GT Solar (SOLR) reported its strongest ever earnings since its 2008 IPO in the solar sector. GT Solar guided 2012 earnings much higher than expected, from $1.25 to $1.50 a share to $1.55 to $1.85 a share due to its polysilicon furnace demand. For a derivative play, polysilicon producers may benefit from the bigger poly market in 2011 and 2012, as GT Solar believes polysilicon demand will be rising strongly well into 2012 (GT Solar sells furnace to produce polysilicon).
Looking around, Korea's OCI poly spent over $200M to meet demand in Korean and Taiwanese markets; LDK Solar (LDK) announced the latest development in the company ahead of its Hongkong poly silicon IPO, in which Deutsche Bank has been appointed as a leading underwriter to help raise US$1B to US$1.3B. Analysts believe this IPO will unlock some of LDK's value. Investors are paying attention to two major developments recently:
LDK decided to postpone the notes sale due to the higher than expected interest. According to CEO Peng, the company will go head with its current business plan without issuing senior notes. The announcement link is here.
LDK and Xinyu government this week signed a CNY$8.39B (~US$1.3B) projects bill to develop new energy in Xinyu city, where LDK is headquartered. The news link is here. The current development of solar projects in Xinyu City will enable LDK Solar to significantly reduce costs to produce polysilicon by using electricity generated from solar panels. Earlier this Month, LDK CEO told reporters he sees over 4GW solar energy installation by 2012 in China alone. The newly signed deals may signal that the demand in China is picking up steam. China has to install 50GW of solar energy by 2020 according to energy department, see reports here and here.
It is very likely that LDK decided to use cash flow or tap CDB's $8B loan guarantee to support its business plan instead of using funds collected from senior notes sale, which is relatively higher cost to the company. It is also noted that the IPO at a later time will provide sufficient funds to management and the shareholders.
We are seeing a positive trend in LDK's business in terms of managing cash flow and the Hongkong IPO debut. The rejection of the senior notes sale (with high interest) is a win for share holders, and signals a better reception of its poly IPO. LDK solar competes with Suntech Power (STP), Yingli green (YGE), Canadian Solar (CSIQ) and First Solar (FSLR).
Disclosure: I am long LDK, STP, FSLR
