Archive forDecember, 2015

Fed Raises Interest Rate For First Time In Nearly A Decade

WASHINGTON (CBS/AP) — For anyone considering whether to buy a home or car, the Federal Reserves interest rate increase Wednesday shouldnt make much difference.

The rates that most people pay for mortgages, auto loans or college tuition arent expected to jump anytime soon. The Feds benchmark interest rate has limited influence on those things.

Still, the Feds move to lift its key rate by a quarter-percentage point will raise short-term borrowing costs for banks. And that, in turn, is intended to prod banks to boost certain other rates. Rates on credit cards and home equity loans and credit lines, for example, will most likely rise, though probably only slightly.

KYW Newsradios Molly Daly asked a local expert how the rate hike will affect your finances.

Penn Wharton School Assistant Professor Peter Conti-Brown, whose focus is central banking and financial regulation, said the Feds decision to raise rates is both inconsequential and historic.

It shouldnt really affect decisions that individuals, households or firms are making. If theyre thinking about buying a new home, financing a car, or their education, most of these kinds of borrowing happen on fixed rates, Conti-Brown explained.

Conti-Brown also said that after signaling more than a year ago that it would raise rates in 2015, the Fed pretty much had to do it now, or risked losing credibility.

The rate the Fed controls is only one factor among many that can influence longer-term borrowing costs. And the Fed made clear it will assess the economys health before raising rates further.

Loans that are linked to longer-term interest rates are unlikely to move very much, Fed Chair Janet Yellen said at a news conference. Credit card rates might move up slightly. But remember, we have very lowrates, and weve made a very small move.

Mortgage rates tend to move in sync with the yield on 10-year Treasury notes. When inflation remains as low as it is now, Treasury notes, with their modest returns, are considered a safe and decent investment. And heavy purchases of Treasurys by US and foreign investors — and by many foreign governments, such as China — help keep those yields low.

The demand for Treasurys has mushroomed, said Carl Tannenbaum, chief economist at Northern Trust. What that means is that for any given monetary policy, interest rates are still going to be lower than they would have been 10 or 15 years ago.

The Feds decision to raise rates is in many ways a healthy sign: Its a vote of confidence that the economy, 6½ years after the Great Recession officially ended, can finally withstand higher borrowing costs and keep growing at an acceptable pace.

Even with a rate increase, most economists expect consumer spending to stay heathy and solid hiring to continue, perhaps even driving unemployment even further below its current low level of 5 percent. Should the economy stumble, the Fed could postpone further rate increases.

Other trends are also working in consumers favor: Gas prices are still falling, and there are signs that paychecks are finally starting to rise after years of sluggish growth.

These things are good for the consumer and will easily outweigh the impact of a rate increase, said Chris Christopher, an economist at forecasting firm IHS Global Insight.

The most visible effects of the Fed increases will probably be in short-term borrowing. Rates for credit cards and home equity lines of credit should rise, typically by the same amount as the Feds increase. The increases could appear as soon as one or two months after the Feds action. Those rates are tied to banks prime rate, which responds quickly to the Feds changes.

Also, Americans with adjustable-rate mortgages will probably face a higher rate at the date of their next adjustment. Auto-loan costs may rise as well, economists said, though not as fast as the short-term rate the Fed controls. Auto-loan rates typically follow the yield on two-year Treasurys.

Greg McBride, chief financial analyst at, calculates that for a $25,000, five-year car loan, a one-quarter percentage point increase would boost monthly payments by precisely $3.

The interest rate impact on the typical household from a quarter percentage point move is almost inconsequential, he said. Most people wont even notice.

And most people buy homes for reasons that have little to do with a slight rise or fall in mortgage rates, McBride said. They tend to buy when they feel financially secure or experience a major life change, such as having children.

All those reasons people buy houses remain the same, whether mortgage rates are 4 percent or 4.25 percent, McBride said.

Last month, Doug Lewandowski moved up the closing date on his purchase of a two-bedroom Chicago condo so that he could lock in his rate. He has seen mortgage rates rise by a quarter-point since he started looking in August. Still, the timing of the Feds move wasnt a big factor in his decision.

I didnt want rates to jump up significantly, he said, but I wasnt willing to settle on a place just to get a lower interest rate.

Lewandowskis outlook, if typical of prospective homeowners, is one reason many economists think home sales may rise next year even if mortgage rates tick up.

Many analysts expect the Fed to gradually raise its short-term rate by a total of 1 percentage point by the end of 2016. If so, Frank Nothaft, chief economist at CoreLogic, forecasts that the average 30-year fixed mortgage would rise from roughly 4 percent to about 4.5 percent.

To put that in perspective, before the Great Recession the 30-year fixed mortgage rate never fell below even 5 percent.

Molly Daly contributed to this report.

