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BUSINESS

Total eclipse of the sun

Isofotón is the latest victim of the downturn in the Spanish photovoltaic market amid EU conflict with Chinese producers

Isofotón employees protesting in Málaga against layoffs at the firm.
Isofotón employees protesting in Málaga against layoffs at the firm. EFE

In 2010, Spain had one of the strongest photovoltaic energy markets in the world. The industry had almost 70 companies: two that produced silicon, two manufacturers of wafers, four making cells and the rest modules or trackers. Three years later, this has almost all dried up.

Only a handful of firms continue to try to survive in overseas markets by developing and installing solar parks. Those left by the wayside had even developed their own technology. Two of the four cell manufacturers, Cel.Celis and Pevafersa, are being wound down. Production at wafer manufacturers DC Wafers and Silicio Solar has ground to a halt, with the firms under receivership, a fate that has also befallen Siliken, which makes silicon and modules.

In the face of this situation, it comes as no surprise that Isofotón, which was founded in 1981 and was one of the pioneers in global solar energy technology, has also called in the receivers and laid off 365 employees — half of its workforce — without compensation because as a company spokesman explains: "We don't have the liquidity to meet those payments." The irony of this dramatic downturn is that it has taken place amid a boom in solar park installations worldwide. Last year alone, 28,000 megawatts of solar energy capacity were installed, an increase of 42 percent over a year earlier.

When the sector in Spain plunged as a result of the restrictions on the industry approved by the government in 2008, domestic companies thought to offset this with overseas business. "A big mistake," says José Donoso, general manager of UNEF, the association that groups together companies in the solar energy sector. "Without the domestic market you don't have the capacity to compete in overseas markets." But that is not the only reason. The key factor has been the triumphant upsurge of Chinese companies bent on cornering the global market by offering the lowest possible prices. They now have 64 percent of the market for photovoltaic energy equipment. Three of the four biggest companies in the world - Yingli, Suntech and Trina, all of which are listed on the Nasdaq in New York - are Chinese. The other one in the top four, First Solar, is US-based.

Chinese firms in 2012 sold solar energy equipment in Europe worth 21 billion euros

This is an unheard-of situation. Europe, which has been edged out and now has only an 11-percent share of the global market, is the world leader in solar parks. Last year, 60 percent of the new installed capacity took place in Europe, compared with only 12.7 percent in China. The huge inroads made by Chinese firms have come courtesy of domestic programs that guarantee much higher prices that allow them to carry out dumping overseas.

As a result, the European Union recently imposed anti-dumping levies on imports of solar panels, wafers and cells. In response the Chinese government launched an investigation into imports of European wine, sparking the threat of a trade war.

"The investigations carried out by the European Commission have shown that Chinese companies have a predatory strategy," says Virgilio Navarro, the general manager of Atersa, a unit of the Elecnor group. "They are selling at prices that entail losses of between 50 and 80 percent, which they offset with official subsidies and loans from Chinese banks." Navarro claims they want to "sink the competition in order to dominate the market and that is a practice penalized by the World Trade Organization."

The alleged dumping has caused European and US firms to go under. Dozens of large companies in Germany have disappeared. Solar World, which had a turnover of 900 million in 2008, lost 500 million in 2012 and is trying to stave off bankruptcy. According to German weekly magazine Der Spiegel, Chinese firms sold solar energy equipment in Europe worth 21 billion euros last year. By contrast, Suntech's sales went from $1.348 billion in 2007 to $3.146 billion in 2011.

The curious thing, says Antonio Luque, the founder of Isofotón, is that "Chinese companies manufacture cells and panels using machinery that is made in Germany. They don't have their own technology. All the photovoltaic research and development has been carried out in Europe and the United States."

Isofotón's sales have plunged as a result of the price war. Annual turnover dropped from 123 million euros in 2010 to 106 million in 2011 and a little over 50 million last year. "Sales have been halved even maintaining the same levels of production," a company source says. Isofotón's Technological Park in Málaga has production capacity of 230 megawatts but is only producing 120, making it hard to compete with big companies that produce 10 to 15 times more. Faced with this commercial challenge, its creditor bank's refusal to renegotiate its debt of 184 million euros and the 100 million it owes elsewhere, Isofotón had no option other than to call in the receivers.

All the research and development has been carried out in Europe and the US"

A pioneer in developing photovoltaic cells, the company currently only makes them for use in its own modules, having ceased to sell them to third parties. The company can boast not only of having its own technology, but it also claims to have the most efficient cell-manufacturing system in the world. It was looking to seal a deal with Samsung to supply cells but the project, for which the Andalusian regional government agreed to provide a loan of 8.4 million euros, has been delayed because of the problems Isofotón is facing.

The company has also been accused by labor union officials and politicians of using Chinese photovoltaic cells and modules and passing them off as made in Spain. It has also been suggested it wants to relocate its production, as in the case of the 50-megawatt plant it has in Ohio in the United States. The company has rejected these accusations, although in a recent press release it spoke about "setting up factories where the final client is." This might all have been brushed to one side if not for the fact Isofotón has received 60 million euros in guarantees and subsidies from the Andalusian government.

The disgruntlement of politicians and workers is highlighted by the fact that the company has announced it has sealed contracts to supply 1,500 megawatts. After receiving the 8.4 million euros from the regional government, it also announced plans to triple output at the Málaga plant to 300 megawatts and that it would guarantee jobs at the factory.

Despite its problems Isofotón, control of which was acquired by Affirma from the Bergé group in 2010, does not seem lost. There are the anti-dumping tariffs introduced by Brussels, which start at 11.8 percent and will rise to 47 percent. The measures, which were backed by Germany, look to revive the ailing European solar energy sector along the lines of the United States, which launched a similar initiative a year ago.

Atersa's Navarro is moderately optimistic. "If the EU is serious about implementing antidumping measures and the Chinese cease to have free access, we will have a photovoltaic industry again," he says.