Suntech Strikes European Sales Agreement For 120 MW Of Panels

by Trefis Team
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Chinese solar panel manufacturer Suntech Power (NYSE:STP) has entered into a partnership with with European systems provider Karnnich Systems to supply up to 120 MW of solar panels. [1]  The deal is a significant achievement for Suntech, which like other panel manufacturers is facing falling demand in European markets because of a pull back in government support for the solar industry. In 2011, a last minute rush from solar installers in Germany to beat annual tariff revisions helped Suntech and other panel manufacturers such as Trina Solar (NYSE:TSL) post strong revenues although the results were weakened by lower margins.

We have a $3.54 price estimate for Suntech Power, which is at a 40% premium to its current stock price.

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Quality push

According to Suntech, the deal with Karnnich Systems highlights the trend that customers prefer quality products proven to be reliable. Karnnich, a distributor of solar equipment, components and complete systems, will market Suntech’s panels in Europe and Australia. The company has focused on providing products that meet strict quality requirements and work perfectly with other components in a system. If Suntech is able to push 120 MW of solar panels through this distributor in 2012, to markets in Europe, it could soften the impact of declining panel sales. Panel sales are set to fall in 2012, as the demand from installers in Germany and Italy experiences a sharp fall.

Suntech is focusing on domestic demand from solar installations in China to drive sales in 2012. Some optimistic industry estimates suggest that the country could add almost 5 GW of solar power generating capacity in 2012, becoming one of the largest markets for solar panels in the world.

Emerging markets in Asia and the Middle East are also set to become important for the company’s sales as European governments aggressively cut support to the industry. The latest deal with Karnnich Systems should help boost the company’s sales in European markets for this year and help it override the industry shakedown, which has resulted in bankruptcy of multiple equipment manufacturers over the past year.

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Notes:
  1. Suntech and Krannich Solar Announce 120MW Sales Agreement, Suntech []
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