Suntech says solar demand has turned up

LOS ANGELES Tue Sep 8, 2009 3:03pm EDT

Related Topics

LOS ANGELES (Reuters) - Global demand for solar power has improved substantially in the last month, led by top solar market Germany, Suntech Power Holding Co Ltd Chief Strategy Officer Steven Chan said on Tuesday.

That improvement, Chan added, gives the Chinese solar panel maker more confidence that it can meet its 2009 shipment goal. Last month, Suntech had cut its forecast for 2009 solar cell shipments for the second time this year.

"Maybe about a month ago the markets were still slower than we would have liked, but as of the past month -- and this has been led principally by Germany -- we have seen the market pick up," Chan said at the Reuters Global Climate and Alternative Energy Summit in San Francisco. "Suntech and others in the market are quite busy right now. We are doing everything we can to ship as much product as we can to our customers. That will probably last for most of this year."

Following Chan's comments, Suntech shares rose more than 6 percent after having been up about 3.3 percent earlier.

Like other solar companies, Suntech has been hurt by a dearth of financing for new renewable energy projects. That lack of funding, as well as a pullback in solar incentives in Spain, has led to a glut of solar panels in the market and a dramatic drop in their prices.

That precipitous fall in prices has recently caused German solar companies Conergy AG and Solarworld AG to voice objections to the pricing practices of Chinese panel makers who undercut their German peers. Germany's solar industry association is looking into allegations of dumping by Chinese solar panel makers.

"We're clearly not dumping," Chan said, pointing to the company's gross margin of nearly 19 percent in the second quarter. He said the company's margins in the third quarter would be roughly the same, and called the German controversy over Chinese panel makers' prices "self serving."

"If they're a German company, they should be able to say 'Okay, we're going to manufacture 100 percent in Germany' and not, you know, '50, 70 percent of our manufacturing is in Malaysia,'" Chan said. "'And now we're claiming that we're a German company that is being oppressed by a Chinese company.' It seems a little bit self-serving."

U.S. FACTORY PLAN

Next year, Chan said Suntech is still bullish on the growth potential of solar power in China and the United States.

China's solar market could reach 400 megawatts (MW) next year, up from about 100 MW this year, Chan said, thanks in part to a new government incentive plan for the clean power source that has already led to big contracts for Suntech and other Chinese suppliers. On Tuesday, U.S. solar company First Solar Inc announced its own major Chinese contract.

It is the United States, however, that Suntech is targeting to become its biggest market, potentially by 2012, Chan said. He expects the U.S. market to triple next year.

To capture that growth, Suntech is planning to lease or buy a facility to produce its solar panels in the United States. The company has narrowed its location choices for that facility to Phoenix or various cities in Texas, Chan said.

The company aims to start production at the planned 50 MW facility by the third quarter of next year. It would employ about 150 workers, Chan said. Suntech may choose to expand that facility, or open other ones close to areas where demand for its products is greatest.

Suntech shares fell last month after the company trimmed its shipment forecast and said the roll-out of its high-efficiency Pluto technology was behind schedule. Investors have also voiced concerns that the company might be selling panels above market prices to the Global Solar Fund, a customer in which Suntech has a more than 80 percent stake.

On Tuesday, Chan said the company is still working on optimizing the production of its Pluto product, which is expected to make up half of Suntech's sales by 2011 and 75 percent of sales by 2012.

As for Global Solar, Chan said prices on the last shipment had been locked in the fourth quarter of last year, when prices were much higher. The next round of shipments for Global Solar is expected to be in the fourth quarter or the first quarter of next year, "at prices that are reflective of the market."

Suntech shares were up 98 cents, or 6.6 percent, at $15.83 in afternoon trade on the New York Stock Exchange after rising as high as $15.86 earlier.

(For summit blog: blogs.reuters.com/summits/)

(Reporting by Nichola Groom; Editing by Phil Berlowitz and Gerald E. McCormick)

FILED UNDER:

Track China's Leaders