Solar Stocks Rally as German Subsidy Concerns Ease (Update3)

By Nicholas Comfort and Jakob Lindstroem

May 30 (Bloomberg) -- Solar stocks, including Q-Cells AG and Renewable Energy Corp. ASA, rallied after Germany's ruling coalition government agreed to implement smaller-than-expected subsidy cuts.

Q-Cells, Germany's largest solar-power company, surged 9.8 percent, the biggest one-day gain in two months, to close at 78.15 euros on the Frankfurt exchange. Renewable Energy Corp. ASA, the largest maker of polysilicon used in solar panels, climbed 6.1 percent to close at 151.5 kroner in Oslo.

The Christian Democratic Union and Social Democratic Party agreed last night to a draft proposal that envisages ``significantly lower'' subsidy cuts than the CDU had previously suggested, Hermann Scheer, an SPD member of the lower house of parliament, said by telephone today.

The biggest solar power facilities could face a 10 percent reduction in subsidies a year from 2009, Scheer said. Solar stocks slumped earlier this week after an industry association said May 27 that the CDU and its Bavarian sister party, the Christian Social Union, favored cutting grants by more than 25 percent during the next two years.

Scheer declined to comment on precisely how much subsidies will decline each year through 2011 since the draft still needs to be debated by both coalition partners. A final vote in the Bundestag, or lower house of parliament, should take place before the first week of July, according to Scheer.

Solarworld

Deutsche Presse Agentur reported earlier today that the proposed subsidy cuts may be less than initially anticipated.

Solarworld AG, Germany's third-biggest solar company, jumped 11 percent to close at 33.18 euros in Frankfurt. Phoenix Solar AG rose 9.1 percent to close at 47.81 euros.

U.S. and Chinese makers of solar equipment also rose in New York trading. Phoenix-based First Solar Inc., the world's largest maker of thin-film modules, gained $20.90, or 8.3 percent, to $273 at 11:55 a.m.

China's Yingli Green Energy Holding Co. rose 3.1 percent and Suntech Power Holdings Co. was up 5.9 percent.

Solarworld slumped 5.6 percent yesterday after Merrill Lynch & Co. cut its rating on the stock and other solar companies to ``sell'' from ``neutral.''

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Jakob Lindstroem in Stockholm at jlindstroem@bloomberg.net.

Last Updated: May 30, 2008 12:27 EDT

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