Solar Shares Under Pressure from Credit Crunch and Pricing

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Deutsche Bank’s Steve O’Rourke observed in a research note Wednesday morning that while companies expect some negative impact from tighter credit in 2009, “quantification is presently impossible.” On pricing, he notes that most solar module companies continue to forecast a price decline in 2009 of under 10% - but he says that a drop of more than 20% is “increasingly likely.”

As the Solar Power International conference continued Wednesday in San Diego, solar stocks continue to lose ground in the face of ongoing concerns about both the ongoing credit crunch and the possibility of a steep drop in pricing in 2009.

Deutsche Bank’s Steve O’Rourke observed in a research note Wednesday morning that while companies expect some negative impact from tighter credit in 2009, “quantification is presently impossible.” On pricing, he notes that most solar module companies continue to forecast a price decline in 2009 of under 10% - but he says that a drop of more than 20% is “increasingly likely.”

Writes O’Rourke: “The over-arching, unanswerable question is one of potential demand destruction in 2009 due to the present credit crisis. No one knows, and no company was willing to offer any kind of quantification. The common belief seems to be that it will be slightly to moderately negative.”

UBS analyst Stephen Chin wrote Wednesday morning that solar projects are largely on track, with financing still available given attractive internal rates of return of over 8%. But he agrees with O’Rourke that pricing is likely to drop 20% in 2009...

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