(TM and Copyright 2015 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2015 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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Blackstone Mortgage Trust Inc (BXMT) To Go Ex-Dividend on December 29th

Blackstone Mortgage Trust, Inc. is a holding company. The Company is a real estate investment trust (NYSE:BXMT), which is a real estate finance company that originates and purchases senior loans collateralized by properties in North America and Europe. The Company has two operating segments: the Loan Origination segment and the CT Legacy Portfolio segment. The Companys Loan Origination segment includes the Companys activities associated with the origination and acquisition of mortgage loans, the capitalization of its loan portfolio and the costs associated with operating its business. CT Legacy Partners portfolio consists of cash, loans, securities and other assets. The Companys focus is to originate loans and invest in debt and related instruments supported by institutional commercial real estate. It directly originates, co-originates, and acquires debt instruments in conjunction with acquisitions, refinancing and recapitalizations of commercial real estate around the world.

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Here’s Why Alibaba Group Holding Ltd Should Head North

As 2015 draws to an end, Alibaba Group Holding Ltd (NYSE:BABA) investors anxiously await the year-end stock performance. The shares made a blockbuster entry on the New York Stock Exchange (NYSE) last year. All the whistles and bells seem to have vanished with time. At present, the shareholders are enthusiastic to see when the stock will move in the upward trajectory.

Alibaba stock is headed south as the company is moving away from its core-business and venturing into various projects outside its domain. However, as the corporation is still on the verge of expanding its empire, there is an immense potential for the stock to trade upwards.

Business Finance News analyzes the recent developments at Alibaba, which are expected to regain investor sentiments going forward.

According to the recent updates, Alibaba will own a 27.7% stake in, making it the largest shareholder of O2O (online-to-offline) Shanghai-based food ordering mobile application start-up. The Chinese retailer has decided to invest about $1.25 billion in online platform for food delivery based in China-the worlds second largest economy.

The food delivery application has raised $350 million earlier this year from investors, which include Sequoia Capital,, Tencent Holding Ltd, and CITIC Private Equity. With Chinese consumers increasing the use of their phones, internet giants have started to invest in services through which more customers are attracted to their platform.

South China Morning Post

Recently, Alibaba has made the decision to acquire Hong Kongs leading newspaper South China Morning Post together with affiliated media assets for approximately $265.8 million. The agreement contains 100-old newspaper, outdoor advertising, magazines, and digital assets. The purchase combines the editorial excellence and culture of the newspaper with the Chinese retailer to provide news and comprehensive analysis associated with Hong Kong and China.

This move has made investors question about Alibabas ideas to pursue its long-term aims. It is believed that Alibabas founder Jack Ma has taken an unprecedented encounter as its reputation has been under pressure owing to its increasing investments outside its core-business.

On a flip side, Alibaba through South China Morning Post, will now communicate a positive picture of China. A good representation of the second largest economy will benefit Alibaba, as it has a pivotal role in the nations economy.

Stock Movement

Since January this year, Alibaba shares have fizzled to multi-year lows, owing to brutal cases against counterfeit goods. It seems that investors are worried over Alibabas management thought process of venturing into various industries rather than to focus on its core-business objectives. Investor sentiments have pushed the stock to its low levels and down over 19% in 2015.

Business Finance News believes that the stock is trading south as shareholders are confused on the trajectory that the company is headed toward. This might be the reason that at the Singles Day event, despite breaking all the record and generating $14.3 billion revenue from the mega event, the stock moved in the red territory.

Alibaba has ventured into various projects which includes telecommunication, sports, logistics, media, and other ventures. Alibaba should provide further clarification on its aggressive investment strategy. In earnings report for the third-quarter, the retailer should mention the benefits it has earned from the investments, including both financial performance and goodwill.

Going forward, more information on the investments should be made public, or else shareholders may feel threatened and will decide to divest their investments elsewhere.

On Thursday, Alibaba shares plunged in New York Stock Exchange. At market close, shares fell 1.20% to $83.78. Most of the analysts on the Street are bullish on the long-term prospects of the retailer. According to Bloomberg, out of 48 analysts who provide coverage on the the stock, 42 rated a Buy, six recommended a Hold, whereas none suggested a Sell rating. The stock has an upside potential of 14% over its last closing price, as the 12-month mean target price comes in at $95.80.

Of the sell side updates, Stifel analyst Scott Devitt rates the stock a Buy, along with the price target of $94. Furthermore, Nomura analysts Andrew Orchard also remains bullish and issues $95 price target.

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Amazon Stock Hops on Promising Holiday Season Performance

On the back of yet another successful holiday season, shares of the largest US e-commerce company bounced up during the trading hours today. As consumers are shifting from brick and mortar retailers to online selling platforms,, Inc. (NASDAQ:AMZN) has been one of the greatest beneficiaries.

