index guideline stipulating that more than 50 percent of last year's revenues must come from solar (see article, p. 36). Up to now, only one other company has been delisted: AstroPower was expelled in July 2003 after the US company failed to file its annual report to the US Securities and Exchange Commission. In the meantime, AstroPower went bankrupt and General Electric has taken over its production facilities (see PI 5/2004, p. 58).

Profitable German companies

The insecure situation in Germany surrounding the termination of the 100,000 Roofs Program last fall affected the market and also the companies listed in the PPVX, as most of them were if not German companies at least very active in this country. The situation changed in November, when the German government passed an interim law with improved PV feed-in tariffs to offset the impact of the terminated 100,000 Roofs Program. In

	© data: Bloomberg, Öko-Invest; gaphic: PHOTON International

consequence, the German PV engine started up again and helped several companies to enter the black with their financial results.

Among these are all German-listed PPVX companies, which is generally reflected in the dramatic increase of their stock performance. One year ago the figures for SolarWorld AG, Solon AG, and Sunways AG only lay between 0.4 and 0.6 times the yearly revenues and on average have climbed by around 5.5 times since then. Only the market caps from Sunways (1.0×) and Phönix Sonnenstrom (0.9×) lie close to the 2003 revenues.

The whole market capitalization of those 14 PPVX listings added up to around €870 million ($1.046 billion) – that corresponds approximately with 2.7 times the whole revenues of €320 million ($385 million). Average values are to be taken with caution as the individual companies are too different from one another: Arise Technologies puts just €2 million ($2.40 million) into the pot, whereas Energy Conversion Devices (ECD) contributes 100 times that amount. And of the good 2,000 employees working at PPVX companies, over half are divided between two firms – ECD and SolarWorld.

Also, using the PPVX as a mirror for the whole sector is difficult as of yet: the cumulative revenue of the index-listed companies is, at €320 million ($385 million), not even 10 percent of the PV revenues worldwide, which Credit Lyonnais Securities Asia (CLSA) analyst Michael Rogol in his study, Sun Screen – Investment opportunities in Solar Power, estimates at around $7 billion (see article, p. 52). Even if large corporations such as Sharp or Kyocera won't join the PPVX for several more years as their PV business share is too small, the index will become increasingly representative of the solar sector. Several companies avoided going public in light of the unfavorable conditions at the stock exchanges. But now the prospects for success have risen equally as much as the need for capital: whoever wishes to keep up with the rapidly growing market has to invest further. The cell manufacturer Q-Cells AG is aiming at going public next year. Phönix Sonnenstrom AG announced it is looking to enter the open market even before year's end, finally bringing its unique role as a non-publicly listed stock in the PPVX to an end (see article, p. 8). Other IPO candidates include Hambug-based Conergy Group, the parent company of Europe's largest integrator chain SunTechnics, which abandoned its first IPO in April 2001, and German wholesaler SES 21 AG, which withdrew at short notice in July 2002. Finally, both announced plans for another attempt at launching under better general conditions. And these are only the German stocks; according to CLSA, further candidates include Thai module producer Solartron and UK-German ingot and wafer manufacturer PV Crystallox (see article, p. 59).