Friday, April 11, 2008

Racing the Sun

No investment conference including an alternative energy segment is complete without at least one aspiring solar player. At the recent Wall Street Analyst Forum, XSUNX, Inc. (XSNX: OTC/BB) pitched the merits of its thin-film photovoltaic cells.

XSUNX is still in the formative stage with no sales recorded as yet. The company has been busy perfecting its technologies and building its sales and marketing strategy. XSUNX has made a big bet on amorphous silicon because it has been found to produce more power than other thin film technologies. For example, amorphous silicon requires less light and therefore can produce power in the early hours and late hours of the day. It has also tested better in hot climates where high midday temperatures can degrade performance of solar cells using conventional silicon technologies.

The design of the XSUNX solar cells calls for two separate solar cell layers of amorphous silicon on a glass substrate. A big selling point for the design is that the required materials are easier and lower-cost to source and result in a finished product with no toxic compounds or heavy metals. Silicon supplies for conventional solar cells are constrained, while the gases needed for thin film technologies are in ample supply.

XSUNX expects that eventually the costs per watt for its solar cell product will range from $0.33 to $0.37 - attractive prices compared to conventional solar cells. The majority of costs are in connectivity components, bring the estimated cost to $1.58 per watt for a solar module.

Thin film is now only 17% of the solar cell market with crystalline photovoltaic cells commanding the lions share or 83% of the 2007 market. XSUNX management believe thin film technologies will nibble away at the conventional cells, possibly reaching 35% market share by 2015.

XSUNX is targeting power producers connected to the conventional power distribution infrastructure. So far the company has built reservations for 145 MW for delivery in the years 2009 through 2011. Management is scrambling to roll out a production line. A small-scale system is expected to begin production yet in 2008. Several full-scale 25 MW systems will go into production beginning in 2009 that will eventually bring total production capacity to 100 MW.

Production and sales could not be coming too soon. XSUNX reported $2.2 million in cash on the balance sheet at the end of December 2007. The company appears to be using approximately $400,000 to $500,000 in cash per quarter to support operations.

The need to conserve cash resources is not the only reason XSUNX is in a hurry to get to production stage. Sharp Corp. announced late last year that it plans to invest $200 million in thin-film solar cell production capacity at its Katsuragi Plant in Japan from the current 15 MW to 160 MW by the end of 2008. More recently Sharp revealed plans for a major investment in a new thin-film solar cell plant in Sakai that will have annual production capacity up to 1 GW. The plant is expected to come on line by March 2010 with 480 MW initial capacity. Sharp’s specialty is tandem thin-film solar cells that feature two amorphous silicon layers and microcrystalline silicon layer with a triple-junction.

Sharp management clearly believes that the market opportunity is substantial for thin-film solar cells. If aspirants like XSUNX would like to get a bite of the pie, they will need to move fast and shrink costs as fast as possible. If the computer chip market taught us anything, it is that Asian producers have cost minimization techniques down cold.

This is the third in a series of posts on presentations made by alternative energy companies at a recent Wall Street Analysts Forum held in New York in March 2008.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

1 comment:

Anonymous said...

xsunx a penny stock has a very questionable past.