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Suntech Reports First Quarter 2007 Financial Results

WUXI, China, May 29 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced first quarter 2007 financial results.

    First Quarter 2007 Highlights
    -- Exceeding guidance, total net revenues grew 174.5% year-over-year to
       $246.7 million, and total production output grew 138.2% year-over-year
       to 64.7MW.
    -- On a non-GAAP basis(1), Suntech group's operating income was $33.8
       million and net income was $32.7 million. Excluding the impact of MSK,
       which discontinued its Japan-based production in the first quarter,
       operating income was $37.6 million and net income was $35.9 million or
       $0.22 per diluted American Depository Share (ADS). Each ADS represents
       one ordinary share.
    -- Suntech group's blended non-GAAP gross margin was 19.9% or 22.5%
       excluding MSK. Margins were impacted primarily by slower than expected
       delivery of lower priced wafers from long-term contract wafer suppliers.
       As wafer delivery is now back on track the Company believes there will
       be a positive impact on gross margins in the rest of 2007.
    -- Annualized PV cell production capacity expanded faster than originally
       anticipated, growing from 270MW to 360MW during the first quarter.
       Having already secured ample wafers to meet expanded output capacity,
       Suntech has raised its full year projected 2007 production output for
       the second time from 250MW to 325MW. 2007 year-end production capacity
       has also been raised a second time from 390MW to 480MW.

''We experienced exceptionally strong demand for our PV modules due to high customer satisfaction and a strong reputation for reliably delivering large volumes of superior quality and performance products on schedule. The demand for our products has never been stronger and we already have firm purchase contracts in place for our entire 2007 projected output, which is notable given that this volume is more than double our 2006 output. In fact, we are already receiving purchase orders for 2008,'' said Dr. Zhengrong Shi, Suntech's Chairman and CEO.

''In order to capture ever increasing sales opportunities, we are exploring all options to bring forward plans to reach our goal of one gigawatt production capacity in 2010,'' added Dr. Shi. ''In the first quarter, we accelerated the installation of three 30MW production lines at our Luoyang facility, and ramped these lines to full operating capacity in April, several months ahead of schedule.''

Commenting on Suntech's silicon supply, Dr. Shi noted, ''We have secured all the silicon we need for our projected 2007 output. Depending upon the source of silicon supplier, our core wafer to module business non-GAAP gross margin ranges from a high of 35%, when produced with wafers from long-term, fixed price contracts, to a low of around 20%, when produced with wafers from contracts with spot-market pricing."

Dr. Shi continued, ''Our margins were impacted in the quarter by the need to purchase more wafers with spot market pricing to meet the high demand for our product and compensate for slower than expected delivery from our long- term supply arrangements. The temporary delay in shipments from our long-term wafer suppliers has been resolved and shipments are currently back on track. We believe we are on course with our prior guidance for margin improvement beginning in the second quarter of 2007.''

    Recent Business Highlights
    -- In its key sales geographies, Suntech's sales continue to outpace
       market growth. In particular, sales volumes have grown measurably in
       Spain, where the Company shipped 27MW in the first quarter of 2007,
       similar to shipment volumes in Germany.
    -- Recent project wins highlight Suntech's increasing traction in the
       North American market. Suntech was selected by Sun Edison as the
       cornerstone supplier for the 8.2MW Alamosa Central Solar Plant in
       Colorado -- one of the largest North American solar power plants.
       Suntech is also collaborating with BASS Electric to supply a 450KW PV
       system to the San Francisco International Airport's new Terminal T3
       solar project.
    -- The Company has increased its BIPV sales and marketing activities
       especially in North America demonstrated by its letter of intent with
       Open Energy Corp. this month. Suntech intends to provide cost effective
       and high quality production of their SolarSave(R) PV Tiles and explore
       broad initiatives to expand BIPV product sales within the North
       American market.
    -- The Company has recently won multiple projects totaling 5MW in South
       Korea demonstrating the growing strength of its Asia-based sales
       outside of China. The market size for solar products in South Korea was
       18MW in 2006 according to Solarbuzz.
    -- The Company is on track with a key step in its move towards
       multi-gigawatt manufacturing with the construction of its new facility
       in Wuxi, China. The 540,000 square foot, 1GW capacity plant is
       scheduled to begin installation of new PV cell production lines in June
       2007.
    -- Suntech's innovative 20% conversion efficiency PV cell, based on its
       new low cost ''Pluto'' technology platform, is ahead of schedule
       achieving over 18% conversion efficiency in pilot production
       successfully validating the commercial feasibility of this technology
       in comparison to conventional PV cell technology.
    -- To address the growing market for thin film and BIPV products, Suntech
       recently began construction on a thin film R&D and manufacturing
       facility in Shanghai. The initial phase with 50MW of capacity is
       expected to begin operation by the middle of 2008. Suntech projects an
       average production cost of $1.20 per watt and conversion efficiency of
       6% to 9%. The thin film modules will be nearly 6 square meters in size
       contributing to a balance of system installation cost for Suntech's
       thin film solution that it believes will be significantly lower than
       other PV solutions.
    -- MSK's third-party PV cell to module business was halted during the
       quarter. Production has since started in Suntech's Wuxi facilities and
       has now become an integral and profitable part of Suntech's operations,
       providing Suntech with additional capacity to meet the increasing
       demand for Suntech's products with nearly no incremental operating
       expenses.  During the first quarter, Suntech also successfully
       established BIPV production lines at its Wuxi facility.

