What do LDK Solar Co., Ltd. (LDK), ReneSola Ltd. (SOL) and JA Solar Holdings Co., Ltd. (JASO) have in common? They all utilize Trichlorosilane (TCS) as a key ingredient in the manufacture of photovoltaic solar modules, also produced by companies such as SunSi Energies Inc. (SSIE).
Trichlorosilane is a chemical compound that contains silicon, hydrogen and chlorine, which at high temperatures decomposes to produce silicon, and purified trichlorosilane. It is the principal source of ultrapure silicon that is used in both the stable semiconductor industry and the emerging solar industry.
While the chemical is primarily produced by large chemical companies like The Dow Chemical Company (DOW) and E.l. du Pont de Nemours & Company (DD), SunSi Energies Inc. (SSIE) aims to consolidate the supply being produced in one of the world’s largest consuming countries – China.
SunSi Energies has already established a Hong Kong-based subsidiary, SunSi Energies Hong Kong Inc., which will source Chinese TCS production facilities. In fact, the firm has already acquired 90% of Zibo Baokai Commerce and Trade Co. (“Baokai”). Baokai owns the exclusive distribution rights within China of the TCS produced by Zibo Baoyun Chemical plant (ZBC).
This acquisition will allow SunSi to begin generating revenues, pending the completion of other Joint Venture transactions with TCS producers, and to strengthen SunSi’s presence within the growing Chinese market, particularly with large Chinese polysilicon producers.
Over the next three years, SunSi Energy plans to acquire facilities and expand to a manufacturing capacity of over 125,000 metric tons per year. While most of the sales will initially be to Chinese companies, the firm plans to expand its sales efforts into higher-margin markets like Europe.
With margins of between 20% and 40%, TCS is significantly more profitable than other products along the solar value chain. And while the commodity has fallen moderately in 2009, the economic rebound in 2010 has helped prices recover significantly from their lows.
Many experts anticipate the solar industry will rebound in 2010 and 2011, despite the economic downturn. Solarbuzz, a highly-respected industry source, projected that the industry would more than double over the 2007 levels by 2012, with a growth rate of over 135%.
Investors looking to play this trend may want to look beyond the traditional solar companies and into a “pure play” further up the value chain – SSIE Valued at just $85.67 million, this stock has the potential to capitalize on the continued move towards alternative energy in the U.S. and abroad.
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