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Suntech Reports Third Quarter 2007 Financial Results

SAN FRANCISCO, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced third quarter 2007 financial results.

    Third Quarter 2007 Highlights(1)
    -- Exceeding guidance, total sales volume exceeded 100MW and total
       net revenues grew 137.3% year-over-year to $386.7 million.
    -- On a non-GAAP(2) basis, Suntech group's net income was $61.2 million
       or $0.36 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 24.4%.
    -- Cash and cash equivalents increased by $68.6 million largely due
       to positive operating cash flow in the third quarter of 2007.
    -- Suntech's PV cell production capacity increased to 420MW at the end
       of the third quarter 2007. Due to the opening of Suntech's new 1GW
       facility and the accelerated installation and ramp of new production
       lines, Suntech has raised its 2007 year-end PV cell production
       capacity target from 480MW to 540MW.
    -- Due to strong demand, expanded silicon procurement, and the
       anticipated benefit from economies of scale associated with capacity
       expansion, Suntech has raised the year-end 2008 PV cell production
       capacity target from 600MW to 1GW, two years ahead of the previously
       announced 1GW PV cell production capacity target at the end of 2010.

"Robust demand and outstanding operational execution drove another strong quarter for Suntech," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "We exceeded our top line expectations and achieved a significant production milestone with total quarterly output surpassing 100MW for the first time in Suntech's history. We already have purchase orders for 2008 delivery totaling over 450MW, and we expect that extremely strong demand for our PV products will continue, leading to firm pricing in 2008."

"At the end of the third quarter, we completed construction of our new 1GW production facility in Wuxi, China. This facility will enable us to transition to a new generation of technology that will facilitate the production of higher efficiency PV cells using thinner wafers on a multi-gigawatt scale. In addition, this facility will enable us to accelerate our capacity expansion to hit 1GW capacity two years ahead of plan and further reduce our cost base through economies of scale. This represents a key milestone for Suntech."

Commenting on Suntech's silicon supply, Dr. Shi said: "Our recent long term silicon contracts with Asia Silicon, Nitol Solar, ReneSola and a major Korean conglomerate mark a major turning point for Suntech's silicon supply environment as they will both enhance our margins and expand our volume. We believe that our new suppliers employ best-in-class equipment and manufacturing processes to produce high quality silicon and wafers. In the near term, despite the industry's shortage, our procurement has been highly successful and we have secured enough silicon for at least 530MW of output. These new contracts not only allow us to accelerate our growth, they also significantly decrease our long term cost of silicon and bring Suntech closer to the goal of grid parity."

    Recent Business Highlights

    New Products and Projects
    -- Suntech announced the completion of a 23.2MW field solar
       installation in the Extremadura region of Spain. Suntech supplied
       more than 120,000 Suntech PV modules to Atersa, a subsidiary of
       Elecnor Group and one of Suntech's key partners in Spain, for
       installation in the solar park. In addition to this project, Atersa
       has contracted with Suntech for the supply of over 50MW in 2007 and
       early 2008.
    -- Suntech recently completed the first stage of a 3MW landmark project
       with WEPCO, a subsidiary of KEPCO, which is South Korea's largest
       power utility. The South Korean solar market has become the fastest
       growing solar market in Asia since the introduction of attractive
       feed in tariffs, and Suntech has rapidly established itself as a
       leading supplier of PV modules. Suntech projects sales to South Korea
       of almost 10MW in the full year 2007.
    -- The U.S. market's most powerful standard 72 solar cell module and a
       new all black solar module for the U.S. residential solar market
       were launched in conjunction with the Solar Power 2007 Conference
       and Expo held in Long Beach, CA in September.

    Silicon and Wafer Procurement
    -- Reducing the cost of silicon is one of Suntech's key strategies to
       rapidly achieve grid parity, and through ongoing recent silicon
       procurement efforts Suntech has transformed its long term silicon
       supply status and now maintains a growing pipeline of silicon at
       prices well below today's spot market. The Company has recently
       announced new supply contracts with:
       -- Asia Silicon Co., Ltd. to provide polysilicon for a total value
          of up to $1.5 billion over a seven-year period with the cost of
          polysilicon decreasing to below $40 per kg.
       -- ReneSola Ltd. to purchase 510MW of silicon wafers over a
          four-year period beginning in January 2008.
       -- Nitol Solar Ltd. to supply polysilicon over a seven-year period
          beginning in 2009.
       -- A major Korean conglomerate to provide silicon wafers over an
          eight-year period with delivery beginning in 2008.

