JA Solar, Essel Tie Up for 500MW Indian Manufacturing Unit

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JA Solar Holdings Co., Ltd. JASO has teamed up with Essel Infraprojects Limited ("EIL") for setting up a solar cell and module manufacturing joint venture (“JV”) unit in India. The two companies signed a memorandum of understanding (“MoU”) on May 16 at the India-China Business Forum in Shanghai, which was part of India’s Prime Minister Narendra Modi's China visit. The facility will have a production capacity of 500 megawatts (“MW”).

The forum’s agenda prioritized the construction of a photovoltaic park and underlined the importance of international partnerships in the photovoltaic industry. Under the “Make In India” campaign, the country has already entered into partnerships with several Chinese solar manufacturing companies with an objective of installing 100 gigawatts (“GW”) of solar energy by 2022. The latest agreement is part of a series of over 20 agreements, worth a total investment of about $22 billion.

JA Solar is the world’s largest producer of solar cells. The company manufactures a variety of special solar modules and has a consumer base spread across the globe.

On the other hand, Essel Infraprojects Limited is one of the fastest growing Indian companies, which specializes in infrastructure projects like roads and urban development, generation and transmission of renewable energy, and waste and water treatment programs. We expect the latest MoU to benefit both companies by strengthening their foothold in the emerging solar market of India.

Having said so, JA Solar recently reported weak first-quarter 2015 results with both earnings and revenues missing expectations. Quarterly earnings also declined year over year. The U.S. government’s recent efforts on promoting its indigenous solar industry have led to the imposition of heavy anti-dumping policies against Chinese-manufactured solar modules. As a result, shipments to the U.S. significantly declined in the first quarter.

The latest anti-dumping policies imposed by the U.S. could pose similar challenges to JA Solar’s profitability as other Chinese solar companies like ReneSola Ltd. SOL, JinkoSolar Holding Co., Ltd. JKS and Yingli Green Energy Holding Co. Ltd. YGE.

JA Solar’s operations are largely dependent on governmental policies of individual countries. Moreover, the company’s exposure to international markets exposes its financial performance to the risks of foreign currency fluctuations.

JA Solar currently carries a Zacks Rank #5 (Strong Sell).

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