Suntech sees return to net profit, no price cuts-INTERVIEW

Trade the News

Tuesday September 07, 2010 07:43:13 PM GMT

* No need to cut European prices in 2011

* 2011 global demand seen flat

* North American growth eyed

* Long-term IRR seen lower but reliable

(Adds quotes, details, background)

By Martin Roberts

VALENCIA, Spain, Sept 7 (Reuters) - China's Suntech Power Holdings Co expects to return to net profit in the third and fourth quarters when it will not need to take charges, which hit second-quarter results, a senior company executive said.

The company, the largest Chinese maker of photovoltaic equipment, reported a net loss of $174.9 million in the second quarter, or 97 cents per American depositary share, after charges of $1.00 per share.

"We took a fair and realistic view of the value of our investments in terms of the impairments and prepayments, and our perspective is that we don't foresee that there's going to be those kind of issues recurring in Q3 and Q4," Suntech Europe President Jerry Stokes said in an interview on Tuesday.

Speaking on the sidelines of a conference, Stokes said he expected Suntech's prices to remain attractive to solar power investors next year due to its brand positioning, scale and track record.

"We don't see any need for our prices to go down going into 2011, because applying Suntech prices to the expected tariffs of 2011, we will still be well above the historical hurdle rates at which investments took place," he said.

Analysts have said the solar sector may face a glut in supply next year due to an expected drop in demand after subsidies are cut in Germany, the world's biggest solar market.

Governments have subsidised solar power in recent years, particularly in Europe, through so-called "feed-in tariffs" in order to cut greenhouse gas emissions and dependence on imported fossil fuels.

The International Energy Agency estimates solar power can supply 22 percent of the world's electricity by 2050 but will not be able to compete with conventional power until 2025-30.

LONG-TERM INVESTMENT

Stokes expected global demand for photovoltaic (PV) panels, -- which covert sunlight into electricity -- to be flat next year as increasing interest outside Europe offsets a decline in the German market.

"North America is one of the key critical markets, so we're going to see tremendous growth there," he said at the 25th European PV Solar Energy Conference.

Stokes added that while he expected internal rates of return (IRR) from solar power projects to fall from recent levels as cash-strapped European governments cut spending in general, he predicted steady profits would lure long-term investors.

"When we look at austerity packages across Europe, those are headline-grabbing, but let's remember that PV systems will continue to perform well after the 20-25 years of feed-in tariff," he said.

"No one knows where the cost of gas, coal or oil is really going to go in the future. It's compelling to compare today's solar costs with traditionally generated energy costs, but we are the ultimate hedge, because the sun's rays are free." (Reporting by Martin Roberts; Editing by Jane Baird)

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