Suntech Power Holdings (NYSE: STP) said Wednesday the market is brightening up a bit as it prepares for growth in the United States, France, Italy and Japan in 2009.
The company estimates that solar panel demand in the United States could reach 400 megawatts to 700 megawatts in 2009, while the global market could take in more than 5 gigawatts, said Steven Chan, Suntech's chief strategy officer, during a conference call with analysts. Chan cautioned that the U.S. outlook depends largely on whether the stimulus package that President Obama signed only a day earlier could achieve its desired results.
The Chinese solar panel maker has increased its product shipment since the fourth quarter, when the financial market crisis forced it to lay off 800 people, or 10 percent of its workforce, while keeping the factories running at 50 percent to 60 percent capacity.
"The flow is beginning to pick up," said Zhengrong Shi, CEO of Suntech, during the conference call. "The solar chain is becoming more familiar with the environment and sourcing. People are breaking up large projects into smaller pieces to speed up financing."
Suntech makes mono- and multicrystalline silicon solar cells and assembles them into panels. It also is installing factory equipment for making thin films using a combination of amorphous silicon plus microcrystalline silicon. The company expects to ship 15 megawatts to 20 megawatts of thin films, mostly in the second half of 2009, Shi said.
Suntech's executives struck a positive tone during their discussions of the company's 2008 financial performances that included a sharp decline in the fourth quarter. The Chinese solar cell and panel maker posted a net loss of $65.9 million, or 42 cents per American depository share (ADS) for the fourth quarter, compared with a net income of $50.6 million, or 29 cents per ADS, in the year-ago period. Suntech reported a net income of $55.9 million, or 33 cents per ADS, for the third quarter of 2008.
The company generated $414.4 million in fourth-quarter revenue, up 4.2 percent from $397.5 million a year ago. Suntech posted $594.4 million for the third-quarter revenue.
For 2008, Suntech brought in about $1.92 billion in revenue, up 42 percent from $1.35 billion 2007. Net income reached $111 million, or 66 cents per ADS, down 35 percent from roughly $171 million, or $1.02 per ADS in 2007.
Suntech's shares on the New York Stock Exchange dropped about 2 percent to reach $8.9 per share in recent trading.
Government incentives have played a key role in boosting the worldwide solar demand even before the financial crisis started to batter the sector. Suntech is counting on countries with feed-in tariffs, which are lucrative solar electric rates set by the government, to drive up sales. Shi highlighted France and Italy as two promising markets.
The outlook for Spain, which by some estimates installed a couple of gigawatts in 2008, is less certain. The Spanish government dramatically reduced the national cap for solar energy installations to 500 megawatts for 2009. Not only that, the government isn't quick about applying the new feed-in tariffs, which causes projects to be put on hold, Chan said, adding that the company has over 100 megawatts worth of projects under development.
"We have customers who have done everything, including building out the racks, and they are just waiting for a resolution before installing the modules," Chan said.
Japan is another growth market because the country plans to bring back incentives that should increase residential solar installations, Shi said. The company, which has contracts with Japanese customers, expects to see a demand of 400 megawatts to 500 megawatts for the Japanese market this year, he added.
The U.S. market could grow nicely if the stimulus plan signed by Obama does make it easier for solar power developers to line up project financing. The plan also includes tax breaks and other incentives for companies that make solar cells and panels (see Obama Signs Stimulus Package).
Suntech bought a solar installation company last year and formed a joint venture with the project developer MMA Renewable Ventures last year to position itself for the solar market. The joint venture, called Gemini Solar Development Co., is angling for a 30-megawatt project with Austin Energy, a municipal utility serving the city of Austin and the surrounding areas.
To cut costs, Suntech has renegotiated a 10-year silicon contract with MEMC Electronic Materials to get cheaper material. It also recently invested about $8.1 million in a new silicon maker, Asia Silicon. Suntech expects a 30 percent or more decline in silicon expenses for 2009, Shi said.
Suntech shipped 497.5 megawatts worth of solar cells and panels in 2008, a 36 percent growth from 2007. The company mostly sells solar panels.
For 2009, Suntech anticipates shipping more than 800 megawatts worth of solar products. The company expects to generate between $340 million and $380 million in first-quarter revenue, and achieve a gross margin of 12 percent to 15 percent.
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