SUDDEUTSCHE ZEITUNG

Should The Solar Power Industry Expect Dark Days Ahead?

The bankruptcy of America’s Evergreen Solar has sent chills down the spines of German solar manufacturers. Solar energy company stocks are crashing on the market. But just how vulnerable is the industry?

The Kollbach solar power plant in Bavaria, Germany
The Kollbach solar power plant in Bavaria, Germany
Jennifer Lange

MUNICH -- A US bankruptcy - the one of Evergreen Solar, based in Marlboro, Massachusetts - has shocked the German solar industry. On Tuesday, the news led to big sell-offs of solar stocks on the Frankfurt stock exchange. Phoenix Solar fell 5.7%, SMA Solar and Solarworld over 4%. The Ökodax fell 2.8%.

Investors are scared, wondering now if the same thing might happen to German solar players. "It's not a good sign for German solar firms, who face the same global cost and price pressures as Evergreen Solar," a dealer said.

Germany is the world's top user of solar technology. As of 2010 it had more than 17,000 megawatts (MW) of installed photovoltaic generating capacity, more than five times the capacity in Spain, which is second on the list.

What lead to Evergreen Solar's ruin was competition from China. For two years, the American solar pioneer tried every way it could to stand firm against its cheaper-priced Far Eastern rival. It even moved its own manufacturing base to China.

Nothing doing. Markets are suffering from massive over-capacity, and the fact that leading solar takers like Germany are no longer receiving government subsidies.

Exacerbating the situation in Germany is the fact that CFO Oliver Blamberger of Solar Millennium is leaving the company – under his own steam, according to the company. Martin Löffler will be replacing him as of Sept. 1, 2011, at least until the end of the business year.

Parallel to this, the power station developer is on the radar of investigators on suspicion of insider trading. The German Federal Financial Supervisory Authority (BaFin) is following up information to this effect, a spokeswoman said in confirmation of a Süddeutsche Zeitung report. In late 2009, when Solar Millennium hired former EnBW head Utz Claasen, board member and company founder Hannes Kuhn bought more company stocks before the official announcement had been made.

Things also don't look good for the Saxon firm Roth & Rau. In the first semester, the company fell deep into the red - 18 million euros - from lack of orders and revenue shifts. The previous year it had shown a 5 million euro profit, but in the first six months of 2011 turnover went down 22% to 93 million euros. In light of cancelled orders, the company also can't come up with a prognosis for the future.

Read the original article in German

Photo - Pure3d

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