Amazon stock hit an intra-day high of 672.40 (up 1.45% from its last closing) on Monday and was trading 0.84% higher at $668.34, as of 12:57 PM EST. Over the same time period, investors traded 1.64 million Amazon shares, compared to an average daily trading of 4.27 million. Amazon share price has grown 11.5% since it reported its earnings for the third quarter of fiscal year 2015 (3QFY15) on October 22.

Todays hike is specifically related to the online retailers performance during the holiday season. The company released a report, stating that it set record for Amazon devices, Amazon Original Series and, Amazon Price on its 21st holiday. During Decembers third week, it added over 3 million members on Prime, which offers two-hour delivery in over 20 metro areas, same-day delivery, and two-day shipping services to its customers. Additionally, the program offers TV shows and movies streaming service for no additional cost. Founder and CEO Jeff Bezos said in a press release: This was another great holiday season to be a Prime member, and we welcomed three million new members in the third week of December alone.

The Man in the High Castle was the most watch TV series on Prime Videos and viewing hours of members doubled during the season, compared to the previous year. Furthermore, Amazon devices sales doubled during the period compared to 2014s record shopping season. The management said that the all-new Fire tablet was the best-selling item among Amazon devices

While other traditional retailers have suffered due to lower shop traffic and decline in spending by consumers, Amazon and other e-commerce companies have benefited during the season. Technology has become a blessing for some retailers and a curse for others. Amazon, which has beaten all of its earnings expectation this year, would report its Holiday season on January 27. Business Finance News continues to believe that it will produce another set of block buster results, which would lead to a massive jump in its stock price. In October, we predicted Amazon stock price could cross the $700 mark after its 4QFY15 results.

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UK Economy to Slow Down Despite Increase in Bank Lending

During the second and third quarter of FY15, the UK economy grew slower than expected. This fact strengthens the stance of Bank of England to keep the interest rates low, despite the rate hike from US Federal Reserve. The low growth is expected to continue in the starting quarters of FY16. Business Finance News analyzes whether the economy has any chance of showing better growth next year, despite low interest rates and increased bank lending.

Government statistics stated that UK economy was only able to expand 0.4% during the third quarter of FY15 (3QFY15), the estimate for the quarter stood at 0.5%. The expected annual growth rate was also cut to 1.8% from 1.9%.

The UK economy is still considered as the most advanced economy of FY15 with its stability compared to that of US; but its public debt amounts to 80% of its GDP. The paths for central banks of UK and US can differ for longer-than-expected duration. While US Federal Reserve is planning for more hikes in FY16 to meet the demand from its improved labor markets; we expect Bank of England to keep the interest rate low for a longer time until weakening signs from the economy are completely eradicated.

Both the US and UK economies showed almost similar signs of growth and job creations so many were expecting that Bank of England will follow the lead of Fed in rate hike. But, there are some indicators in the UK economy, which are not in the US economy and are worth mentioning here.

Britain is more reliant on household spending than the US. Emerging market exposure can be more found in UK economy compared to US economy, making it sensitive to emerging market health. Increased manufacturing and construction in UK is delaying growth, which might be expected in medium-term to show up.

Low inflation and higher wages will determine, whether UK is able to reach its expected GDP growth in FY16. The Wall Street Journal (WSJ) reported: The household savings ratio stood at 4.4% in the third quarter, the lowest figure since early 1963.

Official figures show an increase in productivity of labor, which can result in increased wages for FY16. This fact support Bank of Englands case as increase in productivity helps offset the inflationary pressure.

UK Banks

According to the British Bankers Association, net lending to non-financial companies excluding real estate went up 0.6% compared to last year in November; this marks the first surge in that particular lending type since mid FY09.

This is good news for Britain as the recent official data painted a bleak picture of UK economy with lower tax revenue and major downgrading in economic growth data. British Bankers Association Chief economist Richard Woolhouse said: Net lending to companies is now expanding, particularly in the wholesale and retail sectors, as businesses take advantage of record-low interest rates.

The low interest rate is now finally yielding some benefit for the economy, but the question is why the economic growth expectations for coming years stayed low. Business Finance News believes that growth prospects for the upcoming year are good and UK will be able to meet its 2% economic growth target. The mortgage lending is also growing with an annual growth of 28% from FY14.

Currently, unsecured borrowing accounts for a major part of the lending market. The personal loans are growing at 5.9% and credit card lending went up by 5.5%, annually. With car finance and lending from non-banks added, consumer credit grew at around 8%.

UK Stock Market

Stocks in London were steady, taking small dips to recover over time. Treasury yield there was shrinking and trading volumes are going down with holiday season going. Markets in London were opened for just half day on Christmas Eve, similar timings were observed in NYSE.

