Thursday, April 15, 2010

Solar Module Acquisition Better for LDK Solar or Chairman?

By controlling each node of the manufacturing value chain — and locating its new polysilicon plant adjacent to its existing low-cost (wages) wafer facility in Xinyu City, China — LDK Solar (LDK-$8.43) was confident it could reduce overall production costs, improve product quality (such as conversion efficiency rates), and enhance its core competitiveness in an increasingly crowded (and commodity-like) market for solar wafers.

In 2009, aggregate annualized production was about 6,000 metric tons — significantly lower than forecasted nameplate capacity of 16,000 metric tons. In addition to construction delays, costs for the silicon plant ha approached $2 billion — well above the forecasted budget of $1.2 billion.

In the fourth-quarter of 2009, LDK reported wafer average selling prices (ASP) of US$0.83 per watt, down from US$2.24 per watt in 2007. The significant decline in wafer prices forced the company to write down the carrying values of its inventories by almost US$500 million in the last two years.

Despite its inability to capture wafer cost advantages through the ownership of more of its upstream supplier chain, chairman and chief executive officer Xiaofeng Peng insists LDK should move downstream. In February LDJ purchased a crystalline module manufacturing plant owned by Peng for $21.5 million.

Is the decision best for LDK or Peng?
Read More > ….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

1 comment:

Edward Robins said...

A Solar Energy system can operate entirely independent, not requiring a connection to a power or gas grid at all. Systems can therefore be installed in remote locations (like holiday log cabins), making it more practical and cost-effective than the supply of utility electricity to a new site.