Daniel Englander
Suntech Gobbles Up Another Poly Producer May 30, 2008 at 1:51 PM
Suntech Power painted a gloomy picture for investors back in February. The company’s fourth quarter and full year earnings came in below estimates, and its failure to lock in sufficient polysilicon supplies forced Suntech to revise down its 2008 production estimates from 700 MW to 530 MW. Rising spot market prices and difficulties finding suppliers with enough capacity to sign long term deals during 2006 and 2007 turned the company conservative on its production numbers, forcing it backload planned output until prices came down.
But that was then. Since the pounding investors handed the company on February 20, when its stock price fell 23.9 percent in intraday trading before closing down 12.3 percent, Dr. Shi - Suntech’s illustrious CEO - has gone on a polysilicon manufacturer buying spree. If you can’t beat ‘em, join ‘em - I suppose. In early March, Suntech took a $100 million stake in Russia’s Nitol Solar. The two also have a $1.5 billion, eight year polysilicon supply deal. Around the same, Suntech acquired 11.7 percent of Hoku Scientific in a $20 million deal. Suntech and Hoku also have a $678 million, 10 year supply deal. Besides investments by Suntech, Nitol and Hoku have something else in common - they’re both lame. Credit Suisse and Citigroup pulled Nitol’s $300 million IPO in February, despite a 40 percent discount on the company’s valuation, because of poor market conditions. Hoku’s Money Pit troubles have been well documented on these pages.
But Dr. Shi has a thirst for polysilicon that only acquisitions can slake. Early this week Suntech acquired a $98.9 million minority stake in Shunda Solar. The two have also signed a 13 year, 7 GW wafer deal for an undisclosed amount. But, Shunda is also building a poly plant in Jiangsu Province with an initial capacity of 1,500 metric tons. Not a lot, but a good start. Shunda probably picked up a thing or two from Hoku Scientific’s many, many missteps.
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