Knobias Clip Report (04-02-2008)
Submitted By Knobias ClipReport
TSL: Leading the Solar Arena Higher Following LT Supply Agreement
Wednesday saw a rally in the solar names for the second straight session which dwarfed the moves in Blue Chips and the Nasdaq. One name that saw a majority of the move was Trina Solar, Limited (TSL). The Company, through its wholly-owned subsidiary Changzhou Trina Solar Energy Co. Ltd, is a well recognized manufacturer of high quality modules and has a long history as a solar PV pioneer since it was founded in 1997 as a system installation company.
Trina Solar is currently one of the few PV manufacturers that has developed a vertically integrated business model from the production of monocrystalline and multicrystalline ingots, wafers and cells to the assembly of high quality modules.
On Wednesday, the Company announced that it signed a long-term polysilicon supply agreement with a subsidiary of GCL Silicon Technology Holdings Ltd. Under this agreement, GCL Silicon Technology will supply Trina Solar with virgin polysilicon sufficient to produce approximately 2,600 MW of solar modules in aggregate over eight years. Delivery of polysilicon at predetermined prices will start in April of 2008.
This long-term polysilicon supply agreement will enhance the Company’s raw material supplies and increase its cost structure visibility to strengthen its position as a leading global PV manufacturer. After signing this agreement and together with other polysilicon supply agreements, the Company has now secured approximately 95% of its estimated silicon feedstock requirements for 2008, an equivalent of approximately 195 MW based on a production target of 200 to 210 MW of module output.
Following the news, shares of Trina gapped up at the open and gained over 11% on over 2.8 million shares traded.
China is among the fastest growing countries for manufacturers of both solar cells and modules. In addition to the large export market, photovoltaic demand in China is expected to grow exponentially in the near future. The stated goal of the Chinese government is to have 450MW of photovoltaic power installed by 2010, up from approximately 75MW cumulatively installed in 2005. Furthering demand for solar power, the Chinese government passed legislation in 2005 mandating the use of renewable energy resources for 10 percent of China’s energy consumption by the year 2020.
While the overall market flounders in its current state which seems void of any meaningful growth, it might be wise to watch for names in the solar area as the industry begins its growth phase. And with their pullbacks from the beginning of the year, many in the area are certainly becoming cheap ways to play growth in a domestic market which lacks that opportunity.
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