ECD expects financial hit, production slowdown due to French, Italian solar policy uncertainty

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Changes in solar incentive policy in France and Italy may be taking their toll on one of the leading suppliers of thin-film PV laminates–Energy Conversion Devices and its Uni-Solar product line. The company, which sees the two European nations as key markets, said that its financial performance and production capacity utilization will be negatively impacted in the short term.

“The dramatic and abrupt shift in the French and Italian solar incentive structures has impacted our business and forced us to reconsider our near-term financial outlook,” said Mark Morelli, president/CEO of ECD. “Recent events have injected disruptive uncertainty into the markets, which is causing financing sources to put projects on hold and may impact as much as 50% of this quarter's forecasted revenue. We expect better visibility on the timing of our projects after the announcement of the new Italian feed-in-tariff program and the French tender process.

“Nevertheless, for the quarter ending March 31, we are reducing production to 25MW and are also aggressively pulling back on our cost structure,” he added. “Thus our financial results will be affected due to restructuring and factory underutilization charges.”

During its recent quarterly earnings announcement, ECD said it expected to produce 27-33MW in the third quarter and 30-33MW in the fourth quarter, adding up to a total of 125-130MW for the full year. 

It also guided revenues of $55 million-$65 million for fiscal Q3 and $115 million-$130 million for Q4, totaling $310 million-$335 million for the year.

At the time of the announcement, Barclays Capital cautioned that ECD’s high exposure to the Italian market might make the company’s earnings outlook more difficult to achieve.

“Despite this near-term uncertainty, we expect that Europe will continue to support solar adoption, albeit with different priorities, such as new building energy regulations,” Morelli continued. “These adjusted priorities will, in some circumstances, favor our products. For example, it seems that European regulators are tending to prefer smaller distributed-generation systems, like those found on rooftops, as well as building-integrated projects.

“At the same time, we will continue to diversify our go-to-market capabilities, including penetrating emerging markets like North America, Asia, the Middle East, and Africa, and cultivating new channel partner and distributor relationships. For example, we are still seeing strength in our North American operations and expect increased momentum and sales in this region.”

“Our objective remains clear: we are pursuing price parity with grid electricity through continued investment in our technology roadmap. We are on track to begin production this summer of our next-generation PowerBond product with 10% active-area conversion efficiency. Our nanocrystalline technology with 12% active-area conversion efficiency is expected to be commercially available by the end of 2012,” he concluded.

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