    Global Offices and Production Facilities
    -- Suntech announced the completion of its new world-class, 1GW
       facility in Wuxi, China. The new production facility opening
       represents a key milestone in the evolution of Suntech's production
       processes toward increased automation and the Company's advance
       toward multi-gigawatt production. With additional floor space,
       Suntech has accelerated the installation and ramp of new PV cell
       production lines.
    -- On October 23, Suntech announced the opening of its new headquarters
       office in San Francisco, California.  The establishment of Suntech's
       U.S. headquarters is aimed at providing a diverse range of
       on-the-ground capabilities to its customers in America as well as to
       accelerate U.S. business development initiatives. Since launching
       its U.S. operations in 2006, Suntech has quickly become one of the
       leaders in the market.  Suntech expects to expand its sales in North
       America next year by more than 100% which is over 14 times higher
       than 2006 sales.

    Building Integrated PV (BIPV) Solutions
    -- Since the acquisition of MSK, Suntech has developed one of the
       largest portfolios of BIPV solutions in the industry. Strong
       interest in building integrated solar technology in key markets
       continued to fuel Suntech's BIPV business development.
       -- In Italy, Suntech supplied MSK Photovol Glass panels to
          Socovoltaic Systems for a 10kW BIPV solution.  This will form an
          integral component of a 750kW solar system for a 25,000 square
          meter green building project in the Sicilian city of Pozzallo.
       -- In the U.S., Suntech supplied a custom designed MSK BIPV Light
          Thru skylight system to Recreational Equipment, Inc. (REI) for
          their prototype store in October in Boulder, Colorado.
    -- Suntech has also expanded its BIPV solutions to include co-developed
       products that are manufactured by Suntech. In addition to an
       agreement with Open Energy to manufacture their SolarSave(R) PV
       Tiles, Suntech announced initiatives to produce 10MW to 14MW of
       Akeena Solar's Andalay solar panels in 2008 and to produce Lumeta's
       line of roof integrated photovoltaic products.

    Third Quarter 2007 Results
                                                        Non-GAAP       Non-
                                                         Gross        GAAP
                            Net                         Profit        Gross
                         Revenues                                    Margin
                           (in $       % of Net          (in $
                         millions)     Revenues        millions)       (%)
    Standard PV Modules      $381.2        98.6%           $82.2      21.6%
      - Wafer to Modules      307.4        79.5%            74.9      24.4%
      - Cell to Modules        73.8        19.1%             7.3       9.9%
    Others                      5.5         1.4%             0.6      10.9%
    Total (consolidated)     $386.7         100%           $82.8      21.4%

Suntech reported total net revenues of $386.7 million for the third quarter of 2007, representing a 137.3% increase from the corresponding period in 2006.

Non-GAAP gross profit for the third quarter of 2007 was $82.8 million, an increase of 117.9% year-over-year. Non-GAAP gross margin for our core wafer- to-module business improved to 24.4% and non-GAAP consolidated gross margin was 21.4%.

Non-GAAP operating expenses in the third quarter of 2007 totaled $19.3 million and accounted for 5.0% of net revenues.

Non-GAAP income from operations for the third quarter of 2007 was $63.5 million, an increase of 113.1% year-over-year. Non-GAAP operating margin was 16.4%.

Non-GAAP net income for the third quarter of 2007 was $61.2 million, an increase of 86.6% year-over-year, or $0.36 per non-GAAP diluted ADS.

On a GAAP basis, for the third quarter of 2007 gross profit was $80.0 million, an increase of 115.1% year-over-year. Gross margin was 20.7% for the third quarter of 2007. Income from operations was $56.1 million, an increase of 121.7% year-over-year. Net income was $53.3 million, an increase of 85.4% year-over-year, or $0.32 per diluted ADS.

