LDK Solar (NYSE:LDK) announced that it has won a contract in China to build solar plants with a total capacity of 600 MW.  The news came as a much needed boost for LDK Solar, which has been hit by falling demand for solar panels in major markets such as Germany and the imposition of tariffs on Chinese imports in the U.S. market. LDK Solar and its competitors are increasingly focusing on the local market in China to drive demand for solar equipment in 2012 and beyond, as traditional markets cut subsidies and look to invoke protectionist measures to protect the domestic industry from cheap Chinese imports.
We have a $3.67 price estimate for LDK Solar, which is more than double its current market price.
According to the new contract, LDK will build 3 solar plants of 200 MW each in the province of Gansu.  The plants will be located in the cities of Jiuquan, Jayuguan and Zhangye. The contract comes as a major relief for LDK Solar, which has been hit by a steep fall in prices and low demand from key markets as well as stiff competition. Players like LDK Solar have focused on systems installations to offset declining module prices. LDK Solar is especially focused on the Chinese market for new business as countries like Germany impose sharp cuts on subsidies for solar power.
The Chinese solar industry is hoping that China will add between 3 GW and 5 GW of solar capacity in 2012.  LDK Solar has said that it expects to earn 39% of its revenues from the Chinese market in 2012. In 2011, China accounted for 34% of the company’s overall revenues. The Chinese government is looking to develop ‘new energy’ as a strategic industry. (See: LDK May Receive Boost As Chinese Stimulus Looks Likely) Demand for solar equipment is still largely dependent on government support in most markets.
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