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Suntech Reports Second Quarter 2007 Financial Results

WUXI, China, Aug. 9 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced second quarter 2007 financial results.

    Second Quarter 2007 Highlights(1)
    -- Exceeding guidance, total production output was over 80MW and total net
       revenues grew 147.7% year-over-year to $317.4 million.

    -- On a non-GAAP(2) basis, Suntech group's net income was $48.9 million.
       Excluding the impact of MSK, net income was $50.8 million or $0.30 per
       diluted American Depository Share (ADS). Each ADS represents one
       ordinary share.

    -- Suntech group's non-GAAP gross margin in its core Wafer to Module
       business was 23.9% and blended non-GAAP gross margin was 21.1%. Margin
       improvement was primarily due to the increase in delivery of lower
       priced wafers from long-term contract wafer suppliers.

    -- Annualized PV cell production capacity expansion is on track to reach
       480MW by the end of 2007.

"I am pleased to report excellent results for the second quarter," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "We once again exceeded our output target as we saw unprecedented demand for Suntech's high quality solar panels across a range of international markets. In fact, our sales demand has been so strong that we have already signed contracts to deliver over 150MW of our PV modules in 2008. To put that in perspective, that is nearly equal to Suntech's entire output in 2006. As we deepen our sales channels and networks in key geographies, we believe we will continue to grow faster than our competitors as well as the underlying markets."

"In the second quarter, our margins improved as ASPs remained in line with our expectations and silicon deliveries from our long-term suppliers returned to schedule." Dr. Shi added, "Our MSK integration efforts combined with the strategic refocus on building-integrated photovoltaic products (BIPV) has also led to greater global sales traction and improvements in the margin impact of our MSK products."

Commenting on Suntech's technology, Dr. Shi said, "We are pleased with the progress of our solar innovation initiatives. Despite the success of our high performance semi-conductor finger technology, our ground-breaking 20% efficiency Pluto technology is demonstrating even more impressive results in pilot production and we are on track to commence commercial production using this technology in 2008."

Dr. Shi continued, "Through this period of dynamic growth, we are determined to expand production capacity and increase our competitiveness by leveraging our manufacturing efficiency, technology advantages, and balanced silicon sourcing strategy."

    Recent Business Highlights
    -- Demand for Suntech's PV products in Spain continued to grow in the
       second quarter particularly through collaborations with key customers
       on multi-megawatt projects. Suntech is on track to become one of the
       largest suppliers of PV products to Spain.

    -- Suntech began shipping PV modules for the 8.2MW Alamosa solar power
       plant project in Colorado which is one of the largest PV projects in
       the United States to date.

    -- Suntech recently improved its long-term silicon position by signing a
       contract with Hoku Materials to purchase up to $678 million of
       polysilicon over a ten-year period. Shipments of set volumes of
       polysilicon at fixed prices are scheduled to begin in 2009.

    -- Suntech's MSK branded BIPV system was a key component of Kingspan Off-
       Site's "Lighthouse" net-zero carbon home, which is the first house
       designed to comply with the British government's Code for Sustainable
       Homes Level 6. By 2016, all new homes built in the United Kingdom will
       be required to be designed and constructed to meet the Code for
       Sustainable Homes Level 6.

    -- The Company recently completed phase 1 of an 800kW BIPV curtain wall
       project at Wuxi Airport in China. The installation showcases Suntech's
       BIPV capabilities and serves as a model project for other potential
       solar installations in China.

    -- Suntech successfully met the requirements of Section 404 of the
       Sarbanes-Oxley Act of 2002 ("SOX") regarding internal controls over
       financial reporting. The internal control systems have helped Suntech
       improve operating efficiency and manage rapid production and sales
       growth.

    Second Quarter 2007 Results
                                                     Non-GAAP       Non-GAAP
                          Net Revenues  % of Net   Gross Profit      Gross
                        (in $ millions) Revenues  (in $ millions)   Margin (%)

    Standard PV Modules     $313.5        98.8 %        $66.3         21.2 %
       -- Wafer to Modules   274.6        86.5           65.5         23.9
       -- Cell to Modules*    38.9        12.3            0.8          2.0

    Others                     3.9         1.2            0.6         15.6
    Total (consolidated)    $317.4         100 %        $66.9         21.1 %

    Total (excluding MSK)   $297.5          --          $67.5         22.7 %


    * The Cell to Modules segment includes both Suntech modules produced from
      third-party cells and MSK's slow moving module inventory.

On a GAAP basis, gross profit was $64.3 million and gross margin was 20.3%, operating income was $38.1 million, and net income was $41.3 million or $0.25 per diluted ADS.

Non-GAAP operating expenses in the second quarter of 2007 were $21.4 million and accounted for 6.7% of net revenues.

Non-GAAP income from operations for the second quarter of 2007 was $45.6 million and non-GAAP operating margin was 14.4%.

