October 19, 2010

The Wall Street Journal

Suntech-Calisolar To Fund Calisolar Solar Silicon Plant In Ontario

TORONTO (Dow Jones)--Suntech Power Holdings Co. (STP) has signed a letter of intent with Calisolar Inc. to build a solar silicon manufacturing facility in Ontario.

Suntech, the world's largest solar-module manufacturer, will help finance the project expansion and enter a multi-year agreement to purchase silicon produced at the new facility. The company declined to say how much it will invest.

Calisolar subsidiary 6N Silicon Inc. is the only solar-grade silicon manufacturer in Ontario. It operates a facility in Vaughan, Ont. that, prior to the proposed transaction with Suntech, was targeting capacity of 1,300 metric tons by the second quarter of 2011. The planned expansion will take capacity "well beyond" that, Calisolar Chief Executive Sandra Beach Lin told Dow Jones Tuesday.

Beach Lin said the company hopes to conclude a formal agreement with Suntech in the fourth quarter and complete the plant by the end of 2011. She said the company plans to locate the new facility near its existing facility in Vaughan, but the new site hasn't been finalized yet. The company expects employment to double to more than 350 by the time the new plant is operational.

Suntech, of Wuxi, China, is one of several companies to invest in an Ontario-based clean-tech operation recently. Last month, Sharp Corp. (6753.TO) acquired Recurrent Energy, the largest developer of solar-power projects in Ontario, for $305 million. Canadian Solar Inc. (CSIQ), which is headquartered in China, is building a solar-module plant in Guelph, Ont.

The backdrop to these investments is Ontario's highly touted, but controversial, feed-in-tariff program. The FIT program provides generous long-term contracts to developers of clean-tech projects in Ontario. However, to be eligible for the contracts, developers must procure a fixed percentage of goods and services - such as silicon - locally. For instance, 50% of goods used to build a large solar project must originate in the province. That rises to 60% in 2011.

The domestic-content-requirement, aimed at creating jobs in Ontario, has triggered cries of protectionism by some of Canada's trading partners. Japan has been the most vocal, filing a complaint to the World Trade Organization. The U.S. and the European Union have joined the action as third parties.

Suntech sees a significant opportunity in the province. "We're exited about the (FIT) program," Suntech's Director of Canadian Sales, Howard Gomes, told Dow Jones. "We're working with basically every large developer here. We're very optimistic about the relationships we can build here."

Gomes said Suntech is one of the few "bankable" modules available in the world, which is very important for developers looking to secure financing for large projects.

Suntech has been working with Calisolar for two years and recently approved the use of Calisolar's silicon for Suntech modules, he said. The proposed agreement between Suntech and Calisolar is not exclusive, he said. Calisolar's Beach Lin said she envisions exporting the company's silicon to customers outside Ontario. Having said that, she added that demand in Ontario is strong. "We have a plant that's ramping up. So, as you can imagine, we can sell everything we can make," she said.