ReneSola, Solairedirect Ink Deal - Analyst Blog
05 April 2013 - 6:40PM
Zacks
ReneSola Ltd. (SOL) has entered into a
three-year agreement with Solairedirect SA. Per the agreement,
Solairedirect Technologies (Pty) Ltd, a South African-based module
manufacturing subsidiary of Solairedirect SA, will produce 120
megawatts ("MW") of solar modules in South Africa for ReneSola.
Also, the terms of the agreement require Solairedirect to purchase
54 MW of solar modules. Out of this, Solairedirect intends to
utilize 20 MW of the solar modules for projects in South Africa and
34 MW of the solar modules internationally.
Solairedirect expects to double its module production capacity in
2013. According to the additional terms of the deal,
Solairedirect’s expansion of its module production capacity may
translate into additional solar modules for ReneSola.
Despite being a leading global manufacturer of high-efficiency
solar photovoltaic (“PV”) modules and wafers, Renesola handed over
the responsibility to manufacture modules to Solairedirect given
its strong market presence in South Africa and its module
production capability and capacity. Solairedirect's products are
highly efficient and less sensitive to fluctuation in temperature.
Additionally, the abundance of solar energy, scope for rapid
economic growth and governmental support in South Africa are
expected to benefit the deal.
Import duty for solar panels in South Africa falls in the range of
0% to 20%. This will automatically lower the cost of production for
ReneSola, thereby improving margins.
Meanwhile, South Africa has set a target of generating 42% of
electricity from renewable energy by 2030. It also plans to heavily
invest in clean energy to reduce carbon emissions and bolster
electricity supply. Therefore this deal and several others in the
offing will boost its clean energy initiatives. Recently,
JinkoSolar Holding Co., Ltd. (JKS) entered into an
agreement with a well-recognized solar project developer (the
"Developer"). Per the terms of the agreement, JinkoSolar will
supply high-efficiency solar panels totaling 115 MW for two
projects in South Africa.
Coming back to ReneSola, the company enjoys a
geographically-diversified customer base. Moreover, the company
continues to focus on improving its operating efficiencies,
generating material cost savings through its vertically-integrated
production structure and introducing innovative products.
However, tepid demand for solar products in Europe, rising
competition, credit risk from its customers, oversupply of solar
wafer & modules in the market, and the company’s high research
and development expenses remain concerns. The company presently
retains a short-term Zacks Rank #2 (Buy).
Besides ReneSola, other stocks worth considering are
Canadian Solar Inc. (CSIQ) and STR
Holdings, Inc. (STRI), both with a Zacks Rank #2
(Buy).
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
JINKOSOLAR HLDG (JKS): Free Stock Analysis Report
RENESOLA LT-ADR (SOL): Free Stock Analysis Report
STR HOLDINGS (STRI): Free Stock Analysis Report
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