    First Quarter 2007 Results

Selected highlights of the Company's first quarter 2007 results are set forth below and should be read together with the detailed financial statements at the end of this release.


    Breakdown of First Quarter 2007 Key Results

                               Net         % of Net      Non-GAAP    Non-GAAP
                             Revenues      Revenues    Gross Profit   Gross
                         (in $ millions)              (in $ millions) Margin
                                                                       (%)
    Standard PV Modules       $244.1         99.0%         $48.9       20.0%
     - Wafer to Modules        225.2         91.3           50.9       22.6
     - Cell to Modules          18.9          7.7          (2.0)      (10.3)
    Others                       2.6          1.0            0.3       10.9
    Total (consolidated)      $246.7          100%         $49.2       19.9%
    Total (excluding MSK)     $227.8           --          $51.2       22.5%

On a GAAP basis, gross profit was $47.0 million and gross margin was 19.0%, operating income was $26.8 million and net income was $26.1 million or $0.16 per diluted ADS.

Non-GAAP operating expenses in the first quarter of 2007 were $15.4 million and accounted for 6.2% of net revenues. This decline from 6.9% of net revenues in the prior quarter was primarily due to a combination of the Company's rapidly expanding sales and an increased emphasis on expense controls.

Non-GAAP income from operations for the first quarter of 2007 was $33.8 million and non-GAAP operating margin was 13.7%. The decrease in operating margin was mainly attributable to the decrease in gross profit margin partially offset by the reduced operating expenses as a percentage of total revenues.

Non-GAAP net income attributable to holders of ordinary shares for the first quarter of 2007 was $32.7 million, or $0.20 per non-GAAP diluted ADS.

In the first quarter of 2007, capital expenditures, which were primarily related to production capacity expansion, were $26.9 million and depreciation and amortization expenses were $4.6 million.

During the quarter, the total number of diluted ADSs outstanding increased by 5.0% from 156.3 million to 164.1 million, primarily due to an increase of 5.5 million ADSs on an ''as converted'' basis. The 5.5 million ADSs represent a portion of the 10.3 million ADSs that may be issued in the future as a result of the February 2007 convertible bond offering of $500 million.

The negative impact on the Company's results created by MSK's high cost production has been significantly reduced as its Japan-based production was halted during the quarter and replaced by Suntech's China-based production. As a result, the third-party PV cell to module business produced in China is currently profitable. Suntech's results for the first quarter of 2007 excluding MSK were: non-GAAP operating expenses as percentage of net revenues of 6.0%, non-GAAP income from operations of $37.6 million and non-GAAP operating margin of 16.5%, and non-GAAP net income of $35.9 million. While MSK contributed to a loss of $3.2 million for the quarter, the Company will continue to restructure and divest non-core assets at MSK, which will likely result in restructuring expenses and other accounting charges in the future.

Outlook for Second Quarter and Full Year 2007

Based on current operating and other conditions, Suntech expects its second quarter 2007 total production output to be in the estimated range of 76MW to 78MW.

As a result of the faster than projected ramp of new cell production lines and additional third party cell to module capacity, Suntech has increased its total PV production output target for 2007 to 325MW. The Company is also increasing its end of year projected capacity by two production lines to 480MW.

Suntech expects capital expenditures for the full year 2007 to be in the estimated range of $100 million to $120 million, largely to be used to achieve its goals of expanding its capacity and building its thin film facility.

Conference Call Information

Suntech's earnings announcement conference call will take place on May 29, 2007 at 8:00a.m., Eastern Time, which corresponds to May 29, 2007 at 8:00p.m., Beijing/Hong Kong time.

To access the conference call, please dial +1-617-597-5343 (for U.S. callers) or +852-3002-1672 (for international callers) and ask to be connected to the Suntech earnings conference call. A live and archived webcast of the conference call will be available on the Investors section of Suntech's website at http://www.suntech-power.com .

