Solargiga allots 2b yuan to boost capacity fivefold

PUBLISHED : Monday, 27 October, 2008, 12:00am
UPDATED : Monday, 27 October, 2008, 12:00am

Solargiga Energy Holdings, the world's second-largest producer of monocrystalline silicon ingots, is planning a fivefold capacity expansion in the next four years that could cost at least 2 billion yuan (HK$2.26 billion), according to its chief executive.

The Nanjing company wants to seize on an expected loosening in supply of the raw material polysilicon in the next few years that is expected to drive up sales of solar panels, the final product of a long industry chain.

Solargiga focuses on the upstream segment of the chain, making silicon ingots and wafers that are turned into solar cells and panels by its customers. These products are made from silicon, the world's second most abundant element.

The company aimed to raise its silicon ingot output capacity by 2,000 tonnes annually to 10,000 by the end of 2012 from 2,000 tonnes at present, chief executive Hsu You-yuan said.

It takes 10 tonnes of ingots to produce solar panels with power generation capacity of one megawatt. Mr Hsu said each 2,000 tonnes of capacity added need about 400 million yuan of investment in equipment.

He declined to reveal the total outlay involved but said internal cash flows should be sufficient to fund equipment purchases. Its plants are in Jinzhou, Liaoning province.

Solargiga had 574.98 million yuan of cash at the end of June. It had no long-term bank loan and raised 613.4 million yuan from listing in March.

In the third quarter, net profit surged 91 per cent year on year to 123.2 million yuan, while profit for the first nine months soared 133 per cent to 318.1 million yuan, excluding one-off non-operating items.

Four analysts polled by Thomson Reuters forecast a net profit of 447.97 million yuan this year and 627.22 million yuan next year, up from 292.24 million yuan last year.

Solargiga aims to overtake Hebei-based Sino-Japanese joint venture Hebei Ningjin Songgong Semiconductor, the world's largest monocrystalline silicon ingots maker by capacity next year.

'We believe they will not expand capacity to as much as our 4,000 tonnes by the end of next year,' Mr Hsu said.

With polysilicon prices rising more than 10-fold since 2003 on tight supply, Solargiga this year signed a US$455 million 10-year deal to source the material from Japan's Hoku Scientific to hedge its spot market exposure.

Mr Hsu said Solargiga hoped to source 50 per cent of its needs from the spot market and the rest via long-term contracts to lower the price risk.

After hitting a high of just over US$430 per kilogramme in the second quarter, polysilicon prices have eased to US$350 to US$380, similar to that of last year-end. The raw material makes up 70 per cent of Solargiga's output costs.

'The polysilicon market will still be a seller's market next year, but it may reach supply-demand balance in 2010 and possibly turn into a buyer's market in 2011,' Mr Hsu said.