Ontario-based Canadian Solar Inc. formed a joint venture with GCL-Poly Energy Holdings Inc, China’s largest polysilicon maker, to build a 600-megawatt solar wafer plant in Jiangsu province.
The first phase is expected to cost $ 77 million, 66.7 percent of which will be sourced from debt and the rest from equity. GCL will provide 90 percent of the equity and Canadian Solar will cover the remainder, the companies said in a statement.
“We expect this venture to help further lower our manufacturing costs from the first quarter of 2012 onwards, and further improve Canadian Solar’s gross margins, with a minimal capital expenditure requirement,” Dr. Shawn Qu, chairman of Canadian Solar, said.
The 600 MW can be expanded to 1.2 gigawatts. Canadian Solar plans to have annual production of 2GW by early 2012. In the near term, the company aims to have production capacity of around 1.3GW to 1.4GW by mid-2011.
Solar wafers are thin slices of semiconductor material, such as silicon, used to make solar cells responsible of converting sunlight directly into electricity. Assemblies of cells are called solar modules while a group of solar modules is referred to as an array.
Shares seemed to react accordingly with the company’s announcement. Canadian Solar’s stock prices in Nasdaq was at $9.85 dollars apiece when trading closed May 31, 6.14 percent higher than prices in May 27. Meanwhile, GCL Poly’s stock prices in the HongKong Stock Exchange was at $4.23 Hong Kong dollars ($0.55) apiece in July 1, up 0.06 percent from the previous close.
Headquartered in Canada, operates in China
In 2007 and 2008, due to shortages of polysilicon and silicon, Canadian Solar entered into a number of long-term supply agreements with several silicon and wafer suppliers in an effort to secure raw materials to meet production demand.
Most of the suppliers are from China and Taiwan including GCL Silicon Technology Holdings Inc, Jiangxi LDK Solar Hi-Tech Co, Neo Solar Power Corp and E-Ton, based on documents from the United States Securities and Exchange Commission.
For the second quarter, Canadian Solar has 220MW and 350MW in house production capacity for solar cells and modules respectively. The company expects the percentage of third-party cells vs. internally produced cells in the second quarter of 2011 is expected to be higher compared with first quarter of 2011 as it expands its module capacity.
GCL-Poly is the world’s third-largest maker of polysilicon used in solar cells and wafers, according to Bloomberg New Energy Finance. The Hong Kong-based company said in March it would more than double its polysilicon production capacity to 46,000 metric tons this year from a year earlier and raise wafer capacity by about 85 percent to 6.5 gigawatts.
It sources most of its polysilicon from GCL-Poly and Zheijiang Huayou Electronics, and currently relies on Taiwanese players like Neo Solar and for much of its cells.
In February, GCL-Poly approved an investment of roughly $17.7 billion Hong Kong dollars to build new polysilicon and wafer facilities in China by 2012. The company said it needs to expand to meet long-term polysilicon products and wafer supply contracts made last year with domestic and overseas customers.
The annual polysilicon production capacity of GCL after the upgrade could reach not less than 25,000 tons by year-end and up to 65,000 tons by 2012. Wafer annual production capacity is expected to be ramped up to 6.5 GW by end of 2011. Those capacities stood at 21,000MT and 3.5GW respectively at the end of 2010.
