UPDATE: Clean Tech Firms Switch To Survival Mode, Eye Stimulus Package

By Steve Gelsi

NEW YORK (Dow Jones) -- Companies in the business of alternative energy and reducing industrial carbon footprints say the worldwide economic crisis is putting their survival skills to the test.

Confronted by a slowing flow of venture capital and debt financing, swooning stock prices, and negative economic growth in the U.S., the so-called clean-tech sector faces far leaner funding than this time a year ago, when an unprecedented spike in energy and commodity prices made it one of the hottest fields for investors.

Still, companies held out hope that the nearly $800 billion federal economic stimulus package would provide a spark for the industry in the coming months.

"There's a shake-out going on right now in this industry," said David Miller, a group vice president for solar energy products at DuPont (DD). "Not everyone can continue to invest, but we are investing."

Cost-cutting, conserving cash, and restructuring debt were recurring themes that surfaced in presentations by the 41 companies appearing at Jefferies & Co.'s seventh annual clean technology conference in New York.

For his part, Miller reaffirmed DuPont's plan to invest $200 million this year alone improving photovoltaics and solar film, both core solar energy technologies. DuPont still expects its annual sales to the solar power industry to top $1 billion by 2012, up from $400 million in 2008.

Miller expects zero to 20% growth in the solar power sector this year, slower than in past years, he said. Once the cost of solar power reaches parity with traditional power generation, growth will accelerate, he said.

Jeff Lipton, managing director at Jefferies (JEF), said companies are more hopeful now than they were a couple of months ago.

"People are trying to be more optimistic," Lipton said during a break at the event. "They're surviving the near-term and emphasizing the capital on their balance sheet to weather the storm."

Lipton said he expects the effects of the U.S. economic stimulus package to lift the clean-tech sector somewhat in the second half of the year, with hopes of initial public offerings from the clean tech sector resuming in the fourth quarter.

As for venture financing of clean technology companies, "the deals are still happening, but the process is much longer," he said.

Rory Macpherson, manager of investor relations for China-based Suntech Power Holdings Co. (STP), said the company has been renegotiating its silicon purchasing contracts with its suppliers in the face of lower commodity prices.

Suntech Power is also in talks with its lenders in China on debt payments due later this year, he said.

Meanwhile, Suntech took an investment impairment of $48.8 million in its fourth quarter for investments in materials maker Hoku Materials and Nito Solar. It' no longer committed to providing additional financing, he said.

"Even though it's a difficult market, Suntech has the potential to gain share based on our lower cost structure," he said.

Erik Fyrwalk, CEO of Nalco Holding Co. (NLC), said the water treatment specialist cut its work force in recent months in the face of a challenging economy, but he did not mention a specific figure.

Nalco has seen steady demand from Brazil and India so far this year, but Russia and China markets remain difficult for now.

The company continues to use cash flow to cut down on its debt, while eying smaller acquisitions to improve its growth.

"The credit markets are more open now than they were in the fourth quarter," he said.

Kevin Walsh, managing director, Power & Renewable Energy Group, at General Electric (GE), said the American Recovery and Reinvestment Act provides a three-year extension of the production tax credit, loan guarantees and billions for smart grid applications.

Collectively, the credits will create demand and help provide deployment funding for new technology in a boost for venture capital. Nevertheless, project development is slow and first-of-a-kind projects remain challenged.

However, more help from Washington may soon be on its way in the form of an energy and climate bill being drafted, a national renewable energy standard, a green bank, and assistance for building transmission lines, he noted.