On December 24, 2015, FTSE 100 increased 0.24% and closed at 6,254.64. The index went up 2.94% since the oil started to gain momentum. FTSE 100 closed at two-week high on Wednesday. The market has reacted up to a certain degree to oversupply of oil and uncertainty of demand in China. Brent Crude went down to $35.98 on Tuesday, which was the lowest since FY04.

Investors were of the opinion that the slowness observed in commodities market is a signal of slowing global economy. But oil market went up when it was revealed that US oil stock fell 5.9 million barrels. This change in oil price trend could be linked to the fact that refineries hold fewer inventories at year end to escape taxes.

There was some capacity cuts witnessed in China which pushed the price of Base metals up. There was also an increase in buying in emerging and mining stocks which supported the sentiments in the market.

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Goldman Sachs Group Inc to Outperform as Emerging Markets Struggle

Goldman Sachs Group Inc. (NYSE:GS) together with other banks is scheduled to announce the fourth-quarter results of fiscal 2015 (4QFY15) next month. The theme for the reported quarter is Federal Reserves monetary tightening decision announced earlier this month. As banks are deemed to benefit the most from this decision, emerging markets are faced with increased sell-off and market volatility.

Business Finance News believes that the trend of 4QFY15 earnings needs to be studied, separated from the market sentiments and the interest rates story. Investors have focused on banking stocks since the central bank withdrew its long-standing stance of holding interest rates close to zero. As financial institutions are anticipated to benefit the most from the upturn, their activity on the capital market has remained stable. With the recent changes in the macroeconomic environment, financial markets have been quiet relative to the rocky patch earlier this year.

Economists and analysts feared the market volatility could keep the stocks in the red territory for long, but most financial stocks have outpaced the market in the light of strong prospects of growth both in long- and near-term.

The graph below shows the change in stock prices for Goldman Sacks, Bank of America Corp (NYSE:BAC), and Financial Select Sector SPDR ETF (XLF) over the past three-months.

The US economy has made great strides to meet Federal Open Market Committees (FOMC) goal of maximum employment with price stability. The employment reports for both October and November have been more than expected. Regardless of Inflation, being low is forecasted to upsurge, as the current decline in crude oil prices and costs for imports will not stay for longer.

Emerging Markets

As the interest rates in the US-worlds largest economy have been increased, it will lead towards deteriorating emerging markets. Investors around the globe will move their investments in the US to generate a higher return on their investments. This is mainly owing to the fact that while other central banks follow monetary easing, US is doing otherwise. Appreciation of the US dollar against other currencies has further added to the fears of under-developed economies. They will have to pay higher bills for the imported goods and receive lower remuneration on exports.

The greatest worry in relation to the Feds decision is the implication for emerging market economies and assets given excruciating memories relating to debt crises in the wake of previous US rate hikes. However, claims that emerging markets are generally better positioned for liftoff this time around in large part because they have effectively dealt with rising US rates since the 2013 taper tantrum, according to FX Street.

In the short-term, growth in emerging markets is not anticipated due the hiking cycle. Mr. Maasry still believes that Goldman Sachs better fundamentals will support returns and emerging markets growth in the second half of 2016.

In 3QFY15, Goldman Sachs generated 29.8% of its total revenue from Europe, Middle East, and Africa. Moreover, 14.3% of the revenue was earned from Asia.

In most of the cases, the emerging markets will have to fill up the space through injection of more capital into their economy or to borrow funds for smoother operations. As the increase of interest rates by the Fed is only for the short-term, emerging markets will suffer a re-pricing.

However, a bleak economic outlook, deteriorating conditions in global financial markets intensify the risk of negative spill-over to emerging markets. The rising US interest rates may create a miserable situation for emerging markets. The corporate exposure to dollar-denominated debt is expected to be affected the most.

Streets View

Goldman Sachs is expected to report earnings per share (EPS) of 4.49, translating into an increase of about 70% on a quarter-over-quarter (QoQ) basis. Revenue is forecasted to come in at $7.78 billion, representing an increase of1.22 % over the corresponding period last year. Furthermore, the bank will also reveal its figures for the full fiscal year 2015 (FY15). On a yearly basis, the bank is expected to have per share earnings of $17.68 on a revenue $34.32 billion.

This reflects the positivity in Goldman Sachs earnings. And at the same time, it is important to consider that these earnings hardly reflect the gains from the rate hike. Gains from the current monetary tightening are expected to be fully realized in the quarters to follow.

Bank of America is forecasted to report earnings per share (EPS) of $0.34, representing a growth of 5.9% YoY. Revenue is anticipated to also move in an upward trajectory. The bank is forecasted to post revenue of $20.74 billion, indicating an increase of 6% YoY.

