Suntech CEO: US and China Driving Solar Industry’s Growth
Suntech Power (NYSE:STP) has done extremely well in recent years rising from an unknown China-based solar company to becoming the largest producer of photovoltaic (PV) modules in the world. And while the company continues to grow both in size and reach, a recent announcement by its CEO Shi Zhengrong indicates a marked shift in demand growth from the European countries to China and the U.S. [1] Suntech designs, develops, manufactures and markets PV products and also provides engineering and construction services for building solar power systems competing with other solar industry giants like FirstSolar (NASDAQ:FSLR), SunPower (NYSE:SPWRA), LDK Solar (NYSE:LDK) and Yingli Green Energy Holding Com (NYSE:YGE).
We maintain a $10.70 price estimate for Suntech Power suggesting nearly 30% upside to the current market price.
European Led Growth in the Past
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Germany has been the single largest customer for companies manufacturing solar components for quite a few years now. Italy and France have also played an important role in driving demand in the solar sector.
In 2010, Suntech generated nearly 70% of its revenues from Europe, 15% in the US and slighly more than 5% in China underscoring the industry’s reliance on European demand.
US and China Taking the Lead in Solar
The Chinese government has made notable investments to reduce the country’s dependence on coal and other non-renewables to meet its growing energy needs. Suntech estimates solar energy will be the largest renewable source of energy in China over the next 10 years. [1]
We earlier detailed the imminent growth of Chinese demand for solar energy and its impact on Suntech in a note titled Chinese Government’s Solar Focus Could Energize Suntech Power. In that note we highlighted that the Chinese government intends to derive at least 15% of the country’s energy requirement from renewable sources by 2020. With the country’s electricity consumption currently at more than 4 trillion kilowatt-hours (kWh), this represents a substantial increase in solar power generation
Growth in the U.S. has already been strong in recent years and is expected to continue on the back of the revised renewable standards coupled with Congress pushing solar initiatives forward. Some states have also come up with their own mandates like the state of California, which has set a target of generating at least one-third of its electricity from renewable sources by 2020.
See our full analysis for Suntech Power
Notes:- China, U.S. May Be Fastest-Growing Markets for Suntech, CEO Says, Bloomberg, June 20 2011 [↩] [↩]