Suntech to add 1GW Shanghai capacity as demand jumps

SHANGHAI, June 6 (Reuters) - Suntech Power Holdings Co Ltd (STP.N), China's largest solar panel marker, plans to invest 2.68 billion yuan ($393 million) to build 1 gigawatt in additional production capacity in Shanghai over the next three years as it rushes to meet surging demand, Chairman Zhengrong Shi said.

Despite an expected cut in German solar power subsidies in July that analysts warn will dampen third-quarter demand, Shi told a briefing for reporters on Saturday that returns for power producers in that market would still be attractive, while other markets such as the United States were growing rapidly.

"We're all sold out for this year. We're short of capacity and can't meet our clients' needs," he said.

"We have a backlog in the second quarter. We have a backlog in the third quarter. We haven't seen any impact from the reduction in German subsidies."

He predicted that Germany, the biggest market for solar cells, would see 70 to 80 percent full-year growth this year, while the U.S. market would double in size in the second half of the year from the first half, reaching 1 GW for the full year.

The first phase of the company's new Shanghai plant, with 180 megawatts of production capacity, would be completed at the end of June, he said, putting it easily on course to reach its total production capacity target for this year of 1.4 GW, after reaching 1.2 GW at the end of the first quarter.

Shi added that expansion of thin-film manufacturing capacity in Shanghai, now at 200 megawatts, may be delayed due to low competitiveness of thin-film modules and a need for further research and development to boost conversion rates.

He also reiterated that the fall in the euro was taking a heavy toll on the company's bottom line.

Suntech announced first-quarter results on Thursday in line with Wall Street expectations, although it took a larger than expected hit from the weak euro. [ID:nN03187089]

Europe accounted for 68 percent of Suntech's product sales in the first quarter, down from 74 percent for all of 2009.

Rivals such as Trina Solar Ltd (TSL.N) and First Solar (FSLR.O) also rely heavily on sales to Europe. ($1=6.828 Yuan) (Reporting by David Lin and Edmund Klamann; Editing by Sugita Katyal)