A replay of the conference call will be available until June 10, 2007 by dialing +1-617-801-6888 (passcode: 24487629).

About Suntech

Suntech Power Holdings Co., Ltd. is a leading solar energy company in the world as measured by both production output and capacity of solar cells and modules. Suntech provides solar solutions for a green future. Suntech designs, develops, manufactures, and markets a variety of high quality, cost effective and environmentally friendly PV cells and modules for electric power applications in the residential, commercial, industrial, and public utility sectors. Suntech's majority-owned subsidiary, MSK Corporation is one of the top-ranked companies in the building-integrated photovoltaics (BIPV) space. Suntech's customers are located in various markets worldwide, including key markets throughout Europe, North America, Japan and China. For more information, please visit http://www.suntech-power.com .

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. In particular, the projected second quarter and fiscal year 2007 data, regarding production output, total net revenues and consolidated net income, gross and other margins, capital expenditures, the business outlook and quotations from management in this announcement, statements regarding Suntech's beliefs and expectations about the halting of the cell to module production at MSK Corporation with the expansion of such business in the Company's Wuxi site, as well as Suntech's strategic and operational plans, are forward-looking statements. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Suntech's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F. Suntech does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, Suntech uses the following non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to share-based compensation, restructuring expenses and the purchase price allocation effect related to the MSK Corporation acquisition. Management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Suntech's core business across different reporting periods on a consistent basis, independently of stock-based compensation expenses and the purchase price allocation effect related to the MSK acquisition. Thus, the non-GAAP financial measures provide investors with another method for assessing Suntech's operating results in a manner that is focused on the performance of its ongoing operations. Management also uses these non-GAAP measures internally to make an apples-to-apples comparison of the business and financial performances of current and historical results, for strategic decision making, forecasting future results and evaluating the Company's current performance. Many analysts covering Suntech use the non- GAAP measures as well. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release and which shall be read together with the preceding financial statements prepared under GAAP.

     (1) All non-GAAP measures exclude share-based compensation expenses,
         restructuring expenses and the amortization expenses incurred from
         purchase price allocation related to the acquisition of MSK
         Corporation as of August 11, 2006.  For further details on non-GAAP
         measures, please refer to the reconciliation table and a detailed
         discussion of management's use of non-GAAP information set forth in
         this press release.

Note: The quarterly consolidated income statements are unaudited. The condensed consolidated balance sheets are derived from Suntech's unaudited consolidated financial statements.



                       SUNTECH POWER HOLDINGS CO., LTD.
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                  (In $'000)

                                               Suntech Group     Suntech Group
                                               Consolidated      Consolidated
                                                December 31,       March 31,
                                                    2006              2007

    ASSETS
    Current assets:
      Cash and cash equivalents                    225,530           569,284
      Restricted cash                               78,855           124,235
      Inventories                                  200,292           190,783
      Accounts receivable                           98,855           163,778
      Value-added tax recoverable                   26,218            29,937
      Advances to suppliers                         79,444            75,740
      Other current assets                           7,214             7,896
    Total current assets                           716,408         1,161,653

    Property, plant and equipment, net             113,750           142,995
    Intangible assets, net                          75,751            80,533
    Goodwill                                        28,551            28,786
    Investments in affiliates                        2,208             1,925
    Long-term prepayments                          132,314           131,747
    Long-term loan to a supplier                    22,246            98,431
    Other non-current assets                         6,727            19,670
    TOTAL ASSETS                                 1,097,955         1,665,740

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 288,185           307,286
       Accounts payable                             40,541            45,425
       Other current liabilities                    28,096            26,562
    Total current liabilities                      356,822           379,273

    Long-term bank borrowings                       19,657           527,876
    Accrued warranty costs                           8,846            11,206
    Other long-term liabilities                     41,625            40,980
    Total liabilities                              426,950           959,335

    Minority interest                               18,542            17,775

    Total shareholders' equity                     652,463           688,630

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                      1,097,955         1,665,740




                         SUNTECH POWER HOLDINGS CO., LTD.
                        CONSOLIDATED INCOME STATEMENT (*)
              (In $'000, except share, per share, and per ADS data)

                                     Suntech Group Suntech Group Suntech Group
                                     Consolidated  Consolidated  Consolidated
                                         2006          2006          2007
                                          Q1            Q4            Q1


    Total net revenues                  89,886       217,859       246,696
    Total cost of revenues              62,834       169,372       199,713
    Gross profit                        27,052        48,487        46,983
    Selling expenses                     1,010         3,564         5,686
    General and administrative expenses  4,904        11,569        10,833
    Research and development expenses    1,078         3,626         3,659
    Total operating expenses             6,992        18,759        20,178

