Canadian Solar and JA Solar sign cell supply agreement

JA Solar (NASDAQ: JASO) and Canadian Solar Inc. ("CSI") (NASDAQ: CSIQ) this morning announced a supply agreement valued at between $50 and $60 million USD for the balance of this calendar year.

Under the agreement, JA Solar will supply solar cells to CSI for use in CSI's solar modules. Initial deliveries will start immediately.

In JA Solar's earnings call last week, management commented that more than 80% of expected 2007 cell production was under contract, which appears to incorporate this deal with CSIQ.

"JA Solar is an important strategic supplier to CSI. Securing this additional solar cell supply at a cost meeting our internal target will allow us to fulfill the increased demands from our key customers. CSI continues to ramp up its in-house solar cell manufacturing while maintaining long-term strategic purchasing from a couple of selected supply partners," said Shawn Qu, CSI's Chairman and CEO.

Founded in 2001, Canadian Solar is a vertically integrated manufacturer of solar module and customer-designed solar application products serving worldwide customers. CSI is incorporated in Canada but conducts its manufacturing operations in China.

CSI has been working to lock up raw material supply for 2007. In mid-March, the company had 70% of its 2007 expected silicon requirements under contract.

"We have a production estimate of 64MW for 2007, so the volumes from the JASO deal combined with the previously locked up supply should provide CSIQ with nearly all of its required raw materials for 2007," wrote analyst Jeff Osborne of CIBC World Markets in a research note to clients this morning.

Based in Hebei, China, JA Solar Holdings Co., Ltd. is an emerging and fast-growing manufacturer of high-performance, monocrystalline solar cells. The company sells its products to solar module manufacturers who assemble and integrate its solar cells into modules and systems.

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