Suntech, Solarstrom in Solar Deal

One of the world's largest producers of solar panels, Suntech Power Holdings Co. Ltd. (STP - Analyst Report) has entered into a contract with Solarstrom AG. As per the terms of the contract, the former will deliver approximately 26 megawatts (“MW”) of monocrystalline and polycrystalline solar panels to the latter.

Solarstrom AG S.A.G., located in Freiburg, Germany is a manufacturer and independent provider of high-quality photovoltaic (“PV”) plants configured to customer's individual needs. It constructs efficient plants of all sizes both in Germany and abroad. Solarstrom also produces solar energy at its own plants and will use the solar panels for its new power plants in Germany.

Suntech Power has been providing services to Solarstrom’s PV power plant for the last 14 years. Moreover, the company has been providing solar panels to many other companies due to its proven high-quality standard modules, which can also be well financed when installed in projects.

In July this year, the company entered into an agreement with IBC SOLAR to supply 50 MW of solar panels through the end of 2012. Prior to that, the company had inked a deal with Krannich Solar to supply up to 120 MW of solar panels in full-year 2012.

Recently, in September, Suntech Power Holdings announced preliminary financial results for the second quarter ended June 30, 2012. In the reported quarter, greater demand from European markets, China, Japan and Australia drove sequential shipment growth. As a result, Suntech's shipments of PV products for the quarter increased by approximately 33% from the first quarter of 2012, higher than the previous guidance of a 20% increase in PV shipments.

In the third quarter of 2012, Suntech expects PV shipments to be relatively flat with the second quarter of 2012. Suntech now expects 2012 annual PV shipments to be in the range of 1.8GW to 2.0GW, compared with its previous guidance of 2.1GW to 2.5GW.

Based in Wuxi, China, Suntech Power Holdings Company Ltd. is a solar energy company that designs, develops, manufactures and markets a variety of PV products, including a broad range of value-added building-integrated photovoltaics, or BIPV, products. The company manufactures silicon wafers and ingots used in manufacturing its PV cells (both monocrystalline and multi crystalline) and modules. Suntech’s PV system integration services include the design, installation, commissioning and testing of PV systems. Suntech's PV system integration services include planning, engineering, procurement of permits and equipment, construction management, monitoring and maintenance.

Suntech Power’s geographically diversified customer base insulates it from risk. Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies.

However, the positives are overshadowed by fears of tepid module demand in Europe, rising competition, the volatile Euro and the financial stability of its customers. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

Suntech’s competitors in the solar industry are First Solar, Inc. (FSLR - Analyst Report) and SunPower Corporation (SPWR - Analyst Report).