Non-GAAP net income attributable to holders of ordinary shares for the second quarter of 2007 was $48.9 million, or $0.29 per non-GAAP diluted ADS.

In the second quarter of 2007, capital expenditures, which were primarily related to production capacity expansion and the construction of the Wuxi and Luoyang production facilities, were $51.7 million and depreciation and amortization expenses were $4.2 million.

During the second quarter of 2007, the total number of diluted ADSs outstanding increased from 164.1 million to 168.9 million, primarily due to an increase of 4.8 million ADSs on an "as converted" basis. The additional ADSs represent the final portion of the 10.3 million ADSs that may be issued in the future as a result of the February 2007 convertible note offering of $500 million.

Suntech's results for the second quarter of 2007 excluding MSK were as follows:

Non-GAAP operating expenses as a percentage of net revenues were 6.4%, non-GAAP income from operations was $48.5 million and non-GAAP operating margin was 16.3%, and non-GAAP net income was $50.8 million. Suntech's successful execution of its integration initiatives was reflected in this quarter's results as Suntech reduced its loss from MSK operations by approximately 40% from the first quarter of 2007 to $1.9 million.

Senior Management Hires and Promotions

Suntech announced the following key promotions and new hires:

Mr. Steven Chan who was previously the Vice President of Business Development has been promoted to the position of Chief Strategy Officer. Mr. Chan will be focused on enhancing and solidifying Suntech's long term focus to be a leading solar energy company. In addition to strategy and business development, he will also be responsible for the investor relations and marketing function. His near term focus will be to head new business initiatives in North America as well as to foster key relationships with partners and suppliers.

Mr. Hao Zhi who was previously the Investment Controller has been promoted to the position of Investment Director. Mr. Hao will head the company's investment initiatives including mergers and acquisitions, strategic ventures and alliances.

Dr. Frank Zhang and Mr. Henry Ng are newly hired general managers who will manage Suntech's key production facilities. Dr. Zhang will oversee Suntech's thin film manufacturing facility in Shanghai and Mr. Ng will oversee Suntech's core PV manufacturing facility in Wuxi including its new one Gigawatt facility. Both Dr. Zhang and Mr. Ng have extensive experience in the related semiconductor manufacturing industry.

Prior to joining Suntech, Dr. Zhang was the Chief Operating Officer at China Resources Semiconductor Wafer & Chip Company, a semiconductor foundry in China. He also held a number of senior positions at Honeywell in California. Dr. Zhang received his MBA from the China Europe International Business School, Shanghai, and his Ph.D. in Mechanical and Materials Engineering from Clarkson University, New York.

Mr. Ng previously worked for over 10 years at Sony's manufacturing facilities in Singapore and China. Most recently he served as senior general manager of Sony's Huizhou facility that manufactures specialty LLCD chips. Prior to that, Mr. Ng acted as general manager at MI Wuxi Co., Ltd, a precision plastic molding company, Volex Cable Assembly (Suzhou), a first tier telecom and automotive supplier, and at Seagate Technology. Mr. Ng received a B.Sc degree from the National University of Singapore in Applied Physics.

Mr. Jason Somer was hired as the Senior Director of Business Development to be based in the United States. Mr. Somer was previously the Director of Legal Affairs at IronPort Systems, an e-mail and Web security appliance company in San Francisco that was acquired by Cisco Systems. Prior to that he held legal and business development positions at Neoforma, a Nasdaq-listed healthcare technology company in San Jose. Mr. Somer had previously worked as a corporate/securities associate for law firms in New York City, most recently Morrison & Foerster. Mr. Somer received an LL.M. from Boston University, an LL.B. from the University of British Columbia, and a B.Sc. from the University of Western Ontario.

Outlook for Third Quarter and Full Year 2007

Based on current operating and other conditions, Suntech expects its third quarter 2007 total production output to be in the estimated range of 94MW to 96MW.

Conference Call Information

Suntech's earnings announcement conference call will take place on August 9, 2007 at 8:00a.m., Eastern Time, which corresponds to August 9, 2007 at 8:00p.m., Beijing/Hong Kong time.

To access the conference call, please dial +1-617-597-5344 (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 August 20, 2007 by dialing +1 617-801-6888 (passcode: 14519969).

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 third quarter data regarding production output and the business outlook and quotations from management in this announcement, 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) Selected highlights of the Company's second quarter 2007 results are
         set forth in the text of the release and should be read together with
         the detailed financial statements at the end of this release.

