Most global indexes were down during the period due to concerns over Greece and other European Union economies. These developments impacted AGIXL especially because Europe is a key market for renewable energy installations. Solar stocks were affected most because Europe is expected to account for 72% of global installations in 2010, based on Ardour Capital estimates. Wind stocks also declined, in part, because the major installers are based in Spain, where the government's debt rating was downgraded on April 28. There were notable outliers in the AGIXL, which we attribute to company specific earnings announcements.
Solar companies saw March gains disappear in April, as the Ardour Solar Energy Index (SOLRX) fell 11.4%. There are two major concerns for solar companies regarding Europe. First, a crisis in European economies could tighten bank lending and jeopardize expectations for strong volume growth in 2010. Second, even if project development is unaffected, several major solar companies are based in China or the US and sell primarily into Europe, and their earnings are being diluted by the depreciation of the Euro. In China, the tier-one module manufacturers fell considerably: Trina Solar was down 10.3%, Yingli Green Energy was down 14.2%, and Suntech Power fell 20.2%. In the US, Sunpower was down 15.9%, while First Solar bucked the trend and increased 4.9% on a strong 1Q10 earnings announcement. The European solar players were also down: Q-Cells fell 11.0%, Solarworld 11.5%, and REC 18.3%. The SOLRX was not substantially affected by the German subsidy reduction which was approved by the Bundestag on May 6. While the cuts will certainly have a materially impact on the sector, the news was largely priced into the stocks in prior months when the proposal was initially introduced.
All AGIXL wind stocks were down during the period, but Spain-based companies were hit hardest. Turbine manufacturer Gamesa was down 18.6%, while project developers Iberdrola Renovables and EDP Renovaveis fell 13.1 and 13.5%, respectively. While the project developers do most of their business outside Spain, their mere presence in the Iberian Peninsula was a turnoff to investors in April. The market leader, Vestas, was down 4.6%, reflecting a weak near-term outlook for key markets. In the US, 2010 installation estimates are being curtailed due to low natural gas prices and poor prospects for a federal Renewable Portfolio Standard. China is still poised for growth, but this market is expected to favor domestic companies.
Energy storage and efficiency companies were largely down with the rest of the market during the month. One of the biggest losers, lead acid battery maker EnerSys, Inc, was experiencing steady growth in its stock price, reaching $27.00, up 5%, before the recent selloff brought it down 6.0% for the month. Fears about economic conditions in Europe weighed on the stock as ~40% of its revenues come from there. However, of the three companies in the AGIXL that finished up during the month, two of them were efficiency companies, Itron, Inc. and Veeco Instruments. Despite the tough market, Veeco, up 1.3%, continued its year of growth thanks to strong earnings reported in April and 2010 guidance. Fellow LED manufacturer Cree, Inc. was not so lucky dropping off 8.0%. U.S. smart meter manufacturer Itron was up 1.6%, fighting off selling pressure, after reporting very strong earnings in late April.
Robert Lahey and Shawn Lockman, Ardour Capital Investments, LLC.
