SunEdison Partners Huantai - Analyst Blog

In a bid to build its position in the Chinese solar market, solar technology company, SunEdison Inc. SUNE announced a strategic alliance with local solar wafer manufacturer, Huantai Group to develop solar power projects in the country.

Under a 5-year agreement, the companies will jointly develop 1.7 GW (gigawatts) of solar projects. SunEdison will supply Huantai with polysilicon from its new South Korea plant for the production of high-quality solar wafers.

We believe that through this partnership SunEdison is attempting to build its position in the Chinese solar market. Moreover, we believe that SunEdison will be able to take advantage of the growth prospects and economic benefits in China.

Founded in 1988, Huantai Group is a forerunner in the Chinese silicon wafer industry and specializes in foundry and cutting of mono-crystalline and polysilicon. Moreover, it is engaged in solar PV, LED sapphire, optoelectronic materials and related businesses.

Huantai's portfolio of silicon wafers will strengthen SunEdison's product competencies, which in turn will increase its overall market share, going forward. Moreover, SunEdison's expansion efforts complement Huantai Group's strategy to develop new trade relations.

Currently, China is one of the largest and most dynamic markets for solar products. As per media reports, China installed a record 12 GW of solar panels in 2013, making it the world's largest solar market last year, overtaking longtime leader Germany. As reported by Bloomberg, China expects to reach 70 GW of capacity by 2017, up from 20 GW at the end of last year.

We believe that the current agreement is a positive move for SunEdison and is in sync with the company's strategy. Also, the partnership will help it to emerge as a pure-play solar project developer.

Although SunEdison's growing exposure to the solar energy market is encouraging, project development requires considerable time and investments. Hence, any delay or inability to sell these projects at desired prices could have an impact on liquidity.

Going forward, increase in debt level and competition from SunPower Corp. SPWR and First Solar Inc. FSLR remain headwinds.

Currently, SunEdison has a Zacks Rank #4 (Sell). Juniper Networks, Inc. JNPR with a Zacks Rank #2 (Buy) is a better-ranked stock and therefore worth considering.