Most of the banks are projected to see headwinds from their credit and fixed-income trading costs as both of these catalysts have a direct relation to the oil exploration and production companies. As oil prices are trading close to seven-year lows, banks are feeling the heat as they hold significant exposure to these companies in their portfolio. However, in the quarters to follow, banks are expected to get away with issues related to oil prices as they are not considered to remain high for long.

Of the sell-side updates, Atlantic Equities LLP analyst Christopher J rates the stock as Overweight, along with target price of $220. Furthermore, Keefe, Bruyette amp; Woods also remains bullish with a Market Perform rating and a $205 price target

Most of the analysts on the Street providing coverage on Goldman Sachs stock are confident on the long-term prospects of the company. According to Bloomberg, 13 analysts have suggested the stock a Buy, 16 have recommended a Hold rating, whereas only two favor a Sell rating. The 12-months average price stands at $207.17, representing a return of about 13% over the stock last quoted price.

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Low credit score? This startup wants a chunk of your house

A Palo Alto startup backed by the likes of Greylock Partners, Andreessen Horowitz and former Citigroup CEO Vikram Pandit is offering loans in exchange for equity stakes in the homes of would-be borrowers with bad credit.

The firm, Point Digital Finance, is offering cash loans to people who are restricted in their borrowing choices. The price? The borrowers soul or at least a piece of their house. The company only deals with borrowers who own at least 25 to 30 percent of their homes.

Point Digital doesnt collect payments. Its paid when borrowers sell or refinance their homes. If that doesnt happen after 10 years though, the arrangement shifts, and the borrower merely owes a normal loan repayment, at 15 percent effective annual interest, Bloomberg reported.

If the borrower cant pay, Point Digital seize his or her home and collects its due from the proceeds.

“If your home does well, we both do well,” CEO Eddie Lim explained to Bloomberg. “If your home doesn’t do that well, then this was one of the cheapest sources of financing that you could have obtained.”

If this reminds you of the kind of thing that caused the financial crisis, then you have a fair working understanding of what caused the financial crisis.

Sarah Edelman, director of housing policy at the Center for American Progress told Bloomberg that the loans were a risk for borrowers.

“While it may be appealing to get an upfront lump sum of cash, the risk here appears to be that a consumer could end up with a more expensive product with harsher repayment terms than they would with a more conventional loan, she said. [Bloomberg]  Ariel Stulberg

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Admin manager on fraud rap

A 53-year-old administrative manager has been charged for breaches of the Larceny and Forgery acts.

Ivorine Rose from Yallahs Housing Scheme in St Thomas, was arrested and charged by detectives from the Counter Terrorism and Organised Crime Investigation Branch on Monday.

Reports are that between May 2015 and July 2015, Rose, who was employed at a furniture and appliance store, caused cash loans to be prepared and disbursed in the names of persons who had previously done business with the company. The loan amount was in excess of $800,000.

The loans subsequently went into arrears and when the individuals in whose names the loans were taken out were contacted, they provided documentation to indicate that they did not borrow money from the establishment.

As a result, a report was made to the Fraud Squad and an investigation was launched.

Rose was arrested and charged for forgery and obtaining money by means of false pretence and is scheduled to appear in the Corporate Area Residents Magistrate Court on Tuesday, January 5.

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5 Gadgets That Can Draw the Interest of Homebuyers

If you’re planning on putting your home up for sale, consider the fact that a lot of modern homebuyers are looking for homes that are loaded with convenient features, and even some convenient gadgets that will make their lives easier.

Therefore, investing in these gadgets prior to putting your home up for sale will boost interest from homebuyers, as well as serve to increase the overall value and appeal of your home.

1. Automatic Window Openers

Automatic window openers are really convenient gadgets that can be added to any modern room throughout your home. Companies provide these features to homeowners who want to add a touch of luxury to their space.

But for those homeowners who want even more, there are also automatic opening vent panels, such as Teal products AOV, which can actually provide added ventilation in the event of a fire that produces a lot of smoke.

2. Smart Thermostat

Many homebuyers today are looking for energy efficient homes, and there’s nothing quite like having a smart thermostat already in place to drive the value of a home upward.

Products like Nest will program themselves based upon your preferences, and they can also adjust automatically whenever you leave the house in order to conserve energy. Plus, the best part is that you can also control a smart thermostat from your smartphone, which means you can start warming up your home prior to getting back from work. This can even help homeowners reduce their energy bills.

3. Home Surveillance Systems

Increased security is also a welcomed addition to any home, no matter where you live, so investing in a home surveillance system is yet another way to attract more gadget-obsessed buyers. While older systems required the use of wires that could easily be cut by burglars, today’s systems are wireless and can even be monitored from remote using your smartphone.

Install security cameras, too, throughout the exterior of the property to always keep an eye on what’s going on at home whenever you’re on the go. The sleeker and more discreet the system, the better.

