UPDATE 3-SunPower, AU sign Asia venture, solar shares soar
By Dana Ford
LOS ANGELES, May 27 (Reuters) - Shares of SunPower Corp soared on Thursday after the solar panel maker agreed to set up a $700 million venture with Taiwan's AU Optronics Corp to own and operate a 1.4-gigawatt solar cell plant in Malaysia, shaving costs for the U.S. company.
News of the deal on a day that Wall Street rallied helped lift shares across the solar sector, which has been struggling because of uncertainty and weakness in European markets.
Trina Solar Ltd climbed 8.3 percent, while Suntech Power Holdings Co Ltd and First Solar rose 9 percent and 4.9 percent, respectively.
SunPower shares rose $2.40 or 22.2 percent to end at $13.20 on the Nasdaq.
SunPower said the move will help lower the expense of building and operating the plant, as well as reduce debt.
'We view this as a significant positive for SunPower, as it results in improved liquidity, lower manufacturing cost and faster ramp for SunPower, and creates an industry leading solar manufacturing platform,' said Lazard Capital Markets analyst Sanjay Shrestha.
SunPower and AU Optronics -- Taiwan's No. 2 maker of liquid crystal displays -- will contribute $350 million each to build the cell manufacturing plant, and will own and operate the facility together. Construction began last year.
Both companies will also arrange debt, SunPower's chief executive, Tom Werner, told Reuters, in order to pay the plant's total $1.2 billion price tag.
'It's going to be an intensely competitive market in that part of the value chain,' Werner said in response to why SunPower brought in a partner for its Malaysian plant.
He added the joint venture would cut SunPower's capital expense per watt at the new facility by more than 35 percent, from $0.85 per watt to less than $0.55 per watt in 2014.
ALWAYS EVALUATING OPTIONS
SunPower, a leading manufacturer of high-efficiency solar cells, is working to ramp up production throughout the world to meet an expected growth in demand. The company said the plant in Malaysia would start production this year and hit its 1.4 GW capacity in 2014.
SunPower will retain a substantial majority of the forecast output, starting with 95 percent this year and falling to 80 percent in 2013 and after, the company said.
Despite Thursday's strong stock rise, SunPower stock is down some 45 percent for the year, as are several stocks in the solar sector.
Demand for solar equipment that turns sunlight into electricity has surged in recent months, but stocks have not followed. Investors are worried about subsidy cuts in Germany, the world's No. 1 solar market, and have general concerns about the strength of European markets, where most sales are made.
SunPower's Werner has previously said he sees prices for solar panels falling this year, which could cause high-cost supply to fall off and create tougher competition.
As chief executive, he said he is always looking at points along the value chain to improve and did not rule out additional joint ventures.
'We have nothing imminent, but we're always evaluating options,' he said.
Shares of AU Optronics, which holds a majority stake in the Japanese silicon wafer maker M.Setek, ended 5.4 percent higher at $9.75 on the New York Stock Exchange.
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