From pv magazine Global
Chinese electric utility the State Power Investment Corporation (SPIC) has signed a huge residential PV installation contract with Jolywood which, at first glance, appears to potentially be worth more than three-and-a-half times the market value of the solar manufacturer.
SPIC, through its 70% holding in the newly-established Shanghai Yuanye New Energy joint venture (JV) set up with Jolywood, has awarded an engineering, procurement and construction (EPC) deal to install 7.2 GW of residential solar panels over five years.
Under the terms of the arrangement, Jolywood will fit 1.2 GW of household solar within a year, with a further 1.5 GW to follow annually for the remainder of the contract.
Based on a current investment cost of around RMB3.50 per Watt ($0.54) for household solar, the total value of the five-year deal would be RMB25.2 billion ($3.92 billion). Jolywood, which produces tunnel-oxide passivated contact (TOPCon) modules, had a market value of RMB6.8 billion ($1.06 billion) at the end of April and the RMB4.2 billion ($654 million) which might be expected from the first year of the new EPC contract alone would represent 83% of the manufacturer’s revenue last year.
However, with solar panel manufacturing input costs rising, the state-owned electric company appears to have determined the time is opportune to fix its price for PV and the pressure will be on the manufacturer to maintain its margins over the five-year contract period.
Factory explosions and flooding last year led to a shortage of polysilicon which saw the price of the solar panel raw material more than double in the second half. A lack of chips during the first three months of this year has driven panel prices up further and shortages of EVA backsheets, cables and glass have further pressured input costs.
The contract also stipulates a performance guarantee by Jolywood subsidiary Zhonglai Minsheng amounting to 10% of its shares in the Shanghai Yuanye New Energy JV plus 5% of the total contract value.
The deal was entered into by Jolywood subsidiaries Zhonglai Minsheng and Zhonglai Energy Engineering, with the JV.
The extensive contract would account for a significant chunk of China’s residential PV market, which saw 5.3 GW of household solar added in 2019 and 10.1 GW last year and which is expected to continue to grow this year, to an estimated 15 GW.
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