4. A Home Entertainment System

Being able to entertain themselves at home is an important feature that homebuyers are searching for, so have products like Savant installed in your living room. This type of system will let you control the lighting in the room, the channel on the TV, and the music from your sound system all from one device.

5. Smart Kitchen Appliances

The kitchen is the most important room in the house, so equip it with one of the latest smart refrigerators that let you know when you need to purchase more groceries. No-touch faucets are also a great addition to any kitchen, as are Bluetooth cooking thermometers that let you know when your food is ready by alerting you on your smartphone.

As you can see, there are plenty of amazing, modern gadgets that you can install throughout your home to attract more buyers and increase your property’s value. In fact, by the time you install these gadgets and start using them, you may even rethink moving away.

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The ITC Awakens: What the Extension of a Key Federal Tax Credit Means for Solar

This is a free preview of GTM Squared. Click here to join Squared and get expert insights like this throughout the year.

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Shayle Kann and the GTM Research analyst team give GTM Squared members insight into our internal discussion and debate on the latest business developments across solar, grid, and energy storage markets in this monthly column.

Shayle Kann Senior Vice President, Research: As you all know,the 30 percent ITC has been extended for three years, with a ramp-down through 2022. Weve released forecasts earlier this week that show US solar hitting 20 gigawatts by 2020 and incrementally adding 40 gigawatts over the next five years due to this extension.

But there are tons of details and questions that remain. So, GTM Research team, what are the biggest changes and considerations that come out of the extension within your focused coverage areas?

MJ Shiao Director, Solar Research:From the system cost perspective, this could be a major relief to hardware vendors across the value chain, which were planning for heavy price pressure in 2017. Keep in mind that this doesnt necessarily raise pricing for systems — demand growth and the opening of new markets is still dependent on cost reductions across the value chain.

Competition will still block out high-price suppliers and new entrants that have cautiously waited will now pour more investment into the US, especially as markets like the UK, Germany and Japan see some setbacks.

Whats nice is that developers and companies that have planned for the 2017 pricing environment are now ahead of the game. Cost reduction strategies, such as balance-of-systems integration, 1,500 Vdc, rooftop density maximization, etc., are still every much as applicable in 2017 as 2016. We were expecting to see 8 percent to 12 percent installed cost reductions from 2016 to 2017 under the old regime. Those figures are still possible, but theres less pressure to meet them.

Scott Moskowitz Analyst, Solar Research: As the demand outlook makes clear, this is fantastic news for vendors, installers, and developers alike. However, I dont think we see the pricing pressure truly let up in any market. Many cost reduction innovations — in particular 1,500-volt systems — are ready for deployment. These 1,500-volt systems will make up 30 percent of utility projects in the US in 2016 and should contribute to lowering system costs another $0.02 to $0.05/Wp.

Other opportunities such as higher-power inverters with silicon carbide are also well on their way. In my view, the vendor landscape is too competitive for there to be pricing relief. I think the long-term cost curve remains aggressive and simply makes utility PV more competitive.

It does get interesting in distributed solar. SolarCity in particular has been vocal about lowering costs to become cash-flow positive. I dont think it abandons these efforts, but there is obviously a much lesser need to lower costs quickly, particularly in established markets. Enphase has been similarly focused on cost reductions, and I think this takes some of the pressure off. Judging by the 50 percent bump in its stock price the past few days, Id say investors agree.

Enphase and its competition cannot rest on their laurels, however. The residential inverter market is very competitive. A high-demand future only encourages more competition and new market entrants. Expect to see continued product introductions (still waiting on a DC optimization solution to challenge SolarEdge) and new vendors.

MJ Shiao Director, Solar Research:On Enphase specifically, those cost reductions are must-hit. Whats nice about the extension is that it continues to broaden the residential base to new markets and allows for local and regional installers to flourish through direct ownership and loan products. Those end customers appear to make up more than half of Enphases installations in recent quarters, which means their success is critical for providing the base Enphase needs to be successful.

Im surprised you didnt mention the boon that extension gives for non-incumbent manufacturers in the utility sector. All those companies that were about to miss the party (eg, Huawei) or that are still trying to get traction in utility projects (eg, Sungrow, Yaskawa/Solectria, TMEIC) will see their investments and patience pay off dramatically. Id hesitate to say that the extension would hurt incumbents — the market will be big enough for them to continue thriving — but it does keep a lot of competitors in the game.

Colin Smith Analyst, Solar Research: Developer mindset is going to shift. Developers were in a massive pipeline growth mode and shifting into a massive pipeline completion phase. With 9 gigawatts still to come on-line in 2016, they will not only have to make sure they complete their projects by the contracted commercial operation date, they will now have to shift back into capturing an additional 3 gigawatts of utility PV that is now on the table for 2017. I think we are going to see some dead projects come back with a bit more life and see some early-stage developers selling off more pipeline.

