Spain Casting Shadow on Yingli Solar's Growth

• The Company: Yingli Green Energy, a photovoltaic (PV) product manufacturer.
• The Filing: Form 6-K filed with the SEC on August 6, 2008.
• The Finding: Yingli Green Energy forecasts shipment of between 270 megawatts to 280 megawatts of PV modules in 2008, representing an increase of 89 percent to 96 percent compared to 2007. Management’s outlook could prove too optimistic should the government of Spain sharply reduce existing energy subsidies, set to expire on September 29.

The Upshot: The Spanish solar market represents about 65 percent of total revenue for Yingli Green, according to recent regulatory filings. In addition to capping new utility plants eligible for feed-in-tariffs – under which producers of electricity from renewable sources are paid at fixed rates — at an aggregate of 300 megawatts for 2009, the Spanish government is expected to lower the subsidies that solar power generators receive for installations by up to 35 percent.

Since the close of the second-quarter on June 30, Yingli Green has contracted to supply seven megawatts of PV modules to five companies in Korea and 10 megawatts of power to Belgian developer Enfinity Management for use in European solar projects.

The Question: Can other European Union markets, such as France, Germany, or Italy, offset an expected drop in Spanish demand?