From CS this morning.
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ITC/PTC – back from the dead?
Off again, on again, off again, and now on again? Just when we thought the ITC/PTC extenders were dead, our policy analyst informs us that, unbelievably, these extenders could likely make a comeback in the Senate again tomorrow this time as a part of the Treasury rescue plan. Our policy analyst relays that the surprising developments, starting with the rejection of the TARP plan by the House on Monday, has put in place a process, that once again improves the odds of ITC passing before the recess. We'd add an element of caution remember that the bill has to be presented and approved in the Senate, approved by the House and signed by the President before it can become law. In the past, while there has been strong underlying bipartisan support for extending the ITC, we have still seen these ITC extender bills fail multiple times
in one of these steps in fact, the last time was as recently as Monday this week. The unfortunate reality is that there are conflicting interests from numerous political quarters that invariably get in the way of passing the ITC. Washington politics & the credit crisis. The political stakes are high now ahead of the elections in the US in November, so it has become extremely difficult to predict the outcome of Washington politics. Dealing with this uncertainty and politics is an unfortunate necessity for investors in solar and alternative energy, particularly now as it is crunch time to pass these tax extenders, so an update today was relevant. As an aside, we'd note that besides the ITC uncertainty, contacts at financial institutions involved in financing alt energy projects inform us that widening credit spreads has caused difficulties in raising capital at desirable rates, and the "hurdle rates" for some projects have increased recently.
Flight to quality.
As we navigate through uncertain times, we'd remind investors of our views on the following:
(i) ITC: We've held that eventually the ITC will pass, timing is subject to political volatility; while we are not experts on the economy, we'd hope the credit crisis will also pass over time;
(ii) SPWR will stand to benefit the most from passage of ITC when it happens, and so will FSLR as they lock in more utility contracts; (iii) SPWR, FSLR and ENER are in our view, the most differentiated and highest quality names in solar despite the credit issues and political uncertainty, thus far, we've remained comfortable with our 2009/10 growth and earnings estimates for these stocks (we trimmed estimates for FSLR last month only to reflect conservative currency estimates). |
