Friday, April 04, 2014

ASTI: Not Going Anywhere Fast


By Brandon Qureshi, Contributing Author

 
Recently, Ascent Solar Technologies (ASTI:  Nasdaq) , a publicly traded solar power company, received an additional $5.0 million from institutional investor Ironridge Technology, thereby completing a $10 million Series B Preferred Stock investment.  AST, based in Thornton, Colorado, has emerged as a leader in the development of flexible, thin, high-performance solar panels.

In order to examine AST within an industrial context, a profile of the solar power industry is necessary: according to sources such as Time and E&E Publishing, the industry has experienced record levels of popularity in the United States in the last few years. Indeed, a report published by the Solar Energy Industries Association and partner GTM Research demonstrates that the industry has grown by a whopping 41 percent in 2013 alone, citing record levels of installations in the utility sector. Moreover, solar electric installations continue to increase in value – from $8.6 billion in 2011 to $11.5 billion in 2012 to $13.7 billion in 2013.

What has driven this industrial surge? The report names decreasing prices spurred by technological advancements in the field of solar energy: the average price of a solar panel has declined by 60 percent in the past three years, and the national average photovoltaic installed system price declined by 15 percent in 2013 alone.

With this in mind, what role does AST play in the development of the solar power industry? AST uses substrate materials in its creation of photovoltaic modules, which causes them to be exceptionally flexible, thin, and affordable. These modules can then be implemented in the manufacture of traditional solar panels, building materials, and consumer electronics. Thus, AST is one of several solar power companies that, by decreasing the price of solar energy products, have contributed to their increasing availability, consumption, and production.

How does AST plan to use Ironridge Technology Co.’s investment? It seems that the funds will go largely to marketing efforts: aside from the proceeds that will be used to finance ongoing operations, the funds will be used to develop the Enerplex brand. Enerplex of one of AST’s projects, which involves the implementation of AST’s solar panel technology into everyday appliances including phone cases, chargers, and battery packs.

What does the future hold for the solar power industry? It’s hard to say. There is the obvious: the United States solar industry has experienced unprecedented growth in recent years and is currently the second-largest source of new electricity generating capacity in the nation; but is the situation really so simple? Every year, tax breaks for renewable energy expire – these expirations are bound to adversely impact the industry. The cost of solar power is hardly certain: because a significant portion of the diminishing costs of solar panel manufacture is due to imports from China – which installed of 12 gigawatts of solar capacity in 2013 alone – experts fear an upcoming “trade war” characterized by taxes and rising prices.  Clearly, the future of the solar power industry is no safe bet – or at least not as safe as current conditions suggest.

Is AST a reliable investment opportunity? There can be no doubt of the strength of the company’s product – indeed, its unique CIGS technology has been listed among the top inventions of 2010 and 2011 by both Time and R&D Magazines. Moreover, in the month since Ironridge Technology’s investment, investors have enjoyed a 13.85 percent return on their investments. Within a larger time frame, though, this positive return rate is misleadingly optimistic: since 2008, return rates have plummeted by almost 90 percent, and have barely changed between 2013 and 2014. Despite the obvious innovation of AST’s technology, the company itself doesn’t seem to be going anywhere fast – especially when one considers the uncertain future of the solar power industry.

 

Our guest author, Brandon Qureshi is a student at Columbia University, majoring in economics. He has a particular interest in alternative energy topics and has devoted some of his recent academic projects to the economics of new energy sources.

 

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

 

 

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