Suntech launching U.S. financing programs

SAN FRANCISCO Tue Jun 14, 2011 9:33pm EDT

SAN FRANCISCO (Reuters) - Solar panel maker Suntech Power Holdings Co Ltd STP.N plans to launch four or five financing programs for the U.S. market in the next six to nine months, the head of its North American business said on Tuesday.

The initiatives will cover various parts of the industry, including residential solar, Suntech America President Steven Chan said at the Reuters Global Energy and Climate Summit in San Francisco.

"We about have four or five parallel initiatives that all relate to financing, and in different channels," Chan said. "So financing for the residential channel, the commercial channel, and also the utility channel."

The Chinese company launched a construction line of credit just last week and is working on a residential financing program that will launch in the next quarter, Chan said.

Financing has been a major bottleneck for renewable projects, since without it home owners and other customers essentially are asked to pay for years of electricity upfront.

Tax equity is the key financing tool that solar project developers have relied on for new plants. In that market, developers sell the future tax benefits of the project to a financial partner who uses them to reduce its tax liability.

The market had thrived until the financial crisis pushed Lehman Brothers into bankruptcy and drove insurer AIG out of the market in which both had been leading players.

Suntech, the world's largest solar panel maker, is working on the programs with financial institutions and investment banks who have raised money for that purpose, Chan said.

Returns on the projects would likely be in the range of 7 to 10 percent, he added.

Banks' appetite for tax equity financing has recovered since the Wall Street collapse in 2008, but there is still not enough financing to meet the demand from companies seeking to develop new solar projects.

According to Chan, increasing access to financing is similar to cutting prices in that it stimulates sales.

"It moves the needle not so much from a return perspective, but from an opening up of the market perspective," Chan said.

In some cases, players from outside the financial industry have stepped in to fill the gap. Google Inc (GOOG.O), for instance, earlier on Tuesday said it would finance up to $280 million of residential solar projects in a deal with SolarCity -- a Suntech customer.

In addition, French energy giant Total SA (TOTF.PA) will provide Suntech's U.S. rival, SunPower Corp SPWRA.O, with up to $1 billion of credit support over the next five years as part of its deal to take a 60 percent stake in the panel maker.

"There are definitely companies and banks that we are in discussions with on a line of credit," Chan said.

Also during the interview, Chan said he expects polysilicon prices to settle between $30 a kilogram and $40 per kilogram this year. They have fallen dramatically so far this year and are currently in the low $40s, he said.

As for panel prices, Chan said Suntech prices were slightly above $1.40 per watt for delivery in the second half of the year.

Panel and silicon prices have been in a freefall this year after subsidy cuts in key European markets hampered demand and lead to a flood of solar products in the market.

Suntech shares rose 35 cents, or 4.8 percent, to close at $7.63 Tuesday on the New York Stock Exchange.

(Additional reporting by Matt Daily in Houston and Sarah McBride, Noel Randewich and Rory Carroll in San Francisco; Editing by Bernard Orr)

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