    Income from operations              20,060        29,728        26,805
    Interest expenses                     (857)       (2,390)       (4,419)
    Interest income                      1,471         3,152         6,203
    Other income (expense)                 194         1,546        (2,122)

    Income before income taxes          20,868        32,036        26,467
    Tax provision                       (1,589)       (1,830)       (2,091)

    Net income after taxes before
     minority interest and equity in
     earnings of affiliates             19,279        30,206        24,376
    Minority interest                       16         1,123         1,536
    Equity in (loss) earnings of
     affiliates                             24            88           182

    Net income                          19,319        31,417        26,094
    Deemed dividend on Series A
     redeemable convertible preferred
     shares                                 --            --            --
    Net income attributable to holders
     of ordinary shares                 19,319        31,417        26,094

    Net income per share and per ADS:
       - Basic                            0.13          0.21          0.17
       - Diluted                          0.12          0.20          0.16

    Shares and ADSs used in
     computation:
       - Basic                     147,487,707   149,790,714   150,487,272
       - Diluted                   156,220,705   156,312,894   164,087,838



    (*) Purchase price allocation is preliminary and will be finalized within
        one year timeframe from the acquisition date.
        Each ADS represents one ordinary share



          Reconciliations of non-GAAP results of operations measures
                 to the nearest comparable GAAP measures (*)
                (in $ millions, except margin data, per share
                         and per ADS data, unaudited)

                                          Three months ended March 31, 2006
                                                               Effect
                                                                of     Suntech
                                                     Share-  Purchase   Group
                                          Suntech    based    Price      Non-
                                         Group GAAP  Compen- Allocation  GAAP
                                          Results    sation            Results
    Gross profit                            27.1       0.5      --       27.6
    Gross margin                            30.1%                        30.7%

    Income from operations                  20.1       2.8      --       22.9
    Income from operations margin           22.3%                        25.5%

    Net income attributable to holders of
     ordinary shares                        19.3       2.8      --       22.1
    Net income margin                       21.5%                        24.6%

    Net income per share and per ADS
       - Basic                              0.13                         0.15
       - Diluted                            0.12                         0.14




                                     Three months ended December 31, 2006
                                               Effect                 Suntech
                                                 of                    Group
                                              Purchase Suntech       Excluding
                                Suntech Share-  Price   Group   MSK     MSK
                                 Group  based   Alloc-   Non- Results   Non-
                                 GAAP   Compen- ation    GAAP           GAAP
                                Results sation         Results         Results
    Gross profit                 48.5    0.4     0.3     49.1   0.8     49.9
    Gross margin                 22.3%                   22.5%          26.2%

    Income from operations       29.7    3.8     0.7     34.2   4.4     38.6
    Income from operations
     margin                      13.6%                   15.7%          20.3%

    Net income attributable
     to holders of ordinary
     shares                      31.4    3.8     0.3     35.5   2.3     37.8
    Net income margin            14.4%                   16.3%          19.9%

    Net income per share and
     per ADS
       - Basic                   0.21                    0.24           0.25
       - Diluted                 0.20                    0.23           0.24




                                 Three months ended March 31, 2007
                                         Effect                       Suntech
                                          of                           Group
                                       Purchase         Suntech      Excluding
                         Suntech Share-  Price  Restru-  Group          MSK
                          Group  based   Alloc- cturing   Non-   MSK    Non-
                          GAAP   Compen- ation  Expenses  GAAP  Results GAAP
                         Results sation                  Results       Results
    Gross profit          47.0     2.2     --      --     49.2   2.0    51.2
    Gross margin          19.0%                           19.9%         22.5%

    Income from
     Operations           26.8     6.5    0.5      --     33.8   3.8    37.6
    Income from
     operations margin    10.9%                           13.7%         16.5%

    Net income
     attributable to
     holders of ordinary
     shares               26.1     6.5   (0.2)    0.3     32.7   3.2    35.9
    Net income margin     10.6%                           13.3%         15.8%

    Net income per share
     and per ADS
       - Basic            0.17                            0.22          0.24
       - Diluted          0.16                            0.20          0.22

    (*) The adjustment is for share-based compensation, restructuring expenses
        and amortization expenses incurred from purchase price allocation
        related to the acquisition of MSK Corporation.



    For more information, please contact:

    In the United States:
     Sanjay M. Hurry
     Vice President
     The Piacente Group, Inc.
     Tel:   +1-212-481-2050
     Email: suntech@tpg-ir.com

    In China:
     Rory Macpherson
     Ogilvy Public Relations Worldwide
     Tel:   +86-10-8520-6553
     Email: rory.macpherson@ogilvy.com