Hanwha SolarOne slides into losses: shifting downstream with project financing

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email

Tough market conditions for Hanwha SolarOne led to fourth quarter losses and sliding shipments and average selling prices, which were below in-house manufacturing costs. Although the company posted 2011 revenue above US$1.0 billion level, the company reported a net loss of US$169.8 million. PV module shipments were 189.1MW, in the fourth quarter, a decrease of 5.9% from 200.9MW in the prior quarter. Module shipments for 2011 reached 844.4MW, representing an increase of 5.8% from 797.9MW in 2010. Hanwha SolarOne guided 2012 shipments to be in the range of 1GW.

“The year 2011 was a period of adjustment and consolidation for the industry,” noted Ki-Joon Hong, chairman and CEO of Hanwha SolarOne. “Excess capacity throughout the solar value chain, combined with incentive reductions in key markets, drove selling prices down at a rate faster than input costs, resulting in pressure on profitability. We believe the company continued to make progress in a number of areas, including growing synergies with our largest shareholder Hanwha. We continued to invest in branding, technology, management systems and people. We also made progress in reducing non-poly processing costs in spite of reduced utilization, penetrated new important growth markets including the US and China, and increased shipments nearly 20%.”

Hanwha SolarOne reported fourth quarter 2011 net revenue of US$155.4 million, a decrease of 31.9% from 3Q11, and a decrease of 53.8% from 4Q10.

However, the company incurred several non-cash provisions in the quarter, which related to US$19 million due to inventory write-downs, US$54.4 million in advance payments on long-term supply contracts and US$21.4 million in goodwill impairments.

PV module shipments, including module processing services, were 189.1MW, a decrease of 5.9% from 200.9 MW in 3Q11, and a decrease of 13.6% from 218.8 MW in 4Q10. Shipments to the US in the fourth quarter overtook its key market of Germany.

Module ASPs declined to US$1.00 per watt, while production costs (including both silicon and non-silicon costs) using internally sourced wafers was US$1.03 per watt, a decrease from US$1.13 per watt in 3Q11. Total loss in the fourth quarter was reported at US$96.1 million.

The company reported total net revenue in 2011 of US$1,019.5 million, a 15% decline from 2010. Gross margin was negative 3.4%, compared with positive 22.2% in 2010. Hanwha SolarOne reported an operating loss US$174.2 million and a net loss of US$169.8 million. Operating margin decreased to negative 17.1%, compared with positive 15.7% in 2010.
      
PV module shipments in 2011, which included module processing services, reached 844.4MW, representing an increase of 5.8% from 797.9 MW in 2010. Module processing services was said to have accounted for 8.5% of total shipment revenues in 2011.

Production

Hanwha SolarOne reported 2011 CapEx was US$387.3 million and US$41.7 million in the fourth quarter. The company had ingot and wafer capacity of 800MW at the end of the year. Solar cell capacity reached 1.3GW and module capacity stood at 1.5GW.

Given the market dynamics and financial losses, management noted that it had no plans to expand capacity in 2012. As a result, CapEx would be significantly reduced to approximately US$100 million.

Management noted in a conference call to discuss financial results that it would continue to focus on manufacturing cost reductions in 2012, highlighting that its cost target by year-end was between US$0.55-0.60 per watt. Polysilicon price declines apart – emphasis was also placed on other material optimization strategies.

The company will also increase production of cells employing selective emitter technology and ‘quasi-mono’ wafers to boost conversion efficiencies. The company is targeting monocrystalline cell efficiencies of 18.5% in 2012, up from 18% in 2011. Multicrystalline cell efficiencies are targets to increase from 16.75% in 2011 to 17.25% in 2012.

To overcome impending duties in the US, the company noted that it was already using unidentified Korean manufacturers to produce modules for the US market.

Shipment guidance

The challenging business environment was expected to continue throughout 2012 with shipments declining in the first quarter of 2012, compared to the fourth quarter, though the company guided 1GW of shipments in 2012.

Strategy shift

Management highlighted in the call that module selling current selling prices were unsustainable and would shift away from OEM module business after OEM sales into Germany fell by around 50% in the fourth quarter. Emphasis was placed on moving downstream to develop PV power plants and module sell-through via developing project finance opportunities via Hanwha Group and Chinese banks.

Management said that this strategy would offer better margins and a more sustainable business model in the future.

