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JinkoSolar (JKS) Set to Supply 1.3 GW Solar Module to sPower

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JinkoSolar Holding Company Ltd. (JKS - Free Report) recently announced that its U.S.-based subsidiary has entered into a three-year agreement with sPower, an affiliate of AES Corp. (AES - Free Report) . Per the terms, the subsidiary will supply 13 gigawatt (GW) of high-efficiency solar modules to sPower.

Solar Prospects in the U.S.

A key area of the renewable space in the United States is solar energy. Per an Energy Information Administration (EIA) report, solar electricity generation in 2017 was 211 gigawatt-hour/day (GWh/d), which is likely to increase to 246 GWh/d in 2018 and 294 GWh/d in 2019. In spite of the rapid uptake, solar contributed just 1.3% of the total U.S. utility-scale generation in 2017, indicating immense scope for growth in the days ahead.

Interestingly, a sharp drop in the cost of solar energy hints at higher demand for alternative energy. Per a report by International Renewable Energy Agency (IRENA), solar photovoltaic (PV) modules prices had dropped more than 80% in 2017 from 2009. This has further set the stage for solar power providers like sPower to expand their business by purchasing increased modules from suppliers like JinkoSolar, as is evident from the latest deal.

Our View

In January 2018, President Trump implemented 30% tariff on import of solar panel components. The tariff slam subsequently led the non-U.S.-based solar companies to put up solar manufacturing facilities in the United States.

In line with this, the company announced in March its intention to open its first U.S. factory in Florida. Such a strategic move will not only enable the company to avoid the import tariff on a whole but also provide increased flexibility to support its local partners in the days to come.

Coming to JinkoSolar’s achievements in the United States, JinkoSolar has been able to acquire major solar module supply agreements in the country, of late. Evidently, in January 2018, the company sealed a deal to supply 1.75 GW of its high-efficiency solar modules, over approximately three years, to a U.S. counterparty.

In March, JinkoSolar agreed to supply 2.75 GW of modules to NextEra Energy (NEE - Free Report) . Such deals reflect the huge demand for JinkoSolar’s modules in the United States and offer scope for more such contract wins.  
The company already enjoys a solid relationship with sPower and till date has successfully supplied over 800 megawatt (MW) of solar modules for the latter’s PV projects. The latest agreement should further strengthen JinkoSolar's strategic relationship with sPower, which includes significant down payments, thereby helping the company expand manufacturing capacity in the United States.

Price Movement

JinkoSolar’s stock has lost 33.3% in a year compared with the industry’s gain of 37.4%. The underperformance may have been caused by stiff competition in the solar market.



Zacks Rank & Key Picks    

JinkoSolar currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space are Canadian Solar Inc. (CSIQ - Free Report) and SolarEdge Technologies, Inc. (SEDG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Solar delivered an average positive earnings surprise of 29.35% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 47.1% to $2.06 in the last 90 days.

SolarEdge Technologies Holdings came up with an average positive earnings surprise of 29.11% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 8.17% to $3.31 in
the last 90 days.

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