(TSL) plans to boost its sales in the U.S.

NEW YORK (Dow Jones) 11-09-08- China-based solar-panel maker Trina Solar Ltd. (TSL) plans to boost its sales in the U.S. next year to 8% of total revenue as it works to sign its first customer deals with local solar integrators, rather than distributors, the company's Chief Financial Officer Terry Wang told Clean Technology Insight.
This year, Trina expects close to 5% of its total revenue, projected at between $850 million and $900 million, to come from U.S. customers. So far, the company has been selling its modules, whose average price is $4, through wholesale distributors. But the company is interested in getting closer to the customer and in skipping the distributor part of the equation to sell directly to integrators.
One potential U.S. customers "asked for 60 megawatts per year," said Trina Solar Chief Executive Jifan Gao. "But we can't meet that demand," he added.
The company projects reaching capacity of 700 MW next year for solar cells and modules, and producing 500 MW of ingots and wafers, the executives said. It currently has 250 MW of capacity for each, and plans to reach 350 MW next year.
"Each 100 megawatts costs about $100 million" when spread across all four segments, i.e. ingots, wafers, cells and modules, said Thomas Young, head of investor relations at Trina. By directing the investment into cells and modules, the company is going to use the same $100 million to get an extra 100 MW available downstream to customers, he said. At the same time, the company will need to buy wafers from outside sources. It expects that wafer prices for deliveries in the second half of 2009 will be lower than they are currently, said Wang.
Although Trina, which has been particularly active in expanding the Italian market, expects to see enough demand for its products in Europe, the management is seeking to diversify its customer base. Spain, which will represent about 26% of its sales this year, will decline to 15% of total revenue in 2009, said Young. Other markets where Trina is actively looking for deals today are South Korea, Australia, Mongolia, Romania, India, South Africa, and Abu Dhabi, the executives said. Working with integrators directly helps Trina get into new markets quickly, said Young.
China is another market that should grow in the next two to three years, Wang said. While a renewable energy act in China has called for incentives for solar integrators for a couple of years, local rules are just beginning to catch up, according to Wang.
Trina will need capital to expand its manufacturing and to buy additional wafers and polysilicon. Wang said that, although a recent deal with GCL Silicon calls for many of the wafers that Trina expects to need, it's best to get another supplier on board so as not to depend on a single one. As far as polysilicon, the company has 80% of its projected 2009 output covered by long-term polysilicon contracts, compared with this year's situation when less than half of its output is coming from long-term supply agreements.
Although prices for polysilicon are strong, the downpayments that silicon suppliers require have decreased dramatically since the fourth quarter of last year, said Wang, when it wasn't uncommon to have 25% upfront payment requirements for eight-year deals. Now "prepayments are less than 5% and sometimes just 2%," Wang said.
"Assuming the current level of incentives stays the same, we'll have about 8%" of revenue from the U.S., said Wang. But it's possible that the federal investment tax credit, which is due to expire at the end of the year, will be revived with increased incentives for solar installations. "That would be an upside for us," said Wang. Of course, there is a chance that the tax credits will lapse, but Trina is counting on the tax credit extension, said Wang.
"We just started talking to system integrators, and there are a couple (of) candidates" for deals, said Wang. The contracts would be signed before the end of this year, he said.
The company's modules are priced competitively, with others such as those produced by SunPower Corp. (SPWR) selling for higher prices. While SunPower has talked about expected price declines of 10% to 20% next year, Trina sees much more modest declines. "Contracts we're working on now are 2% to 3% lower in price," said Wang. In the third quarter, which is currently underway, the company actually expects its average selling prices to increase.