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European Renewables Caught In Perfect Storm

Date: 15-Nov-11
Country: GERMANY
Author: Christoph Steitz

Three of Europe's top renewable energy companies became the latest victims of a global collapse in prices, massive oversupply and governments slashing subsidies in light of growing debt piles, echoing recent comments from overseas peers.

SolarWorld, Q-Cells and Nordex are among the latest renewable energy companies to be hit by a mix of high inventories, slower demand and banks tightening their purses regarding wind parks.

Solar companies in particular suffered as they ramped up production last year to meet a surge in demand from Germany and Italy where customers rushed to buy solar panels before governments cut vital subsidies.

Both economies are reducing so-called feed-in tariffs to make the solar sector more productive, and subsidies and prices have been falling at a faster rate than manufacturing costs, leading Germany's renewable elite to slash their 2011 outlooks.

Pressure on governments has also increased after debt problems in the euro zone escalated, forcing governments to find ways to save costs, including EU-paymaster Germany as well as Italy, which last week pushed through an austerity package demanded by the European Union.

"The sovereign debt crisis in Europe and rising equity requirements imposed on banks have rendered financing of wind farm projects more difficult again," German wind turbine maker Nordex said on Monday, adding it now saw 2011 sales of 920 million euros, instead of 1 billion.

SolarWorld, Germany's No.2 solar company by sales, also cut its outlook, saying it no longer expected 2011 revenue to reach last year's 1.3 billion euros ($1.8 billion).

"In the entire market, the demand in the third quarter of 2011 developed worse than expected," Chief Executive Frank Asbeck said, adding he saw prices for modules falling by another 10 percent in 2012 after a 40 percent drop this year, making only single-digit margins possible.

NUCLEAR EXIT, CATASTROPHIC FINANCES

Q-Cells, once the world's largest maker of solar cells, said finance chief Marion Helmes resigned following a wider-than-expected quarterly operating loss.

"The lights go out at Q-Cells. The CFO is leaving the sinking ship, EBIT is more than just weak and this all doesn't look good for the company. Quite the opposite: the balance sheet could be described as catastrophic," a trader said.

Along with peers such as First Solar, Suntech and Yingli, Q-Cells has been hit by falling prices while Germany's decision to pull out of nuclear power did not translate into additional support to the industry.

In fact, analysts and industry experts see a return of conventional power and imports rather than a wide-ranging government-backed expansion of renewable power.

Shares in Q-Cells and SolarWorld were the biggest decliners in Frankfurt's technology index, down 29 percent and 15 percent, respectively at 1233 GMT.

Nordex shares, however, were flat as the company posted higher-than-expected third-quarter EBIT of 9.4 million euros, beating the 3.6 million average forecast in a Reuters poll.

(Additional reporting by Daniela Pegna and Anneli Palmen; Writing by Christoph Steitz and Maria Sheahan; Editing by Dan Lalor, Hans-Juergen Peters and Mike Nesbit)

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