North Coast Solar Stocks

November 16, 2009

Suntech hopes Arizona plant to ease US job worries

Filed under: STP, YGE — Tags: , , , , , , , — Jason @ 3:03 pm

Mon Nov 16, 2009 3:03pm EST

* Plant to start at 30 MW in third quarter of 2010

* Co expects to keep same margins for U.S.-made panels

* Co hopes new plant will ease worries on green jobs

By Laura Isensee

LOS ANGELES, Nov 16 (Reuters) – Suntech Power Holdings Co Ltd (STP), China’s largest solar panel maker, hopes its first U.S. manufacturing plant in Arizona will ease worries that China may be taking green jobs from the United States, an executive said on Monday.

Suntech said on Sunday that it picked Arizona as the site for its U.S. panel assembly facility, which will use solar cells shipped from China.

Shares of Suntech, which is set to report quarterly results on Thursday, were up nearly 13 percent at $15.47 in trading on Monday on the New York Stock Exchange.

“This is truly an international marketplace, especially when you’re talking about solar. It always has been. It makes a very positive statement — here’s a Chinese solar company that’s literally exporting jobs from China to the U.S.,” said Roger Efird, managing director of Suntech.

“We’re hoping that this kind of action helps to alleviate the worries that some people have about alternative energy jobs moving overseas,” Efird said.

Suntech plans to open its new plant in the third quarter of 2010 with an initial capacity of 30 megawatts and a staff of 75 people. The plant is part of its long-term strategy for the United States, which the company expects to be its biggest market in three years.

Piper Jaffray analyst Jesse Pichel said that Suntech’s plans for U.S. manufacturing are primarily political for now but could pay off economically in the future.

“If you want to be a global player, you have to have global production to meet local market demand,” Pichel said.

“In the future if the U.S. can be the size of the German market, then putting (manufacturing) in the States will have some economic benefit. But clearly right now, it’s a political move. Everyone wants jobs,” Pichel said.

He noted that federal buildings may require U.S.-made solar panels. “Given that Suntech uses a lot of silicon made in Texas and with module assembly in Arizona, they would be as ‘Made in the USA’ as anybody,” Pichel said.

PLANS FOR NEW PLANT

Suntech, which has a global capacity of more than 1 gigawatt, is working to finalize the location for the new plant in the Phoenix area.

“We’re looking for an 80,000 to 100,000-square-foot space. In the interest of time it makes a lot more sense to find an existing space,” Efird said.

The executive declined to estimate the plant’s cost but said the company applied for a 30 percent investment tax credit from the stimulus package.

Efird said the Arizona plant would be more automated than Suntech’s panel-assembly plants in China and would help the company save on transportation costs.

“Solar modules are heavy. They’re made primarily of glass and aluminum … We will save a significant amount of money by shipping solar cells to the U.S. as opposed to shipping finished panels to the U.S.,” Efird said.

He did not give a savings estimate but said the company’s target is for its U.S.-made panels to match the finished cost of its Chinese panels and hold the same margins.

The size of Suntech’s new plant in Arizona would allow future expansion should market conditions permit, Efird said.

Suntech is looking for a “very strong quarter” in terms of U.S. orders, the executive added.

The new plant’s staff of 75 could double within a year, he said.

Chinese panel maker Yingli Green Energy Holding Co Ltd (YGE) has also announced plans to start U.S. manufacturing and others could follow.

ThinkEquity analyst Colin Rusch said that six and 12 Chinese solar companies are “seriously considering” establishing small manufacturing in the United States to raise their profile in the country and gain market share.

“It’s a brand exercise,” Rusch said.

(Reporting by Laura Isensee, editing by Gerald E. McCormick)

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