OSLO (Reuters) - Renewable Energy Corp posted above-forecast quarterly core earnings and expects a strong 2010 as customers in key markets look to lock in waning solar panel subsidies, lifting its shares to a three-month high.
REC said it remained "cautious" on 2011 as a result of the planned cuts in feed-in tariffs in Germany and Italy, although returns for customers from new solar panels should remain sufficiently high to drive demand.
After a tough 2009, clean energy firms are expected to post strong results, with Norway's REC the first big solar group to report, although valuations have dipped recently due to the fears about weak medium-term demand.
REC said it expected quarter-on-quarter core earnings growth both in the third and fourth quarters of 2010, with demand buoyant as customers rush to purchase solar energy generators before incentive schemes run out.
"Demand is very strong in Germany and we see growth in Italy and other markets. We anticipated prices to decline but they have been more steady than anticipated," REC Chief Executive Ole Enger told a news conference.
Enger told Reuters global demand for solar power would be closer to 15 gigawatts (GW) in 2010 than REC's April view of 10 GW, highlighting the additional demand that producers hope will pad prices amid a sharp increase in solar equipment supplies.
He also said that the time was ripe for consolidation in the solar industry, with large players eyeing entry.
Such sentiment helped lift REC shares to a three-month high at 21.20 crowns, up 9.1 percent on the day. REC shares are still down 45 percent from the start of the year.
At 0827 GMT, REC shares were up 4.9 percent at 20.37 crowns on a nearly steady Oslo bourse. Shares in German solar peer Q-cells were up 2.4 percent at 4.68 euros.
Fellow clean energy producer Iberdrola Renovables is expected to post a rise in first-half core profit after the market close on Tuesday, with focus also on the impact of Spanish subsidy cuts for the wind power sector.
REC's earnings before interest, tax, depreciation and amortization (EBITDA) rose to 455 million Norwegian crowns ($72.40 million) from 218 million a year ago, beating all 19 forecasts from a Reuters poll of analysts.
REC remained in the red on the operating level, as expected.
"The most important thing is that they are putting a weak quarter behind them and confirming that the third and fourth quarters will be strong," Argo Securities analyst Henrik Schultz said. "Many will take a favorable view of this report."
Handelsbanken analyst Anita Huun said silicon production had been particularly strong, adding: "This looks like a very strong report. I will raise my 2010 estimates by a bit based on this."
REC said it expected feed-in tariffs and other subsidy schemes to continue to be lowered in markets like Germany and Italy, although it did not envisage any collapse in demand.
"After the significant reduction in module prices during 2009, these changes are expected to normalize returns on investments in PV systems although REC expects the returns will remain sufficiently high to drive demand," REC said.
Enger said: "One has to be cautious about 2011, especially about the first half of 2011. We prepare for a more imbalanced market in 2011, with more supply than demand -- so we will get back to a situation where there will be pressure on prices."
REC said continued uncertainty with respect to subsidy schemes in key could hit demand and prices, although new markets were emerging with solar incentive plans started or due to start in Britain, Canada, India and China.
"Demand is not expected to be significant (there) in the near-term but these markets may represent a broader base for growth in the PV market in the future," REC said.
($1=6.284 Norwegian Crown)
(With reporting by Terje Solsvik; Editing by Simon Jessop)