Yingli’s Latin America Plans Begin To Take Shape With Peru Project

Due to the challenging conditions in the largest markets of Europe and North America, Chinese solar firms are beginning to tap the under-penetrated markets of Asia and Latin America to drive the next wave of growth. Yingli Green Energy (NYSE:YGE) took a positive step in this direction with the announcement that it has supplied 40 MW of multi-crystalline solar panels to Latin America’s largest solar power plant located in Peru. The project, a joint venture between Spain’s Gestamp Solar and Solarpack, is based in two locations and is expected to commence operations by the end of this year. ^[1] Yingli is the sole supplier of panels for this project.

Latin America Shows Promise

Latin America is home to some of the world’s fastest growing economies. Electricity demand in the region has been growing due to rapid industrialization and rising economic empowerment of the middle class. Most of the countries in the region rely on hydro and thermal energy for electricity generation presently.

Although solar power installations are currently negligible in Latin America, it could play an increasing role in the electricity generation mix. The region has relatively high electricity costs, meaning that solar generated power could reach grid parity in these markets relatively quickly as the cost of solar panels continue to decline.  Also, given that much of the region receives excellent solar irradiance due to proximity to the equator, solar power is likely to be more economically viable.

Governments in the region are also playing their part to encourage solar power installations.  Mexico has initiated a net-metering system, which allows solar system owners to receive credit for the power that is sold to the grid. Brazil is studying a similar arrangement. ^[2] As of last year, the governments of Peru and Argentina conducted energy auctions in which 10 solar power projects won contracts to sell a total of 100 MW. ^[3]

Yingli’s Progress

Yingli operates sales and distribution offices for its photovoltaic products in Chile and Brazil, and is looking to further strengthen its presence in the Latin American market. To improve its brand recognition in the region, the company has signed up as an official sponsor of the FIFA soccer world cup that will be held in Brazil in 2014.

We have a price estimate of $2.16 for Yingli Green Energy, which is about 25% ahead of its current market price.

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1. Yingli Solar Press Release [↩]
2. Renewable Energy World [↩]
3. Brazil Needs State Incentives To Boost Solar Power, Bloomberg [↩]