Updated: Suntech plots three-phase 500MW project in Panzhihua, China worth US$1.2 billion

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Update July 2nd: Suntech’s press office has confirmed the news of a planned 500MW project for Panzhihua, China. The deal is “a non-binding strategic agreement similar to our agreement with the Qinghai government,” said our source, and could potentially lead to the Chinese PV market becoming much bigger than expected in the not-too-distant future.

Original story: Suntech is hitting the headlines twice in as many days with the news that the company is planning to invest RMB 8 billion (just under US$1.2 billion) in a 500MW solar power project in Panzhihua, Sichuan province. The report on JLM Pacific Epoch, citing a report on SPVChina.com, claimed that Suntech signed the framework agreement for the three-phase on-grid project with the Panzhihua municipal government in Wuxi, Jiangsu province on June 26th.

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Hui Tong Credit Guaranty and the Taiwan-based Nanowin Technology have also expressed an interest in the project, with a rumoured US$150 million lined up for investment in the region.

Commenting on the news, Barclays Capital Solar Daily’s analyst Vishal Shah said that this agreement being a framework agreement, as was the Qinghai news just over two weeks ago, the projects actually taking shape will depend on receipt of NDRC approval, permits, feed-in-tariffs and funding.

Looking forward to the plants’ completion and the likely timescale, Shah commented that, assuming initial volumes of 50MW per project, the world could see implementation in the second half of next year.

However, working with the figures as given in the SPVChina.com report, an investment of RMB 8 billion would suggest a system price of US$2.4/W.

Shah continued: “…Considering potential FIT of $0.16/kWh, the system price appears to be reasonable. Assuming project starts in 2H10, module prices would have to decline to $1.5/W or lower in order for the project economics to work.”

With an eye on the long-term implications of the two huge solar plans, Shah seems optimistic about Suntech’s potential to remain an industry leader, despite the polysilicon oversupply situation.

“We believe STP remains well positioned to emerge as an industry leader given strong traction in both Chinese and U.S utility scale solar markets. More importantly, prospects within the Chinese solar market appear promising – if some of these projects get developed, China could potentially become the third largest market in 2012 (behind U.S and Germany).”

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