Mohit Anand Senior Analyst, Solar Markets: From a manufacturing perspective, Americas attractiveness as a location for PV manufacturing has increased substantially. As tracked in our PVMAX, with the ITC extension, the US is now the second most attractive market for PV manufacturing instead of the fifth most attractive without it.

This is thanks to the sheer size of the increase in domestic demand volume and the stability and growth of its demand trajectory out to 2020. With a business environment and manufacturing ecosystem ranked in the top five out of 50 countries, there is a strong likelihood that the US will see more domestic manufacturing despite its relatively weaker cost-competitiveness compared to the East Asian manufacturing majors.

Source: Global PV Manufacturing Attractiveness Index 2015

MJ Shiao Director, Solar Research: Definitely agree that utility-scale solar is the most affected market. With or without the ITC extension, theres a huge pipeline that needs to be executed on. As Colin implied, nearly 2 gigawatts of projects may slip from 2016 to 2017, but we still expect around 3 gigawatts of utility projects beyond that to come on-line in 2017.

Looks like were forecasting almost 28 gigawatts of utility solar between 2017-2020. Thats over 17 gigawatts more than what our pre-extension forecasts modeled. The ITC doesnt change the fact that many state targets are already fulfilled — so what are some of the other drivers?

Mohit has an excellent point about manufacturing attractiveness. The extension also buoys the prospects of domestic manufacturers like SolarCity (through Silevo) and SolarWorld. However, extension also means that some of the Chinese module manufacturers may open up more allocation to the US

On the module environment in general, not sure the ITC extension drastically changes the pricing and supply for next year. A revision downward might somewhat soften tight supply at the end of the year, but likely not by much. Many of those projects are just slipping into 2017, so the module agreements are already or will be soon in place anyway.

Under the no-extension scenario, many manufacturers indicated significantly reduced allocations — not just because of less demand, but because the price-plus-tariff environment meant much smaller margins vs. other global markets. With the ITC extension and potential feed-in tariff revisions in China and Japan, the US importance for global module manufacturers has increased substantially — and so has the need for tariff-exempt capacity. Also, that Silevo acquisition by SolarCity is looking better and better, although its still contingent on execution.

Nicole Litvak Senior Analyst, Solar Research: Of course this impacts utility-scale solar the most, but it also has big implications for distributed generation. The residential solar boom will continue. However, net-metering and rate-design battles remain the biggest challenge for that sector, and I dont think the extra 6 gigawatts well get from the extension will help the situation.

Well also continue to have a level playing field for third-party and customer-owned solar, at least until 2021. This is a big win for the many installers that rely mostly on loans and cash sales, as well as the companies that provide those loans. The extension will also help to open up new state markets. This is an opportunity for both the SolarCity/Vivint/Sunruns to expand and for new local installers to pop up.

And finally, the ITC extension is literally a lifesaver for the non-residential market, which needs all the help it can get. It will remain the smallest market segment, but itll be more than 50 percent larger than it would have been otherwise in the period 2016-2020. Financing is still the big challenge, but perhaps a shift to cash/loans in residential solar will help bring more tax equity funds over to non-residential.

Scott Moskowitz Analyst, Solar Research:Is there any other way this might affect the struggling non-residential market, Nicole? Obviously it improves the economics. Does the tax credit extension make it more likely that well see new business models or policies (PACE, REITS, MLPS)? Are these still on the table and attractive?

Nicole Litvak Senior Analyst, Solar Research: I think its actually the opposite (except for PACE, which is and will continue to be a major driver of small commercial). Non-residential needs to focus on plain old tax equity financing, and now it has the opportunity to do that. There are still many challenges to efficiently matching projects with financing. Now the market just has more breathing room to find solutions and take advantage of the 30 percent ITC.

On a related note, I wonder how this will affect the YieldCo market. There will be more assets to fuel YieldCos (across all market segments), but the immediate question is still whether they will fully recover from this years slump. Anyone else have thoughts on this?

MJ Shiao Director, Solar Research: As far as YieldCos are concerned, the ITC extension doesnt hurt, but I dont know if it pulls them out of the current conundrum. There are broader investor-sentiment and company-specific forces at play, but in general, until their share prices rise, itll remain difficult for them to raise the cheap capital they need.

Of course we arent equity analysts, but SolarCitys price has rebounded strongly after the ITC news. YieldCos and their partners have as well, but not to the same level, indicating that there are strong, non-ITC influences at play.

Austin Perea Analyst, Solar Research: Previously our forecasts had residential PV installations growing in 2016 before taking a hit in 2017 due to the ITC expiration, and then rebounding to near-2016 installation levels in 2018.

