Trina Solar Made a Huge Splash in Chinese Solar Today
Trina Solar hasn't been a big player in the utility scale construction market but that changed in a big way this morning. It announced an agreement with the local government authority of Turpan Prefecture to develop 1 GW of ground-mounted solar-power-plant projects in western China, a huge project for any company.
The projects will be completed over the course of four years with the first 300 MW coming next year, if all goes well. To put the size in perspective: Next year's phase is 12.5% of the company's 2.4 GW capacity and the entire project is nearly five months worth of production.
The deal also includes construction of a PV module manufacturing facility in the local area. Details on that expansion were sparse, so we don't know exactly what kind of capacity will be added to Trina Solar.
China becomes a solar energy powerhouse
The government of China is planning to install 35 GW of solar by the end of 2015 and large projects like this will need to be a piece of the puzzle. This also puts Trina Solar in a league with large project builders like Canadian Solar and First Solar , who have used high project margins to generate profits in 2013.
What we know less about is how profitable a major project will be in China, where system margins don't appear to be as high as other parts of the world and where incentives aren't paid consistently. Keep an eye on comments Trina Solar makes about this and other projects in coming quarters because the systems business could help increase gross margins beyond the 15.2% reported last quarter or they could be a drag in Chinese incentives aren't paid.
That's the advantage Canadian Solar has building projects in Canada and why First Solar focuses in the U.S., South America, and other more open markets.
An incremental positive for Trina Solar
Signing a deal to captivate demand for solar modules should be viewed as a positive for Trina Solar and that's why shares are up today. The next step is to prove that these projects help improve profits, which I expect to grow consistently next year. Time will tell if this backlog can do that for Trina Solar or anyone else building projects in China.
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The article Trina Solar Made a Huge Splash in Chinese Solar Today originally appeared on Fool.com.
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