Analyst: Suntech, Nitol deal exemplifies Si supply strain

Mar. 14, 2008 – Suntech Power Holdings has taken up to a $100M minority interest in one of its suppliers, PV cell/module manufacturer Nitol Solar, which will among other things help accelerate development of a new 3700MT/year polysilicon plant in Siberia, due to come online in 2009. The two companies noted in a statement that they are already in a multiyear first-phase supply deal from 2009-2015.

American Technology Research analyst John Hardy noted that Nitol has >$1.5B in total backlog commitments through 2015, with customers including Evergreen Solar, Motech, Trina Solar, and ersol. Last month the firm shelved a planned IPO citing the ubiquitous “unfavorable market conditions,” so the new funds through Suntech are timely, Hardy noted. “Clearly this strategic stake in a poly producer was the primary catalyst for STP’s speedy convert offering earlier in the week,” he writes in a research note.

Overall the stake in Nitol is “an incremental long-term positive” for Suntech, since it will help Nitol meet its supply agreements with the firm (among other customers), and ensures access to raw materials, Hardy writes. He also notes a key benefit in Nitol’s ability to manufacture its own trichlorosilane gas, a key material used in the production of polysilicon.

In a broader view, he adds, this Suntech-Nitol deal illustrates how tight the polysilicon market still is, which “continues to drive cell and module manufacturers to be creative in their procurement strategies” (Suntech also recently invested in Hoku Scientific, a company also eyeing a two-year production ramp.)

On the flip side, it also shows that new entrants into the polysilicon supply market “are having to seek financing from those that need their services directly as opposed to traditional routes such as the public markets” — something that is due to a “return-on-asset” advantage still held by incumbent polysilicon suppliers, he notes.


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