Trina Solar, Profitability Over Internal Expansion (TSL)

Trina Solar Ltd. (NYSE: TSL) is halting the development of a previously announced polysilicon production facility, which originally had a total estimated cost of some $1 Billion.  Less than two weeks ago, the company announced it had secured long-term supply pacts over an 8-year period.

The solar photovoltaic products maker in China said its related equipment supply contract with a unit of GT Solar International Inc. will lapse as a result of this capacity not coming on-line.  This strategic decision came after what the company called a careful assessment of raw material requirements, along with recent and favorable long-term polysilicon market and supply condition developments.

Trina Solar’s stock closed on Friday at $38.00, and shares are indicated up about 3% between $39.25 and $39.50 in early pre-market trading this morning.  Its market cap is close to $950 million and the company is currently profitable.  Its 52-week trading range is $25.88 to $73.06.

At first this sounds cautionary in that the added capacity won’t be there.  But the shares indicating higher on the news as this implies more rewards for profitability monitoring rather than just capacity expansion  now that it secured longer-term pacts.

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Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at [email protected] and he does not own securities in the companies he covers.