#shunfeng

Today I am grateful for finally getting my second and last box of stuff sent home. It was a bit pricey since I used Shunfeng, the most reliable and fastest courier service in China, but they were the only ones who would ship to Australia. I need the stuff faster than seamail, and airmail with China Post is supposedly just as expensive anyway. Plus I didn't want to face that woman again. 

Eric Luo, CEO of Wuxi Suntech: New owner, gigantic plans. photo credit: sunnybloke.com

Greetings from Munich,

Whoever was able to take a look at Suntech’s booth at Intersolar Munich last week, would have probably not imagined that this company was completely in shambles only a year earlier - and even had to file for insolvency in March 2013. The Suntech stand was nicely designed and belonged to the bigger ones at the show - this company seemed like it belongs to the sector’s market leaders rather than a totally defeated champion. sunnybloke talked to Wuxi Suntech’s new CEO Eric Luo in late May in China about his vision for the company.

During our conversation, Luo, who was appointed CEO in January after serving over 3 years as SVP Global Supply Chain at Suntech, first emphasised that Wuxi Suntech is now a company independent of Suntech Power Holdings, which is still in bankruptcy proceedings and operated by an insolvency administrator. “Wuxi Suntech owns the Suntech brand, the IP and production operations,” he said. In the end, it is Wuxi Suntech’s new shareholder, who makes the real difference. “We are now part of the Shunfeng Group, and so we have twisted our strategy a little bit.” According to Luo, Hong Kong-listed Shunfeng, which took over Wuxi Suntech in April, tries to become the “largest integrated clean energy company.” For Luo, integrated has two meanings: First, Shunfeng’s largest shareholder, Cheng Kin Ming is also the second largest shareholder of LDK. While LDK sells primarily wafers, Wuxi Suntech produces cells and modules, and Shunfeng makes cells and develops downstream projects. On the other hand, Wuxi Suntech will continue to grow through acquisitions to enhance the downstream part of the business - starting from project planning, system design, EPC to operating service and intelligent control. “We announced the acquisition of Sunways, the German inverter guys,” Luo said, “and we will acquire a couple more companies that are specialised in EPC, services and also storage, home energy.” This integration strategy is aimed at differentiating from the competition. “Our longterm vision is to become an integrated energy supplier, basically a one stop solution,” he underscored.

Building on its brand, more acquisitions

As a member of the Shunfeng Group, Luo sees currently two main tasks for Wuxi Suntech: One part is what he calls Wuxi Suntech’s mission to build on its internationally recognised brand, which he still considers very valuable. “Shunfeng is very much branded by its projects in China, outside we only use the Suntech brand,” explained Luo. Manufacturing will use the Suntech brand as well as project development, while inverters will keep the Sunways brand. “This is a very good brand,” underlines Luo. “We acquired the Sunways brand, technology and also the social assets - and will sell the products also separately,” he said. Sunways serves more than 600 installers.  Every few years inverters generally need replacement, need service. “Of course we want to replace it ourselves,” he said.  Moreover, Luo wants to sell panels into this new channel. “We can bundle inverters and panels and offer them directly to customers and installers,” he said. 

Up to 18 GW of projects by end of 2016

Wuxi Suntech’s other important task is to provide the “highest-quality modules” for Shunfeng’s projects. “We continue traditional module sales, but projects are much more important.” As the project development business grows, replacement, service, operating power plants will become a huge market in which Shunfeng/Wuxi Suntech wants to participate. In fact, participate is probably not the right word, it is rather domination. Luo showed incredible self-confidence - and the numbers he mentioned left at least me pretty much stunned for a moment. “Our goal is to have 10 GW by end of 2016 in China and probably 6 to 8 GW outside China,” he said. These numbers refer to system operations, Suntech is not planning to develop on its own. “That’s why we need acquisitions. We need a very capable international project team to focus on the projects,” he underlined. As Suntech Power Holding did let go most of its international staff during the consolidation process - according to Luo, worldwide no more than 30 people are left, Shunfeng/Wuxi Suntech are creating their own international team. “We will build our own teams in Europe, in the US - and the further we develop with our acquisitions, the further we grow,” Luo said.

3 GW goal for China this year

The focus of Wuxi Suntech/Shunfeng’s business will be primarily on China. ”This year, Shunfeng plans 3 GW in China - and if this can be realised we will be the second largest solar developer in China, after China Power Investment, said Luo. In addition, the Group plans to develop and construct 600 to 800 MW outside China. Japan, the world’s second largest PV market, has been traditionally a stronghold for Suntech, which operated a module factory through its Japanese subsidiary MSK on the island. The factory still exists, but is not operated in mass production mode; it is rather used for customisation of panels for the local market. With its own EPC team, Wuxi Suntech targets to built 300 to 400 MW by the end of 2015 in Japan. The UK is Wuxi Suntech’s other big foreign solar market, where in early May Shunfeng signed a deal with German EPC company Greenfield Solar to develop solar farms with a capacity of 400 MW in 2014 and 500 MW in 2015; Wuxi Suntech will supply the modules. As much as Luo sees the importance of the US market, the trade case causes him - like many other Chinese and now also Taiwanese solar players - quite some headache. As the rulings of the latest trade case chapter have yet to happen, time is quickly passing by though projects need to be closed urgently for next year. “The problem is that many of next year’s PPA projects have to be signed before August,” he said. Despite the trade case in the US or other demand issues, like potentially disappearing big markets such as the UK, which might not be attractive at all for big projects anymore sometime next year, Luo feels his company is very well prepared. “That’s why we believe if we build up an integrated model - and can take profit from each segment - our total LCOE will be extremely competitive,” he said. “If you look at our total venture, then we will have a lot of demand, plus become an energy supplier.” There are many new markets emerging in Africa, South Pacific Islands, Central Asia and Latin America. “These guys want one stop solutions,” he said again.

Although Wuxi Suntech/Shunfeng is looking for vertical integration of its module production, Luo told sunnybloke that the extent will depend on the direction the industry goes. “We have no plan to do 1-to-1 integration.” In China, although production lines have been upgraded, probably not much more capacity will be added; subcontracts or OEM will be used for some of the integration. Currently, Wuxi Suntech operates 2.5 GW of module capacity. For cells, Wuxi Suntech/Shunfeng have about 3.1 GW capacity (Wuxi Suntech alone has around 1.3-1.5 GW). On top, he mentioned 4 to 5 GW combined wafer capacities of LDK and a former Suntech subsidiary.

In our conversation Luo left little doubt that the resurrection of “Suntech’s” brand will succeed and that a flight back to the top will happen. He even mentioned that once the turnaround is fully accomplished and the company has a stable business, he wants to re-list the company at a US stock exchange. Not this year, but from the confidence in his eyes he likely plans to make it happen earlier than most people would think. More soon.

Yours sunnybloke

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