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Suntech Signs Up Chinese Locales For 1.8GW Of Solar Projects

By Yuliya Chernova (of Dow Jones Clean Technology Insight),
New York, July 14, 2009
Source: Wall Street Journal

Solar panel maker Suntech Power Holdings Co. (STP) signed nonbinding agreements with four Chinese provinces and cities to develop up to 1.8 gigawatts of solar projects.  Projects resulting from these agreements could be installed between 2010 and 2012, Steve Chadima, Suntech’s spokesman, said in an email.  Suntech agreed to develop 300 megawatts in Shaanxi province, 500 MW in Shizuishan city, located in Ningxia province, 500 MW in Qinghai province, and 500 MW in the Panzhihua city of the Sichuan province.

“Qinghai is the farthest along, but all of these governments are serious about seeing solar installations installed in their jurisdictions,” said Chadima.  “Suntech’s announcements demonstrate its aggressiveness in pursuing relationships to create downstream (development) long-term opportunities in China once policy support is clarified,” Paul Clegg, analyst with Jefferies & Co., wrote Monday in a note to clients.

“The size of these agreements is typical of large Chinese scale and may impress on the surface. However, the policy details necessary to determine whether or not a massive solar build in China makes sense near-term are still missing and these figures should not be considered etched in stone, but rather indicative of initial enthusiasm for the long-term possibilities for [solar power] in China,” Clegg added.

The analyst has a hold rating on the stock and a $14 12-month price target. Jefferies makes a market in the stock, but hasn’t provided investment banking services to Suntech.  The company’s shares closed up 57 cents or 4% at $14.92 in Monday’s trading when the overall market went up. Before Suntech starts implementing the project it must get the necessary permits, settle on the national and provincial feed-in-tariffs and other incentives, and meet other conditions.

The Chinese government is in the process of developing a national feed-in tariff, but one person active in the Chinese solar market said that project owners would be paid in the range of CNY1.1 to 1.3 per kilowatt-hour. Some provinces like Shanghai, Shenzhen, Jiangxi and Zhejiang are considering additional subsidies, according to the person.

Each of Suntech’s regional projects will start with 50 MW, most likely, and move up from there, said Chadima.  He declined to estimate how much revenue Suntech could see from these deals.  The company will provide its modules, some balance of system products and engineering services. It will subcontract the construction and sell the project “eventually” to a third party to own and operate, said Chadima. These parties haven’t yet been determined, said Chadima.