Saving Solarworld Clearing Skies or Cloudy Outlook?

The chief executive of Europe's last big maker of solar panels said the Bonn firm is back on track a year after its near-bankruptcy, with help from Qatari investors. But Solarworld's profitability still lags and some investors aren't convinced.
Solarworld, Europe's last large maker of solar panels, is struggling to recover in the face of low-cost Chinese rivals.

Frank Asbeck doesn’t give up easily.

A year ago, Mr. Asbeck convinced shareholders to accept a radical writedown of debt and equity to save Solarworld, Europe's last large maker of solar panels.

Now, Mr. Asbeck, Solarworld's chief executive and biggest shareholder, is looking to the future with optimism and new expansion plans.

“We want to reactivate a further part of the Bosch factory in Arnstadt,’’ the town in central Germany where Solarworld tests its solar panels, Mr. Asbeck said in an interview with Handelsblatt.

If everything proceeds according to plan, Solarworld could begin producing ingots, a component of solar panels, at the old Bosch factory in the German state of Thuringia. That would be positive for Solarworld, which is based in Bonn and now buys ingots on the global market at a higher price. Producing its own ingots at less cost would support Solarworld’s halting recovery from near-bankruptcy last year.

“We could begin with production (at Arnstadt) in the second quarter,’’ Mr. Asbeck said.

Crucial to Mr. Asbeck’s recovery strategy are his investment partners in Qatar, who intervened at the height of Solarworld’s existential crisis to save the solar panel maker.

The Solarworld chief is Europe's last line of defense in an industry that has been crippled in the last few years by lower-cost producers in Asia, primarily in China.

Crucial to Mr. Asbeck’s recovery strategy are his investment partners in Qatar, who intervened at the height of Solarworld’s existential crisis in 2013 to save the solar panel maker. At the time, Qatar Solar Technologies took a 29-percent stake in Solarworld.

Three years ago, Mr. Asbeck and the Qatari investors had announced plans to jointly build a large factory in Qatar to make silicon, a key element of solar panels. But the deal never moved beyond the talking stage – until now apparently.

“The building start for the silicon factory in Qatar will begin at the latest in the first quarter of 2015,’’ Mr. Asbeck told Handelsblatt.

Production will be increased to an annual output of 8,000 tons of silicon per year, he said.

Solarworld bought the factory site last year from Bosch, which was so anxious to rid itself of its solar production facility that the seller gave Solarworld €130 million ($161 million) to clinch the deal.

At the time, some market observers thought Solarworld was overreaching once again.

Mr. Asbeck said the concerns were groundless.

“Currently we are producing at full capacity at all of our production locations,’’ Mr. Asbeck said. “We are also producing in Arnstadt at globally competitive prices.’’

With the acquisition of the Bosch plant, Solarworld raised its annual production of panels to a generating capacity of 1.3 billion gigawatts. By the end of 2016, it is planning to raise the total electricity output of its annual solar panel production to 2 billion gigawatts.

Solarworld nearly collapsed in 2012 as Asian rivals flooded the market with cheap solar panels. More than 12 German solar panel makers, including Q-Cells, went into bankruptcy.

To save Solarworld, Mr. Asbeck convinced shareholders to accept a drastic 150:1 writedown, laid off workers in the United States and accepted a lifeline from Qatari investors.

Solarworld nearly collapsed in 2012 as Asian rivals flooded the market with less-expensive solar panels.

Mr. Asbeck also launched a broad restructuring program with 200 measures to return the company to profit. “We’re on target with our changes for this year,” he said, adding that in terms of cutting costs  this year, Solarworld is making good progress.

He is confident that he will achieve his main goal: “We want to make an operative profit next year.” To do so, Mr. Asbeck will invest a sum in the two-digit millions to make production more efficient.

 

Frank Asbeck, the CEO of Solarworld, said the German solar panel maker is back on track after nearly going bankrupt in 2013.

 

“Solarworld is on the right track but the firm is going to have to work really hard to make real progress in terms of its EBIT,” said Erkan Aycicek, an energy specialist at the Landesbank Baden-Würrtemberg. He said Chinese competitors such as Yinko and Trina, and First Solar and Sunpower from the United States, are all more profitable, with single- to double-digit EBIT margins. Solarworld still had a negative margin in the third quarter.

Solarworld must also be competitive with its technology on the global market, which won’t be possible with standard modules – the toughest area of the price wars. Mr. Asbeck said the company plans to introduce a new line of panels in 2015 that will let Solarworld products use reflected sunlight through the back of panels in addition to direct sunlight on their faces, the current industry standard. He said the dual-use modules would raise the electricity produced by 10 to 50 percent.

Mr. Asbeck plans to launch these new modules in the second quarter next year.

The company also has great hoped for its cooperation with Qatar Solar Technologies, where production of the new silicon factory in Qatar – which will be financed by Qatari banks – is supposed to start early next year. The plant will eventually produce 8,000 tons of silicon annually, which is enough raw material for solar modules with a production capacity of 2 gigawatts, the same amount that was installed in Germany this year.

Qatar does not only want to produce the silicon raw material but also finished solar panels. Mr. Asbeck said Solarworld is planning another factory in Qatar.

“We have plans for a module facility in Qatar,” Mr. Asbeck said. “Qatar Solar Technologies will start building the factory next year.”

Production of high-performance solar panels is supposed to begin by 2016 at the Qatari plant, which is to produce panels with an annual capacity of 250 megawatts for the Middle Eastern market.

 

095 WTB

 

Georg Weishaupt covers the solar, wind and renewables branch for Handelsblatt. Kevin O'Brien is editor in chief of Handelsblatt Global Edition. Allison Williams is deputy editor in chief of Handelsblatt Global Edition. To reach the authors: [email protected], [email protected] and [email protected]