Yingli Green Energy Holding Company Limited Adr (NYSE:YGE)
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Shares of solar-power companies jumped Tuesday amid reports that government officials and industry groups in Germany, the world's top solar market, were reaching agreement on solar-power subsidy cuts for 2011.
The news gave confidence to investors that Germany's government would not cut subsidies in a way that would dramatically impact the industry, analysts said.
Solar-power product manufacturers, particularly those based in China, saw their stocks bounce more than 10%, including shares of China-based solar-panel maker Yingli Green Energy Holding Co. (YGE), which closed $1.10 higher, at $11.61, and shares of solar-cell maker LDK Solar Co. Ltd. (LDK), which closed $1.25 higher, at $13.35, and was trading 8 cents higher after-hours at $13.43. U.S.-based First Solar Inc. (FSLR) was trading at $148 after-hours, after closing 5% higher.
While global demand for solar power continues to grow, Germany, which consumed roughly half the world's solar panels in 2010, is expected to remain a major consumer of solar products. Uncertainty about the extent to which the German government would make a promised cut to subsidies this year has made investors nervous about the outlook for solar-power manufacturers, said Jesse Pichel, an analyst with Jefferies & Co. He added that media reports indicating that the government was close to reaching a deal with the solar industry on subsidy cuts has made investors more confident about Germany's solar market and prospects for solar companies that sell their products in that market.
"This is a partial removal of a policy overhang for investors, which is why investors with big funds have avoided this group," Pichel said. Even with the reported subsidy cuts, "investment returns in Germany will be quite high," Pichel said.
Germany promotes photovoltaic solar energy facilities--mostly rooftop installations--through so-called feed-in tariffs, or rates that utilities must pay solar power generators for the electricity they generate. Electricity consumers pay for the subsidies.
The German government could cut the subsidies by up to 12%, effective in July, depending on how much new solar-power capacity is added, people familiar with the matter told Dow Jones Newswires. If solar-power installations exceed 7.5 gigawatts by May, the subsidy reduction could be as much as 15%, as favored by some government officials, although the details of the plan were still being worked out, said people familiar with the matter.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; firstname.lastname@example.org
(Ali Ulucay in Frankfurt contributed to this article)