     (2) 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
                                                 March 31,          June 30,
                                                    2007              2007
    ASSETS
    Current assets:
      Cash and cash equivalents                    569,284           519,963
      Restricted cash                              124,235           127,372
      Inventories                                  190,783           198,385
      Accounts receivable                          163,778           225,758
      Value-added tax recoverable                   29,937            36,135
      Advances to suppliers                         75,740            76,970
      Other current assets                           7,896            22,781
    Total current assets                         1,161,653         1,207,364

    Property, plant and equipment, net             142,995           185,255
    Intangible assets, net                          80,533            77,121
    Goodwill                                        28,786            27,580
    Investments in affiliates                        1,925             6,661
    Long-term prepayments                          131,747           144,486
    Long-term loan to a supplier                    98,431            99,134
    Other non-current assets                        19,670            13,189
    TOTAL ASSETS                                 1,665,740         1,760,790

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 307,286           328,036
       Accounts payable                             45,425            59,135
       Other current liabilities                    26,562            38,010
    Total current liabilities                      379,273           425,181

    Long-term bank borrowings                      527,876           528,686
    Accrued warranty costs                          11,206            14,298
    Other long-term liabilities                     40,980            34,619
    Total liabilities                              959,335         1,002,784

    Minority interest                               17,775            18,289

    Total shareholders' equity                     688,630           739,717

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                      1,665,740         1,760,790



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

                                          Suntech      Suntech       Suntech
                                           Group        Group         Group
                                       Consolidated Consolidated  Consolidated
                                            2006         2007         2007
                                             Q2           Q1           Q2


    Total net revenues                    128,154      246,696      317,377
    Total cost of revenues                 92,034      199,713      253,043
    Gross profit                           36,120       46,983       64,334
    Selling expenses                        1,547        5,686        6,961
    General and administrative expenses     4,751       10,833       15,122
    Research and development expenses       1,632        3,659        4,171
    Total operating expenses                7,930       20,178       26,254

    Income from operations                 28,190       26,805       38,080
    Interest expenses                      (1,177)      (4,419)      (6,005)
    Interest income                         3,030        6,203        8,811
    Other income (expense)                 (1,387)      (2,122)       3,234

    Income before income taxes             28,656       26,467       44,120
    Tax provision                          (2,153)      (2,091)      (2,425)

    Net income after taxes before
     minority interest and equity in
     earnings of affiliates                26,503       24,376       41,695
    Minority interest                         (30)       1,536         (515)
    Equity in (loss) earnings of
     affiliates                                63          182          123

    Net income                             26,536       26,094       41,303
    Deemed dividend on Series A
     redeemable convertible preferred
     shares                                    --           --           --
    Net income attributable to holders
     of ordinary shares                    26,536       26,094       41,303

    Net income per share and per ADS:
       - Basic                               0.18         0.17         0.27
       - Diluted                             0.17         0.16         0.25

    Shares and ADSs used in
     computation:
       - Basic                        148,240,382  150,487,272  151,143,225
       - Diluted                      156,012,742  164,087,838  168,862,744

    (*) 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 June 30, 2006

                                                                      Suntech
                                      Suntech              Effect of   Group
                                       Group  Share-based   Purchase    Non-
                                       GAAP   Compensation   Price      GAAP
                                      Results              Allocation  Results
    Gross profit                       36.1       0.5          --       36.6
    Gross margin                       28.2%                            28.6%

    Income from operations             28.2       2.8          --       31.0
    Income from operations margin      22.0%                            24.2%

    Net income attributable to holders
     of ordinary shares                26.5       2.8          --       29.4
    Net income margin                  20.7%                            22.9%

    Net income per share and per ADS
      -Basic                           0.18                             0.20
      -Diluted                         0.17                             0.19


Three months ended March 31, 2007

                                                                      Suntech
                                     Effect                            Group
                                       of             Suntech        Excluding
                     Suntech Share- Purchase  Restru   Group            MSK
                      Group  based   Price    cturing   Non-            Non-
                      GAAP   Compen  Alloca  Expenses   GAAP    MSK     GAAP
                     Results sation   tion             Results 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


Three months ended June 30, 2007

                                                                      Suntech
                                     Effect                            Group
                                       of             Suntech        Excluding
                     Suntech Share- Purchase  Restru   Group            MSK
                      Group  based   Price    cturing   Non-            Non-
                      GAAP   Compen  Alloca  Expenses   GAAP    MSK     GAAP
                     Results sation   tion             Results Results Results
    Gross profit      64.3    2.6      --       --      66.9    0.6     67.5

    Gross margin      20.3%                             21.1%           22.7%

    Income from
     operations       38.1    7.1      0.4      --      45.6    2.9     48.5
    Income from
     operations
     margin           12.0%                             14.4%           16.3%

    Net income
     attributable to
     holders of
     ordinary shares  41.3    7.1      0.4     0.1      48.9    1.9     50.8

    Net income
     margin           13.0%                             15.4%           17.1%

    Net income per
     share and per
     ADS
       -Basic         0.27                              0.32            0.34
       -Diluted       0.25                              0.29            0.30

    (*) 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