The revised scenario, whereby the ITC is extended through 2021 with various stepdowns, leaves residential solar in a position for tremendous growth. It should be noted, however, that uptake of distributed generation is also contingent upon how customers are compensated at the meter for exporting power back to the grid.

California also had huge win this month with the CPUC ruling on NEM 2.0, which more or less keeps export compensation at the retail rate. Given that California represents about half the market for residential, a favorable ruling on NEM 2.0 and an ITC extension is a huge win.

When it comes to markets outside of California, weve seen some very impressive growth coming from a number of nascent markets with an installed base of 10 or more megawatts. Nevada was the leader of this group of fast-growing states in the last quarter, and an ITC extension undoubtedly supports this continued trend of geographic diversification of demand.

However, in-state regulatory proceedings in those states will also be important to the long-term growth of these markets. Both Vermont and Nevada have important NEM 2.0 rulings coming out in the next two months and could define the outlook going forward.

Cory Honeyman Senior Analyst, Solar Markets:Nicole, Austin and Colinhit the nail on the head with their points. A revitalization of origination opportunities for utility-scale solar, a level playing field continued for direct-owned residential solar, and recent major net metering win in California all speak to a broader theme.

The extension of the ITC will accelerate the growth trajectory to new heights in both established and emerging state markets for solar. Were talking an additional 1 million homeowners and businesses that will go solar between now and 2020 thanks to the extension. And as Colin noted, were in a new phase where dirt-cheap utility-scale PPAs are not a 2016 fluke, but a trend that will keep on emerging.

For utility scale, my moneys on the Southeast and Texas being the hottest markets. And to Nicoles question, my new favorites for distributed solar are a handful of markets, some of which Austinmentioned. Vermont is creeping up there now, but by 2020, a few other states to watch are New Mexico, Michigan and Utah. They all have 10 percent year 1 savings and top-tier installers located there, making them ripe for high growth.

Austinalso asked about how the ITC extension plays into future NEM debates. More residential solar will come on-line over the next five years (24 gigawatts) than all solar installed to date thanks to the extension. And a number of states are going to have to deal with grid penetration challenges sooner rather than later.

The big question is whether residential solar can grow at record rates and become a true asset to the grid — and an asset that utilities properly account for in net metering rules. I dont think net metering rules can stay static in a world where solar exceeds 10 percent of states loads.

Systems and technologies team, what do you think about how smart inverters and other innovations can support residential solar growth in high-penetration markets?

Also, Ill throw out one other question on my mind to Colin Smith. High or low? I think one-third of all centralized solar procured between now and 2020 will come from large corporates.

Colin Smith Senior Analyst, Solar Research: Id say closer to 20 percent to 25 percent, rather than one-third.

California, Nevada, Arizona and Texas will be big markets for retail procurement, but I also think we are going to see more projects like Amazons 104-megawatt system in Virginia pop up. We will also see more green tariff deals like the recent one with Duke and Corning.

Several years down the line I think we will see more companies push back to own and receive power directly from these PV projects. But in the meantime, they will go through a green tariff.

Scott Moskowitz Analyst, Solar Research: Our projections obviously show accelerated growth in distributed solar penetration. Utilities will take this seriously and double down on mandating advanced inverter requirements. Rule 21 in California is the main mechanism for this and has laid out the feature sets required for the inverter vendors.

The early requirements — reactive power and functions that prevent blackouts during voltage drops — are easily met. However, the communications protocols in the later phases will take a strong effort between the inverter vendors and utilities to standardize. The SunSpec Alliance is taking the lead and will now have a greater incentive to accelerate its work.

Beyond advanced inverters, this becomes a huge opportunity for energy storage. Not only does energy storage ensure its proportional benefit of the ITC going forward, but higher PV penetration rates will only encourage their use as a grid-stabilization and demand-balancing tool. GTMs energy storage research team definitely has their work cut out for them even more than before.

MJ Shiao Director, Solar Research: As Scottmentioned, there are functions that help dampen intermittent solars effect on the grid, but technology continues to outpace requirements and regulations. What we have through Rule 21, HECOs requirements, and, more broadly, IEEE standards is mostly passive.The next step is to transform these solar devices into usable grid assets to further mitigate the impact of high-penetration PV — and perhaps make the grid more reliable as a whole.

Youre seeing these discussions coming up more in various market transformation processes.Look for other regions to look toward these states for precedent. Also, we had a brief discussion about this topic at our recent US Solar Market Insight conference.

In short, the ITC extension is a game-changer and accelerates the timeline for the next stage of solar. Well hit nearly 100 gigawatts of cumulative solar by the end of the decade — after starting the decade with less than 2 gigawatts.

With that ramp up, solar isnt just a promising technology. Its a real, deployable tool and platform for a next-generation electricity grid. The regulations and innovations that come together in the second half of this decade will set the stage for what the future of electricity in the US looks like.


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