Jolywood signs mega-deal to supply 7 GW of household solar

Chinese electric utility the State Power Investment Corporation (SPIC) has signed a huge residential PV installation contract with Jolywood which, at first glance, appears to potentially be worth more than three-and-a-half times the market value of the solar manufacturer.

SPIC, through its 70% holding in the newly-established Shanghai Yuanye New Energy joint venture (JV) set up with Jolywood, has awarded an engineering, procurement and construction (EPC) deal to install 7.2 GW of residential solar panels over five years.

Under the terms of the arrangement, Jolywood will fit 1.2 GW of household solar within a year, with a further 1.5 GW to follow annually for the remainder of the contract.

Value

Jolywood agreed a first-year price of RMB3.50 per Watt ($0.54) for the arrays, with the value for subsequent periods to be set annually. Under those, first-year terms the total value of the deal would be RMB25.2 billion ($3.92 billion). Jolywood, which produces tunnel-oxide passivated contact (TOPCon) modules, had a market value of RMB6.8 billion ($1.06 billion) at the end of April and the RMB4.2 billion ($654 million) guaranteed from the first 12 months of the EPC contract alone will represent 83% of the revenue generated by the manufacturer last year.

However, solar panel manufacturing input costs are rising and the state-owned electric company is likely to expect installation costs to fall in subsequent contract years, putting further pressure on the manufacturer's margins.

Factory explosions and flooding last year led to a shortage of polysilicon which saw the price of the solar panel raw material more than double in the second half. A lack of chips during the first three months of this year has driven panel prices up further and shortages of EVA backsheets, cables and glass have further pressured input costs.

The contract also stipulates a performance guarantee by Jolywood subsidiary Zhonglai Minsheng amounting to 10% of its shares in the Shanghai Yuanye New Energy JV plus 5% of the total contract value.

The deal was entered into by Jolywood subsidiaries Zhonglai Minsheng and Zhonglai Energy Engineering, with the JV. News of the contract saw Jolywood's share price spike 17.34% before settling 13.4% up in the following day's trading.

The extensive contract would account for a significant chunk of China's residential PV market, which saw 5.3 GW of household solar added in 2019 and 10.1 GW last year and which is expected to continue to grow this year, to an estimated 15 GW.

This copy was amended on 10/05/21 to reflect Jolywood and SPIC have agreed a price of RMB3.50/W for the first year of the contract and to add in details about the effect of the contract on Jolywood's share price.