Monday, March 30, 2009

Thoughts on LDK, STP, Pluto.

So, Suntech Power (STP) has announced an improvement in the efficiency of their panels.

I did some calculations on the ramifactions of this kind of move by LDK wafer customers awhile back.

In the PR, Suntech states that this increase in Conversion Efficiency should lead to an increase in Energy Output by 12%. We know that Total Wattage is proportional to Energy Output in this case, so we can say that Total Wattage also increased by 12% per number of Wafers used.

Running a scenario.

Keep the number of wafers constant.

In this case, assume that LDK has a contract with STP, by which STP buys some number of wafers from LDK in order to support some number of MW of output. Let's set the inital Peak Power at 100MW, or 26.3 Million Wafers.

LDK delivers wafers at some ASP, say, $2.00/W, and so the total revenue from this 100MW order of wafers will be $200 Million.

STP sells modules at some ASP, say $3.00/W, and so their total revenue over and above their cost to LDK is also $100 Million.

Wafer percentage of total cost of Panel: 66%

Now, say that STP increases the Peak Power / Wafer of their modules by 12% (Conversion Efficiency up by roughly 3% from 15.5% to 18.1%).

LDK delivers the same number of wafers as they had in the previous scenario. Lets say that they charge the same per wafer, so they make $200 Million.

STP sells for the same ASP (per Watt) as previously, but through increased efficiency, has increased the Wattage sold by 12%. Therefore, with the same ASP, STP has increased revenue by 12%. So, instead of producing 100MW, STP has produced 112MW, and has sold for an ASP of $3.00/W for a total (after wafers) of $136 Million.

As a percentage of the total cost of the Panel, LDK's $2.00/W has dropped to 59%.

Question: If STP had a Billion Dollars, would they benefit most by spending that money to go upstream and make their own wafers and poly, or do they benefit more by spending that Billion Dollars on ramping up volume on their high efficiency modules, or on R&D to increase the efficiency even more?

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