Suntech Reports 2nd Quarter Results

Second Quarter 2009 Highlights:
-- Total net revenues were $321.0 million in the second quarter of 2009
-- Gross margin improved to 18.6% for the second quarter of 2009, compared with 17.8% for the first quarter of 2009
-- Net income attributable to holders of ordinary shares was $10.0 million or $0.06 per diluted American Depositary Share (ADS); each ADS represents one ordinary share
-- Suntech's multi-crystalline Pluto powered module achieved world record conversion efficiency of 15.6%
-- Suntech maintained PV cell production capacity of 1GW at the end of the second quarter of 2009

"During the second quarter, we continued to demonstrate Suntech's ability to adapt to fluid market conditions and improve competitiveness," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "A seasonal pick up in demand combined with a gradual thawing of global financial markets and improving project returns led to sequential shipment growth in most of our major markets. In addition, despite pricing pressure, our continued reduction of silicon costs enabled us to improve gross margin in the second quarter."

"We are confident that the strategies that we are implementing today will position Suntech for strong growth over the next several years. For example, in China we are building relationships with regional governments and key development partners in anticipation of a national feed-in tariff program. In Japan, we have established a relationship with Yamada Denki that will expand our distribution reach and improve brand recognition. And we are gaining traction in emerging markets such as the Middle East through partnerships with regional players."

"In addition to our market expansion initiatives, we are making significant progress in technology development. Suntech's multi-crystalline Pluto module was recently accepted by the scientific journal Progress in Photovoltaics as the world's highest conversion efficiency multi-crystalline module with 15.6% conversion efficiency. In addition, our new state-of-the-art PV module testing facility, which is the largest in China, will help to enhance our efforts to deliver the most reliable and premium quality solar products in the market."

"We remain confident that these initiatives will help us gain access to the end consumer, improve our brand recognition, and increase our ability to compete in a volatile macro-economy. Suntech, as a leader in both low cost manufacturing and research and development, is well positioned to be among the first to reach grid parity in many markets. As a result of Suntech's competitive advantages and our downstream initiatives, we will continue to gain market share and further our position as a leader in the rapidly evolving PV industry."


RECENT BUSINESS HIGHLIGHTS

China Market
-- Suntech signed framework agreements with several provincial and city governments in China to develop an aggregate of 1.8GW of photovoltaic projects over the next several years.
-- Suntech has signed strategic framework agreements with China Energy Conservation Investment Corporation (CECIC) and China Huadian New Energy Development Co., Ltd (HNE) to develop solar projects in China. Through these partnerships, CECIC and HNE will be primarily responsible for project investment and development of solar projects, and Suntech will be responsible for supplying turnkey solar solutions.
-- Suntech has established one of China's largest system integration and project development teams with around 200 people. Suntech expects to develop approximately 30MW of projects in the full year 2009, with the majority in the second half.

U.S. Market
-- Suntech signed a contract with Recurrent Energy to deliver 5MW of modules in Q4 2009 for California's largest photovoltaic system to date. The project will more than triple San Francisco's total municipal solar power output from 2MW today to 7MW upon completion in 2010.
-- Suntech has narrowed the search for a U.S. production and distribution center site to two locations and expects to make a decision within the next few months. The new facility demonstrates Suntech's commitment to the long term growth of the North American market.

Global Markets
-- Suntech recently established an agreement with Yamada Denki Co., Ltd., Japan's most popular consumer electronics and home appliance chain, to sell systems incorporating Suntech modules through all of its 450 retail outlets across Japan.
-- Suntech continued to gain traction in the Middle East and was selected by Aldar Properties PJSC to supply over 1,120 solar panels for a 292 kW solar system for The Shams Tower, an iconic building on Yas Marina Circuit in Abu Dhabi.

Technology
-- Suntech achieved a new world record conversion efficiency of 15.6% on a commercial grade multi-crystalline silicon PV module. The world record conversion efficiency was accepted by the scientific journal Progress in Photovoltaics.
-- Suntech's Pluto modules recently passed all the tests for the IEC 61215 certificate. Suntech has initiated commercial shipments of Pluto- powered modules and currently expects to ship 10MW to 15MW of Pluto products in 2009.
-- Suntech initiated production of amorphous silicon thin film solar panels at its facility in Shanghai. The initial panels are exhibiting a conversion efficiency of approximately 7%.
-- Suntech opened a world-class PV module testing facility in collaboration with Underwriters Laboratories. Through UL's Witness Testing Data Program, PV module tests may be conducted under the supervision of highly experienced UL personnel and subsequently awarded certification, enabling Suntech to bring solar products to market faster.

