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China's JKS in South Africa Solar Deal

JKS

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Emerging solar power product manufacturer, JinkoSolar Holding Co., Ltd (JKS - Snapshot Report), announced that it has won a contract to deliver 81 MW of photovoltaic (“PV”) modules at a fixed price to WBHO-Building Energy (Pty) Ltd. (“WBHO-BE”) for the development of a solar PV park in South Africa.

The project is situated in Gamagara Local Municipality in the Northern Cape Province of South Africa. Per the agreement, JinkoSolar would supply a total of 344,540 PV high quality solar modules to WBHO-BE. The project will be constructed, designed and commissioned by WBHO-BE and is one of the first to be sanctioned under the government’s Renewable Energy Program.

The shipment of the PV modules is expected to conclude by late 2013, beginning in the first quarter 2013. With the completion of the program, it will become the largest PV solar project in South Africa.

The solar program will have an output capacity of around 146 Gigawatt-hour ("GWh") and is anticipated to power about 12,000 homes. In addition, the project will help in reducing carbon emissions of roughly 145,800 tons on an annual basis.

JinkoSolar has been aggressively expanding its business footprint across Europe and Africa. The company at the end of October 2012 supplied 5.7 MW of PV modules for the development of an 11.6 MW solar power station in Starkenberg, Thuringia, Germany.

JinkoSolar was appointed as the principal module supplier as well as technical support provider in an agreement with China Jiangxi Corporation for International Economic & Technical Co, Ltd. (“CJIC”) for a 50MW solar power project in Kenya.

We believe these programs will certainly add value to JinkoSolar’s growth prospects. The constant support given by the Chinese government to the company’s domestic renewable energy programs is also an encouraging sign. The company presently retains a short-term Zacks #3 Rank (Hold rating).

Another Zacks #3 Rank solar product major, MEMC Electronic Materials Inc. , is also eyeing prospects in South Africa. This is evident from its subsidiary, SunEdison’s recent collaboration with Chint Solar (China-based electrical appliance maker), the Public Investment Corporation (Africa’s largest investment firm) and the Kurisani Youth Development Trust for the development of a 58MW solar plant in the country.

The Zacks Consensus Estimates for the fourth quarter and full-year 2012 currently stand at a loss of 83 cents and $6.02 per share, respectively. Owing to the tariff austerity and the anti-subsidy tariff of 2.9% to 4.73% imposed in March 2012, JinkoSolar will face difficulties in gaining traction in the growing U.S. market, which will affect its earnings going forward.

The beleaguered European economy will also remain an overhang for the company's business prospects. Amid such a scenario, the South African solar project remains the only glimmer of hope.

With a market capitalization of $140.21 million, Shangrao, China-based JinkoSolar has 7,941 total employees.

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