China announced an agressive solar subsidy earlier today. So, this is exciting, great, news for Chinese solar companies, right?
Not so much, says Mehdi Hosseini, analyst at FBR Capital in a note released after the news broke. He calls the announcement “good PR” for Chinese solar companies, but says the program “may be insufficient to offset” the earnings misses that are coming this year.
The subsidy will cover 500 MW of solar installations spread over 2 to 3 years. FBR already assumed installations in China of 300 MW this year, 750 MW next year and 1 GW after that. This means that the installations that come from the subsidy were already built into FBR’s models.
Don’t buy into the overblown promise of the announcement, Hosseini warns. Rather, take a look at the “dilution impact of de-leveraging balance sheet” amongst Chinese solar companies.
In other words, these companies are screwed for the forseeable future, so don’t buy the hype.
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