Two separate announcements from major European solar PV companies underscore the continued tough environment for suppliers, and where they think they need to focus to get back on the growth track.

January 13, 2012 - Two separate announcements from major European solar PV companies underscore the continued tough environment for suppliers, and where they think they need to focus to get back on the growth track.

The REC Group has announced its third long-term contract cancellation in barely two months, one that will return ~NOK 200 million to the coffers in 1Q12 (around NOK 325 million including earlier received prepayments). This, after other cancellations reported in early December (NOK 170 million) and early November (NOK 370 million), plus one in mid-September (NOK 40 million) -- that's four cancellations and nearly NOK 800 million returned ($US 130 million, or ?100 million), for a company whose 3Q11 EBITDA was only NOK 370 million, evaporating -80% from just two quarters ago.

Blame the heady days of 2006-2008 when everyone was signing up for long-term silicon supply deals at heady valuations -- only to be followed by a consistent decline in prices right to the present day that has been as breathtaking as it's been relentless on suppliers. REC already has twice reigned in production in Norway, including entire plant closures; so have Conergy and Photowatt, and reports suggest similar closures and suspensions among China's industry. It's reached a point where many companies are choosing to simply buy silicon components rather than make them internally -- an about-face from "the rush toward vertical integration that we've observed for last few years," observed IMS Research's Sam Wilkinson. A projected 50-plus-percent annual surge in capacity, vs. just 19% growth in demand, will do that.

Conergy and REC share something else in common this week: more executive shuffles. REC Group, continuing to decentralize away from its Norwegian roots, has hired Alessandro Perrotta as EVP for wafers/cells/modules; he spent most of the past decade at Amphenol (Singapore/Asia) and the prior six years at Motorola, at each stint overseeing consumer products and Asia region management. John Andersen Jr., who formerly held that role at REC, will continue as EVP and Group COO, and (somewhat vaguely) remaining "a central member of the corporate management team" to "support the continued development of the company."

Conergy, too, has exec news: it's hired its first standing CEO in more than a year and promoted two other execs to oversee operations and business in Asia and the Middle East. Company chairman and former investment banker Philip Comberg takes the CEO seat for one year, COO Alexander Gorski adds European regional management to his plate, and Marc Lohoff expands his territory from Singapore (he's the company's first-ever board member outside Hamburg) to the entire Asia-Pacific region, plus North America and the Middle East.

Taken together, the REC and Conergy promotions have one thing in common: Asia. Perrotta's "deep knowledge of the consumer electronics industry as well as his extensive experience from Asia will be important in developing REC's competitive position", noted CEO Ole Enger. For Conergy, Asia is already its largest growth market, and its new management changes will help it align "more with the worldwide trends of the industry and puts the non-European markets into focus more consequently," said Comberg. (The company also noted that its collective restructuring moves since last summer have reduced debt by two-thirds, reduced its vertical manufacturing range, and increased its independence "from the ongoing price decline of solar components" -- reflecting the first theme above.)