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JA Solar Holdings Co. Ltd. (JASO - Analyst Report) has entered into an agreement with an affiliate of China Power Investment Corporation ("CPI") – CPI Huanghe Hydropower Development Co. Ltd. – for the supply of solar modules.

Per the deal, JA Solar will supply 96 megawatt (MW) of solar modules to CPI Huanghe Hydropower, which are likely to be utilized in two solar projects in China's Qinghai Province. The company has already started deliveries of the modules and expects to wrap it up by the end of this month.

Situated in Gonghe County in Qinghai's Hainan Autonomous Prefecture, these two projects have a capacity of 320 MW and 200 MW, respectively. The first project is a hybrid hydro-solar power station that is expected to be the biggest of its kind worldwide. This station will work in collaboration with the existing Longyangxia Hydro Power Station in order to boost uninterrupted energy generation. Both projects are scheduled to begin commercial operation by October.

JA Solar − the largest solar-cell producer by capacity – is one of the most cost-efficient solar producers in the world, with a geographically diverse customer base as well as silicon wafer supply agreements in place to feed its production.

Last month, the company posted second quarter 2013 results. Although JA Solar incurred a loss in the reported quarter, it managed to cut its loss on a sequential as well as year-over-year basis. The narrower loss came on the heels of higher-than-expected shipments. Strong demand in the high average selling price market of Japan led to the growth.

JA Solar is also steadily expanding its customer base worldwide in several geographic end markets including the U.S., Canada, Italy, Japan, Australia and India. Europe accounted for 20% and the Americas accounted for about 8% of its total shipments last quarter.

In the domestic field, JA Solar would stand to gain from the Chinese government boosting its target to 35 gigawatt (GW) of cumulative solar installations by 2015. The company has also made major progress in accessing new markets like Thailand and Australia.

However, the U.S. Department of Commerce’s (DOC) imposition of tariffs on Chinese solar product manufacturers has impacted solar players like JASO, LDK Solar Co. Ltd. and Suntech Power Holdings Co. Ltd. among others. This action by the DOC is mainly to constrict Chinese solar-products supply in the U.S. and encourage domestic players to tap the growing renewable U.S. market.

Hence, weak demand and a global supply glut of wafer and module, resulting in falling average selling prices are headline risks. JA Solar has also registered declining revenues for seven consecutive quarters now. In such a situation, we believe domestic contracts, like the latest one, will bring some relief to the company’s growth prospects.

JA Solar Holdings Co. currently has a Zacks Rank #2 (Buy). Another attractive stock in the solar space is SunPower Corp. (SPWR - Analyst Report) sporting a Zacks Rank #1 (Strong Buy).

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