Emphasis on high-performance module production and increased shipments to markets such as the US and Japan, to take advantage of growing utility-scale and residential businesses respectively, was a key highlight in JA Solar’s quarterly conference call. China, would also receive greater attention as partnerships with utility customers expanded its pipeline.
Management said that both SECIUM and MAPLE solar technologies would make up 50% of shipments in 2012 as in-house module capacity is expected to reach 2GW, up from 1.2GW in 2011.
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The company said that it had achieved conversion efficiencies of 19.5% for SECIUM-based cells that enabled modules to be produced in the 60 cells format with output of 265W and above. The higher performing modules were a key reason for guiding higher shipments in 2012, despite industry concerns over flat to down global installations due partially to lower FiT rates in key markets such as Europe.
Management believed that it could capture a greater market share in 2012, while gaining a premium on pricing due to the increased performance of the modules, compared with competitors.
“We expected this new high-power product will help us to capture further market share in key markets where conversion [efficiency] is important and at the same time offer a higher ASP than conventional product,” noted Dr. Peng Fang, chief executive officer of JA Solar in the conference call.
According to Ming Yang, vice president of business development and corporate communications, both technologies had demonstrated better pricing power for the company as experienced in the fourth quarter of 2011 when it was able to achieve ASPs of 5% to 10% above prices for conventional modules.
“In terms of average conversion efficiency in mass production, over the fourth quarter, we achieved 18.5% efficiency for MAPLE cells and 18.8% efficiency for SECIUM cells. We are confident that we can continue to make improvements to these technologies and we have a very clear R&D roadmap to achieve 20% efficiency,” added Yang, without providing timelines on the 20% conversion efficiencies.
Capital expenditure and capacity expansion
JA Solar reported fourth quarter 2011 CapEx of US$48.9 million and US$350.2 million for the full year, up from US$261.6 million in 2010. The increase in spending was mainly due to its module capacity expansion plans at its Fengxian and Hefei plants.
However, management guided that capital spending in 2012 would be reduced significantly to approximately US$160 million. Due to module manufacturing equipment and lower purchasing costs compared to wafer or cell production equipment, JA Solar said that the targeted CapEx this year would meet its plans to further increase module capacity. Approximately 50% of CapEx would target module production capacity expansion to 2GW, up from 1.2GW in 2011. The remaining CapEx budget would go towards equipment and facilities maintenance, equipment upgrades and R&D.
Modules and markets
Management spent a lot of time in the conference call to outline its focus on module shipments and which markets those modules were expected to meet demand in 2012 as an obvious step to justify the capacity expansions from last year and continued capacity additions this year.
China market
Having previously downplayed business in China, now seen as the second biggest outside Germany yet regarded as the lowest margin market, management noted that it had partnered with companies planning a significant number of large-scale PV power plants in the country. JA Solar is also continuing to ship modules as part of the Golden Sun program.
In one example, it had partnered with Jiuquan, Gansu Provisional Government on projects where it would supply JA Solar branded modules worth over 100MW each year for several years to come in the Jiuquan region. This would also require a dedicated 100MW module plant to be built in Jiuquan to meet the partner needs, separate from its current facilities with a further unidentified number of production plants needed.
Described as an ‘integrated approach’ by management, the strategy includes partnering with leading utility companies and EPC firms, engaging in utility-scale projects and on rooftop projects.
“So in China, for example, we partnered with Datang Power on a 23MW utility-scale project in Ningxia province. Other major domestic independent power producers in China, including China Power Investments and the Huadian are also key customers of JA in the local China market,” commented Dr. Fang.
Not surprisingly, for large-scale projects in China, installed costs were expected to be required in the range of US$1.6-US$2.0/W. JA Solar said that the expected increase in business expected in China in 2012 would result in 30% or more of its module shipments.
US market
Although concerned about the real impact of duties imposed on cells and modules imported into the US from China, management highlighted it had increased its focus on the country due to expectations of further significant installation growth in 2012.
Dr. Fang noted that the company had established new sales contracts with several top tier project developers and IPPs in the US in the fourth quarter of 2011, with its shipment and business growth expected to come from the utility-scale market.
“In Q4 of 2011, we closed our agreements for shipments over 50MW to better supporting our US customers, we have opened a new office in Silicon Valley and have chosen the RFAs and operations team to better supporting the growing demand in USA and in Canada,” added Dr Fang.
The executive noted that it would be supply modules in the US that were compliant with US DoC requirements. In later questions from financial analysts in the call, management said that it had partnered with other unidentified manufacturers to supply compliant products.
Japan
Dr. Fang spent time specifically discussing the Japanese market, which would see the strategy focused on the residential market using its OEM module business model due to the need for that market highly sensitive to quality, appearance and performance.
Management said that it had already signed a number of sales agreements for 2012 that had already resulted in record shipments to Japan in February of this year. JA Solar said that it would further increase it partnerships with leading project developers and other players in the solar value chain in Japan.
The Japanese market was guided to be in the range of 15%-20% of module shipments in 2012.
Europe
The German market had remained the most important market in Europe for JA Solar in 2011. Though less commentary was given compared to other markets, management said it continued to see strong demand for its [OEM] products.
The European market was expected to account for between 20%-30% of shipments in 2012.
However, Dr. Fang noted that overall PV product shipments in the first quarter of 2012 would be in the range of 320MW-350MW, approximately 12%-20% below fourth quarter levels of 398MW a decrease of 10.6% sequentially and a decrease of 14% year-over-year.
Financial results
Financial results for the fourth quarter included total revenue of US$309.1 million, a decrease of 21.4% sequentially. 2011 revenue was US$1.71 billion, compared with US$1.87 billion in 2010, representing a year-over-year decrease of 8.7%.
The company reported a quarterly loss from operations of US$77.5 million, compared to a loss of US$43.9 million in prior quarter. For the full year, loss from operations was US$66.8 million compared to an income from operations of US$314.2 million in 2010.