Solarworld in trouble

Dark clouds are gathering over the town of Bonn in western Germany. The only one smiling at a crucial shareholder meeting there is Frank Asbeck, chief executive of Solarworld. He knows that the very future of his company is at stake.

"I felt that the rain outside was a positive signal, symbolizing that our solar modules have been washed clean," Asbeck was found joking. "Now the dust has finally come off."

He wants to see a new beginning, says the man whose outfit makes him look more like a Bavarian pub owner than a company executive. Asbeck lives in two castles, complete with private hunting ground.

At the peak of Solarworld's business operations, the firm was worth some 5 billion euros ($6.7 billion), but today it is worth next to nothing. Creditors recently agreed to part with about half of their invested money, while ordinary shareholders had to put up with seeing their investment being whittled down by 95 percent to stave off insolvency.

"We've only had our shares for about a year," said an elderly investor. "We meant to support the firm a bit, but who would have thought it would go down the drain like that?" Some shareholders inherited their investment, others simply had good faith in the solar industry.

"I bought my shares, because I considered Mr. Asbeck to be a shrewd entrepreneur, but now I'm simply disappointed," said one participant in the meeting. No one seems to be really angry, just disappointed while facing a drastic capital reduction. Who previously owned 150 shares, will now only retain one according to the rescue scheme. But insolvency would result in the total loss of investments made. Many had hoped, though, that their shares would one day help top up their pensions.

Wave of insolvencies follows boom years

"Solarworld's initial rise came at time when many other solar companies were prospering, too," said Philippe Welter, the editor-in-chief of the specialist journal "Photon." Feeding environmentally friendly solar electricity into the national grid was subsidized by the government, causing a photovoltaic boom in the country. "Profit margins were high for producers at the time because of low capacity and high demand in the beginning," said Welter. Solar companies were mushrooming. But it didn't take long before foreign and predominantly Asian firms started entering that growth market, too.

Meanwhile, German solar companies such as Q-Cells, Solon and Conergy have had to file for insolvency, with parts of the production cycle wound down or sold to foreign competitors. Big firms such as Siemens and Bosch have completely opted out of their solar business. But Solarworld's Frank Asbeck believes in starting over, helped by a major investment by Qatar Solar, which is to hold a 29-percent stake in the firm.

Does solar have a future?

But energy experts are anything but sure whether the solar industry will have a future in Germany. Claudia Kemfert from the German Institute for Economic Research points to enormous price pressures from Asia, saying that companies hoping to stay afloat will have to face up to those pressures.

She argues the crux of the matter would be the implementation of innovations in the high-tech segment. "If that approach is pursued, solar will certainly have a future here," Kemfert maintained.

The head of the Fraunhofer Institute for Solar Energy Systems, Eicke Weber, came up with a similar assessment of the situation. He said the German economy was too hesitant to invest in new technologies.

"German investors have grown very reluctant to run a risk," he commented. "Foreign investors have been quicker in realizing the potential of new technologies."

But there are other voices, too. "I never believed in the solar industry being a future-oriented business," said Manuel Frondel from the Essen-based Institute for Economic Research (RWI).

He argues that by financially supporting consumers willing to mount solar panels on their roofs no matter where those panels come from, the government had also financially supported competitors from abroad in a systematic way. He claimed money had been evenly spread to all instead of investing specifically into German research and development units. That meant that firms were backed in nations with a far lower income level, meaning those companies were able to sell their products at much lower prices. And those who built their companies at a later stage were able to use state-of-the-art technology, giving them an edge over their rivals.

"It's been a complete washout," one of Solarworld's shareholders reflected. And yet he was in favor of the large-scale capital reduction scheme, arguing that it would be better to still have something rather than nothing at all.