GCL-Poly Delivers Best Processing In Solar Industry, Costs Can Go Lower

GCL expects to produce polysilicon at $18.50 or below per kg in Q2, and process wafers at below $0.13 per watt

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On Thursday, May 17^th, GCL-Poly Energy Holdings Limited (HKG:3800), released its operational indicators achieved in the first quarter of 2012. The company once again has delivered strong performance in the area of processing costs, even though some of the results have been flat in comparison to Q4 of 2011.

GCL produced 12,235 MT of polysilicon at the average purity of 11Ns, an 11% increase sequentially.  The company sold 3,041 MT of polysilicon in the period, with the majority being consumed in the production of its own wafers.  The average selling price of the polysilicon was at $25.98 per kg versus $26.20 in Q4. Production costs were approximately $19.70 per kg, a slightly higher result than the prior quarter’s cost of $19.30.

During Q1, GCL produced 1,164MW of wafers, a decrease of 3% over production figures from Q4-2011. Recorded sales were 1,234MW, 8MW less than the amount of wafers sold sequentially.  The average selling price of wafers in the period was at $0.28 per watt, while processing cost was at $0.135. Renesola, the close second competitor to GCL, sold its own wafers at $0.33 per watt and had $0.19 per watt processing dynamic in the reporting period. Renesola (SOL) also disclosed multi-processing costs of $0.16 per watt.  The superiority of GCL, however, is found in the production capabilities and efficiencies in production costs of polysilicon. Renesola produced its own polysilicon in the quarter at $33 per kg, with a year-end objective of blended cost of $22 per kg, which is 19% higher than GCL’s planned production cost of $18.50 for the second quarter of 2012. Estimated GCL's overall costs of production including cost of polysilicon would be in the area of $0.25, giving the company a gross margin of 11% on wafer sales.  

In the production of wafers the company uses self-developed 880kg advanced ingot furnace systems, which increase production yields and reduce energy consumption. The company is also using a two-way slicing technique to produce wafers using diamond wire.  GCL offers high-efficiency wafers, which have 17.6% conversion in multi and 18.5% in the quasi-mono category. The company is expected to launch new products in 2012, and plans to use up all of its 8GW capacity, as well its full 65,000MT poly capacity, having 100% utilization currently.

As mentioned, GCL expects to produce polysilicon at $18.50 or below per kg in Q2, and process wafers at below $0.13 per watt.  In comparison, Renesola is foreseeing wafer processing costs at the end of 2012 at below $0.15 per watt. In some of the statements GCL disclosed year-end objectives to have a wafer processing cost at or below $0.11 per watt, with cash costs of poly production being below $0.10 per watt and the overall cost objective at $0.20 or below per watt. Conversion from poly to wafer has been estimated to be between 5.5 to 5.7 grams per watt, which is an improvement from the 5.9 grams average of last year.

In the system integration GCL has a 3GW project pipeline, including projects in China and the US.  The company announced a number of deals in the US recently, in which it will use the technology advantages, combined with materials, including modules assembled by its own clients, like Trina, Tainergy and others.

During the conference the company provided more details and  GCL expects around 35GW demand in 2012, or around a 20% increase from 2011. The management expects a lot of new markets to materialize this year including China’s at 6GW. The Chairman, Executive Director and CEO Mr. Gongshan Zhu expects China to become the biggest market in the world by 2013.