The company said it would target 100MW or 20% of sales in the project business for 2012.

The company declined to provide financial guidance for 2012.

1 December 2021
Join over 500 attendees at this virtual conference on 1-2 December 2021 for expert presentations covering PV Module Technology, Supply & Site Optimisation for Utility-Scale. Delegates can access streamed presentations, session recordings and chat/messaging tools to connect with fellow delegates and speakers. Speakers include leading developers, manufacturers, testing and research institutes, including: NREL, Silicon Ranch, Sonnedix, Heliene, Powertis, LONGi Solar, JinkoSolar, PVEL, Risen Energy, Seraphim, STS, Trina Solar, Eternalsun Spire, QEERI, Fraunhofer, Estuary Capital Partners, VDE, First Solar, Longroad Energy, Powertis and DNV Energy Systems
2 December 2021
Intersolar is the world’s leading exhibition & conference series for the solar industry. As part of this event series, Intersolar India in Mumbai is India’s most pioneering exhibition and conference for India’s solar industry. It takes place annually and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. Since 2019, Intersolar India is held under the umbrella of The smarter E India – India’s innovation hub for the new energy world.
9 December 2021
The Smart Energy Council is hosting Australia’s second Virtual Smart Energy Conference and Exhibition on Thursday, 9 December 2021. This event will show that the industry powers on despite COVID-19 and we are standing together undeterred in spirit. Bringing our global community together using the latest technology.
13 January 2022
Intersolar North America and Energy Storage North America “Come Together” for the first time in Long Beach, CA—connecting installers, developers, utilities, technology providers, policy makers, and key stakeholders from around the world to advance the clean energy future. With best-in-class conference programming, integrated exhibits and pavilions, and the live Solar Games installer competition, #isnaesna21 will showcase the industry trends, innovative solutions, and emerging talent transforming the solar, energy storage, and e-mobility markets. Register today to redeem our exclusive offer for PV Tech readers—free expo hall or 20% off full conference pass.
1 February 2022
As Solar Finance & Investment enters its ninth year, we sit on the cusp of a new power market with solar at its heart. The 2022 edition of the event will build on our years of expertise and relationships to bring investors and lenders together with top developers. Connect with leaders in the field and use exclusive insights to drive investment and development decisions for the future. Meet new and existing project partners at the largest gathering of European solar investors and lenders.
23 February 2022
Held annually since 2016, the Energy Storage Summit Europe is the place to be for senior stakeholders in the European storage industry. Designed to accelerate deployment of storage, we examine evolving chemistries, business models, project design, revenue stacks and use cases for storage. The 2022 edition will include exclusive content around longer duration solutions, energy strategies for wide-scale deployment of EVs and "EnTech", the event which sits at the intersection of digitisation, decentralisation and decarbonation of the power system. Come to meet TSOs, DSOs, Utilities, Developers, Investors and Lenders and leave with new contacts, partners and a wealth of information.

Read Next

PV Tech Premium
November 30, 2021
Array Technologies reveals to PV Tech Premium the core motivations behind its US$652m deal to acquire STI Norland, creating what it says is the world’s biggest tracker company, from stronger supply chains to an ability to target more international markets
November 30, 2021
Electrical equipment group Schneider Electric and energy major bp are collaborating to help high emission companies achieve their decarbonisation targets.
November 30, 2021
JinkoSolar has slashed its shipments guidance for the year, reducing its top end guidance by more than 5GW as it blamed ongoing logistics issues and port blockages.
November 30, 2021
Solar EPC company iSun is investing in US commercial PV project developer Encore Renewable Energy as part of efforts to accelerate its geographic expansion.
November 30, 2021
The CEO of Hevel Group, Igor Shakhray, will leave the company to become CEO of Unigreen Energy, a silicon wafer and cell manufacturer, which is owned by Hevel majority shareholder Ream Management LLC
November 30, 2021
South Korean LG Electronics has announced a series of new appointments as it aims to target greater growth and customer satisfaction moving into 2022, while also elevating certain critical departments to division level in order to supply them with greater resources

Subscribe to Newsletter

Upcoming Events

Solar Media Events
December 1, 2021
Solar Media Events
February 1, 2022
London, UK
Solar Media Events
February 23, 2022
London, UK
Solar Media Events
March 23, 2022
Austin, Texas, USA
Solar Media Events
March 29, 2022
Lisbon, Portugal