Suntech Power (
), one of China's largest solar firms, plans to expand its
operations to Uzbekistan. The firm is expected to invest around $10
million in a joint venture with Uzbekistan's state energy company,
Uzbenergo, to construct a solar panel manufacturing facility in the
country. Like most Chinese solar firms, Suntech has been hit by
rising trade barriers, subsidy cutbacks in key markets and a
chronic global oversupply of solar panels. We believe the
expansion allows the firm a head-start in a largely under-tapped
market and also provides the firm opportunities to
diversify its revenue stream.
Solar Sector In Uzbekistan
Uzbekistan's electricity sector is still heavily reliant on
fossil fuels such as natural gas and solar capacity in the country
is presently negligible. However, interest in renewable energy
has been picking up as the country looks to diversify its energy
mix. The country's climatic conditions are also quite conducive to
solar power with around 2,000 hours of sunshine received annually
in the northern part of the country and over 3000 hours in the
south. The country will also be extending tax breaks for foreign
direct investment in the renewable power sector. State energy firm,
Uzbenergo, intends to build a total of around 2 GW of solar power
plants over the next few years with a portion of the financing for
the projects coming from the Asian Development Bank.
Other foreign investors such as Russia's Lukoil have also
shown interest in solar sector in the country.
Does The Move Make Sense For Suntech?
While Chinese solar firms have been expanding internationally,
most of their acquisitions have been aimed at
circumventing tariffs in the U.S. and European markets, or
acquiring technical capabilities. Suntech's move is quite unique
since it involves building manufacturing capacity in
an emerging solar market.
Building panel manufacturing capacity in the country should help
the firm cut down on costs and make it more competitive in the
market. Despite the firm's already high debt load (debt net of cash
was around $1.6 billion) the firm should be able to raise funding
for this project, given that lenders such as China Development Bank
have been financing solar companies for strategic expansions
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