By the end of June 1, 2017, the first solar closing price of $38.32, in just two months time, FSLR shares have rebounded from the lowest point of 25.56 U. S. dollars 50%.

The reasons behind, and the recent uproar "201 articles" is not unrelated.

1. what is the clause 201?"

"Section 201" from the United States, "1974 Trade Law", according to the provisions, if imports caused serious damage to the United States a local industry, then president of the United States have the right to take some temporary protective measures, such as tariffs etc..

There are two interesting places in this article:

First, it is different from the "double anti" (anti-dumping and anti subsidy) of imported products for a particular country. The 201 clause applies to all non American goods. Even if you are an American company, but the factory is abroad, I am sorry, you still belong to eliminate the object;

Two, the ultimate winner is not the Congress of the United States, but the president, the Trump who simply can not predict behavior.

2., solar panel industry and "201 articles" on the relationship?

Things began in April 17th, when the US solar panel battery maker Suniva filed for bankruptcy protection at the court.

The so-called bankruptcy protection, that is, Suniva will continue to operate and restructure, while creditors can not rush the debt. During this period, a new loan is required to support the day-to-day operation of the company, the highest level of repayment of the loan, known as Debtor-In-Possession financing (DIP loan). Suniva DIP is a loan provided by a company called SQN capital company, and one of the conditions of SQN is Suniva according to the "201 clause" to the United States International Trade Commission (USITC) petition, let USITC investigate imports of photovoltaic battery and components of the United States photovoltaic industry caused serious damage.

Although the "201 clause" applies to all non US manufactured goods, but in the photovoltaic case, mainly for Chinese manufacturers. According to the U. S. customs, more than $8 billion worth of components last year, the influx of the United States, of which 1 billion 500 million U. S. dollars from china.

This is just on the surface of the data, in fact, many Chinese manufacturers in order to avoid the "double reverse", set up factories in Malaysia and Thailand and other Southeast Asian countries, so the photovoltaic products in the United States imports, Chinese PV manufacturers contributed at least 50%.

And SQN instructed Suniva to submit the petition of clause 201, precisely to blackmail Chinese photovoltaic manufacturers. The company in May 3rd had sent an email to China CCCME (Chinese photovoltaic companies in the chamber of Commerce), SQN mentioned in the message, the Suniva had to provide more than $51 million in loans for the purchase of equipment, if the China PV manufacturers are willing to spend $55 million to buy out the equipment, then the company will the revocation of the trade litigation.

What's the last sentence?:

The, trade, case, would, have, to, be withdrawn.

But nobody do not know them, or have not reached an agreement, SQN now has no mention of the sale of equipment of this thing, and have changed the tone:

We, believe, the, industry, requires, protection.

So shameless inversion, I am embarrassed to translate.

3., the United States photovoltaic industry, how tragic?

In 2016, the U.S. installed capacity of nearly 15GW, in terms of increments, the world ranked second.

Over the same period, the U.S. home component factory produced only 0.5GW.

That is to say, more than 95% of the demand is satisfied by the output of foreign factories, and the capacity utilization rate of local manufacturers is only 30%.

Between 2012 and 2016, the United States has at least 8 crystal silicon solar cell / photovoltaic manufacturers went bankrupt, so the petition submitted to the USITC statement in the Suniva, the company said miserably:

Without, temporary, relief, there, will, likely, be existing American CSPV cells no, or, modules, industry,, within, a, short,, period, of, time.

Just to say, if the government doesn't make a move, we'll die for you.

On how to protect the local photovoltaic industry, Suniva suggested that the United States government take the following measures:

• distribute 80% of the "double anti" income to the PV manufacturers in proportion;

Special funds are set up to support local PV manufacturers;

Discuss overcapacity issues with other countries;

• first year: crystalline silicon battery charge 40 cents / watt tariff, component import price shall not be less than 78 cents / watt;

Second years: silicon battery charge 37 cents / watt tariff, component import price shall not be less than 72 cents / watt;

Third years: silicon battery charge 34 cents / watt tariff, component import price shall not be less than 69 cents / watt;

Fourth years: silicon battery charge 33 cents / watt tariff, component import price shall not be less than 68 cents / watt;

You know, now the market is 21 cents / watt battery components, 33 cents / watt, once the above measures are executed, then import battery prices will be close to 200%, the price of imported components also rose more than 100%, the price will be no competition at all.

4. who will benefit from it?

The United States has only 1.4GW capacity components, assuming the United States still has about 15GW increments per year in the future, then the gap between supply and demand will reach more than 10GW. Who will benefit from it?

In a petition submitted by Suniva, there was such a remark that caught my attention:

Excluded, from, petition, are, thin, photovoltaic, products, produced, from, amorphous, silicon (a-Si), cadmium, telluride (CdTe), or, copper, indium, gallium, film, selenide (CIGS)

Film components made from amorphous silicon (a-Si), cadmium telluride (CdTe) and copper indium selenide (CIGS) are not within the object of this trade case.

I think the income of more than 80% from the United States, the largest component manufacturers FSLR CdTe films (see "in addition to the retail industry, founder of the WAL-MART family in another industry, also created a giant"), is the biggest potential beneficiaries, to understand the logic of the investment (J), can enjoy the stock return of nearly 50% of the wave front (than expected quarterly or credit).

In fact, each year more than 10GW gap, FSLR family also can not meet, this is a rare opportunity for all membrane component manufacturers.

5., "201 articles" of the future

The latest progress is that USITC has launched a formal investigation will be made before September 22nd, damage identification, namely determining whether it is a hurt, and then submit a report to the president in November 13th, according to past experience, Trump received the report, it is possible to make a decision within 15 days.

But for the final approval, the petition of "201 articles" still has many difficulties to overcome.

Typically, components in the power plant capital expenditure accounted for about 40%, if the imported component prices rose more than 100%, means to build a power station the dads may take more than 40% of the cost of the future, to build photovoltaic power plants will certainly greatly reduced.

Last month I went to a foreign brokerage conference call held, participants include Photovoltaic Industry Association of former US President Rhone Resch, he said at the meeting, the current number of photovoltaic manufacturing workers is 38 thousand, while the downstream power plant installed part of the number of employees is 137 thousand people. So, from a political point of view, will Trump sacrifice the majority for the few?

Moreover, as everyone knows, Trump is pushing the traditional fossil energy, even before the two day also announced that the United States will withdraw from the Paris climate agreement, if he would have to belong to the new energy photovoltaic industry, and at China start a trade war?

But on the other hand, the United States has been involved in the "double reverse" and "section 201" iron and steel trade professional lawyers John Gurley, said in a telephone conference, usually need the approval of the president of this petition before submission and the White House have been greeted, so USITC accepted the case, that the White House is acquiescence, eventually the probability will take relevant measures, just so much efforts may not have Suniva requirements.

6. on the way out

As mentioned earlier, SQN was the sole provider of DIP loans, but later joined a hedge fund called Lion Point.

After my investigation, Lion Point in solar (Code: CSIQ) holds about $25 million worth of stock and $38 million in convertible bonds, jinkosolar (Code: JKS) holds about $12 million worth of stock, while exports to the United States China PV manufacturers, CSIQ and JKS are the biggest two.

So I guess Lion Point's move is to gain the initiative in this trade case and to protect the Holding Company's interests by exerting influence on the Suniva. Related to the interests of Lion Point reached $75 million in total (the total size of the fund is less than $600 million.), to provide Suniva DIP loan of just $1 million 300 thousand, and is the highest level of repayment, this investment is worth it.

As more stakeholders emerge, the whole thing becomes more and more interesting.