Recent share placements by renewable energy companies suggest the industry has passed through a financial bottleneck, but investor appetite for further stock sales could vanish as quickly as it surfaced.
Germany's Q-Cells, the world's largest maker of solar cells; Danish Vestas, the world's biggest maker of wind turbines; and U.S. solar panels maker SunPower all raised money by offering stock over the last few weeks.
Norwegian solar energy equipment maker Renewable Energy Corp also announced plans to raise 7-9 billion Norwegian crowns ($1.11-1.42 billion) by issuing new shares and debt, while Suntech Power last week announced it would issue 20 million new American Depository Shares.
Together with the recent surge in solar stocks around the world, this suggests that investors are buying back into the once-booming sector but the buy side is watching the fundamentals for the upsurge with some suspicion.
I'm a bit careful to say that we should call off all the danger ... but the industry has through these transactions shown that it's capable of doing things in the capital markets, said Hogne Tyssoy, fund manager at Holberg Fondene, which participated in Vestas' placements.
Since reaching a 2009 floor on March 9, the FTSE clean technology index has recovered about 54 percent, and bellwethers such as SolarWorld and wind turbine maker Nordex have outperformed the benchmark.
But the index's rise was preceded by a massive drop. It lost 60 percent between September -- the month of the Lehman Brothers collapse -- and March.
There's no doubt that the market for issues is wide open ... but there's also no doubt that the volatility and uncertainty in the capital market is almost as big as earlier, so it can probably shut as quickly as it opened, said an investment banker who declined to be named.
While some fund managers -- such as Jannik Arvesen at Sigma Funds -- say that the appetite is back regarding solar stocks, others remain skeptical as the fundamental problems that have caused the industry's crisis -- such as the lack of project funding -- have not been solved yet.
LIFELINE TO SECTOR
The financial sector remains the lifeline to the funding-hungry renewables industry. Large projects need big financing packages that the companies themselves can seldom provide. But banks -- which have been hit hardest by the credit squeeze -- have not yet started to loosen their belt in terms of funding.
Companies' (banks) willingness to re-enter the project financing area is not as great as it was, said Peter Thiele, executive vice president of Sharp Corp's European solar activities.
Q-Cells and Solon both highlighted a lack of funding for solar projects as they reported results this month and were joined by Chinese peers LDK Solar and ReneSolar Ltd last week.
Also weighing on renewable companies is the lack of information about state subsidy programs, which may have helped support the recent upward trend, but whose true impact cannot yet be foreseen fully.
Several renewable subsidy programs -- most notably those planned in the United States and China -- have received much attention but few details have been released so far.
Whereas the U.S. Department of Energy will have a 2010 budget of $26.4 billion -- with funding for solar projects set to increase by 83 percent as part of the proposal by the Obama administration -- China has so far offered much less in terms of substance.
In addition, most of the renewable companies which have announced placements or rights issues have taken a beating on their shares, with investors viewing money raising as a negative in the current environment.
Suntech fell 15 percent last week after it announced it would issue new shares, while SunPower dropped about 6 percent on news it would raise cash through a stock offering.
It seems to me as if the recent very strong run on solar placements is going against the more skeptical view that is held by analysts. I don't believe this to be sustainable, said Arthur Hoffmann, who manages the New Power Fund at Swiss Bank Sarasin & Cie.
($1=6.328 Norwegian Crown)
(Reporting by Christoph Steitz in Frankfurt and Richard Solem in Oslo; Editing by Jon Loades-Carter)