Financing Activities
-- Suntech received a $50 million convertible loan from International Finance Corporation with a conversion price of $18.00 per ADS in July 2009. The loan has a fixed rate coupon of 5.0% per annum payable on June 15 and December 15 in each year. If not converted, the loan will be repayable in full 7 years after the date of drawdown.
-- Suntech closed a follow-on public offering of 23,000,000 ADSs. The aggregate amount of ADSs sold reflects the exercise in full by the underwriters of their option to purchase up to 3,000,000 additional ADSs to cover over-allotments. The Company received aggregate net proceeds of $277.7 million, after the deduction of related expenses.
-- Suntech secured a $200 million syndicated loan facility from the China Development Bank. $120 million of this facility was drawn down in the second quarter of 2009.
-- In the second quarter of 2009 Suntech repurchased an aggregate of $30.8 million principal amount of its 0.25% Convertible Senior Notes due 2012 for a total consideration of $29.1 million. As of June 30, 2009, Suntech had $225.0 million principal amount of 2012 convertible notes outstanding.


Second Quarter 2009 Results

Total net revenues for the second quarter of 2009 were $321.0 million, an increase of 1.7% from $315.7 million in the first quarter of 2009.

Total net revenues from the investee companies of GSF were $15.3 million in the second quarter of 2009 compared with $100.5 million in the first quarter. Sales to the investee companies of GSF were conducted under terms comparable to those with unrelated parties, and the revenue and profit related to the sales activities during the second quarter of 2009 were fully recognized during the same period.

For the second quarter of 2009, gross profit was $59.7 million and gross margin was 18.6% compared to gross profit of $56.3 million and gross margin of 17.8% in the first quarter of 2009. The increase in gross profit was primarily due to Suntech's silicon wafer cost and total cost structure falling faster than sales price in the second quarter of 2009.

Operating expenses for the second quarter of 2009 were $38.6 million compared to $35.1 million in the first quarter of 2009. The increase was primarily due to additional hires to improve sales and marketing efforts and a bad debt provision.

Income from operations was $21.1 million for the second quarter of 2009, which was flat with the first quarter of 2009.

Net interest expense was $24.3 million in the second quarter of 2009 compared to net interest expense of $21.6 million in the first quarter of 2009. Net interest expense in the second quarter of 2009 includes $11.6 million of non-cash interest expenses of which $10.3 million was related to the adoption of FASB Staff Position No APB14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB14-1").

Foreign currency exchange gain was $17.5 million in the second quarter of 2009 compared to a loss of $6.2 million in the first quarter of 2009. The foreign currency gain in the second quarter was primarily related to the appreciation of the Euro versus the USD.

Net other expense was $2.5 million in the second quarter of 2009, compared with $12.6 million of net other income in the first quarter of 2009. The net other income in the first quarter of 2009 was mainly due to $9.3 million in gains from repurchases of the 2012 convertible senior notes and $3.2 million in gains from mark-to-market valuation of foreign exchange forward contracts. The net other expense in the second quarter was primarily due to a loss from mark-to-market valuation of foreign exchange forward contracts.

Net income attributable to holders of ordinary shares for the second quarter of 2009 was $10.0 million, or $0.06 per diluted ADS compared to a net income of $1.8 million, or $0.01 per diluted ADS, in the first quarter of 2009.

In the second quarter of 2009, the major non-cash related expenses were share-based compensation charges of $4.2 million; $11.6 million of non-cash interest expenses; and depreciation and amortization expenses of $14.4 million.

In the second quarter of 2009, capital expenditures, which were primarily for the construction of the thin film production facilities in Shanghai, and to retrofit existing production capacity to enable production of PV modules based on our high efficiency Pluto technology, totaled $20.9 million.

Cash and cash equivalents increased to $760.5 million as of June 30, 2009 from $406.0 million as of March 31, 2009. The increase was primarily due to the follow-on public offering of 23 million ADSs during the quarter from which we received aggregate net proceeds of $277.7 million and an increase in long term bank borrowings due to a syndicated loan of $120 million from the China Development Bank.

Accounts receivable was $292.1 million as of June 30, 2009, compared with $265.4 million as of March 31, 2009. The increase was primarily due to an increase in credit terms in line with industry trends.

Accounts receivable due from investee companies of GSF was $108.4 million as of June 30, 2009, compared with $104.9 million as of March 31, 2009. Suntech has been closely monitoring the settlement on this account receivable and expects full collection on this account receivable will be made no later than the end of 2009.


Business Outlook

Suntech expects third quarter 2009 shipments to be more than 50% above the second quarter 2009. Gross margin in the third quarter of 2009 is expected to be relatively flat compared to the second quarter of 2009.

Suntech expects shipments in the fourth quarter of 2009 to be slightly lower than the third quarter of 2009 due to seasonality. As a result, Suntech has revised full-year 2009 shipment expectations to approximately 600MW. Suntech intends to hold PV cell production capacity at 1GW in 2009 until demand visibility improves. Suntech expects capital expenditures to be in the range of $100 million to $120 million in 2009.


For further information, please contact:

In China:
Rory Macpherson
Investor Relations Director
Tel: +86-21-6288-5574
Email: rory@suntech-power.com

In the United States:
Kristen McNally
Executive Vice President
The Piacente Group, Inc. (Investor Relations Counsel, Suntech)
Tel: +1-212-481-2050
Email: suntech@tpg-ir.com

SOURCE Suntech Power Holdings Co., Ltd.

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