In the third quarter of 2007, capital expenditures, which were primarily related to production capacity expansion and the construction of Suntech's new production facilities, totaled $41.8 million and depreciation and amortization expenses totaled $5.5 million.

Suntech's balance of cash and cash equivalents was $588.6 million at September 30, 2007, compared to $520.0 million at June 30, 2007. Inventory totaled $164.3 million at September 30, 2007, compared to $198.4 million at June 30, 2007, primarily due to improved inventory management.

Business Outlook

Based on current operating and other conditions, Suntech expects fourth quarter of 2007 total sales volume to be in the range of 109MW to 111MW, and has increased the forecast of full year 2007 sales volume by 12% from 325MW to be in the range of 363MW to 365MW. Non-GAAP consolidated gross margin in the fourth quarter of 2007 is expected to improve by 50 to 100 basis points from the third quarter of 2007.

Suntech has currently secured enough silicon to produce more than 530MW in 2008. Based on this level of silicon supply, Suntech expects revenues to be in the range of $1.9 billion to $2.1 billion for the full-year 2008.

Due to the accelerated installation of production lines within the newly opened 1GW facility, Suntech has raised the year-end 2007 PV cell production capacity target from 480MW to 540MW. Suntech has also raised the year-end 2008 PV cell production capacity target from 600MW to 1GW, two years ahead of the previously announced 1GW PV cell production capacity target at the end of 2010.

Changes to the Board

Suntech announced the re-appointment of Mr. Jason E. Maynard to its Board of Directors and the resignations of Dr. Jingjia Ji and Mr. Chengyu Fu. Dr. Ji will continue to serve as a senior scientist at the Company concentrating on key initiatives such as the Pluto technology and the thin film R&D and manufacturing facility. Mr. Maynard, formerly a member of the Company's Board from August 2005 to October 2006, will serve on the Audit Committee, replacing Mr. Zhi Zhong Qiu, who remains on the Compensation Committee and Corporate Governance and Nominating Committee.

"We are very pleased to welcome Mr. Maynard back to the Suntech Board," said Dr. Shi. "We are confident that Mr. Maynard will play an important role in guiding Suntech's future initiatives to reduce the cost of solar energy and expand our position in international solar markets."

Mr. Maynard was formerly a partner and Head of the Asian Special Situations Group at Goldman Sachs (Asia) LLC based in Hong Kong. He has over 14 years of experience in principal investing with a focus ranging from distressed companies to growth private equity. Previously, he held positions at Merrill Lynch Asia Pacific, Chase Manhattan Asia and Citicorp International. Mr. Maynard received his bachelor's degree in East Asia Political Economy from Hamilton College in the United States.

"I would also like to thank Dr. Ji and Mr. Fu for their contributions to the Board over the past two years. Their dedication and insight were invaluable during a critical stage in Suntech's rapid development," said Dr. Shi.

Senior Management Hires

Ms. Kristina Peterson was hired as Director, Structured Finance of Suntech America, based in Suntech's U.S. headquarters in San Francisco. She will manage Suntech's structured, project and customer finance business in the U.S. Ms. Peterson was previously CEO of Mayflower Partners, an international financial advisory firm in Menlo Park, California. Prior to Mayflower, Ms. Peterson was Vice President at Citibank and ABN AMRO Bank in project and structured finance based in New York, Chicago, Los Angeles and Dubai, United Arab Emirates. Ms. Peterson received an MBA from the University of Chicago, and a B.S. from Boston University.

Ms. Polly Shaw was hired as the Director, External Relations of Suntech America also based in San Francisco. Ms. Shaw will focus on monitoring government affairs issues and actively represent Suntech in key industry associations in the U.S. such as the Solar Energy Industries Association and the Solar Alliance. Prior to joining Suntech, Ms. Shaw was a Senior Regulatory Analyst at the California Public Utilities Commission where she served as the staff lead to implement the $3.2 billion California Solar Initiative. Polly has worked for over 14 years to design policy models and programs that advance clean, efficient energy use and climate protection in the U.S., and energy efficiency and methane capture programs in the U.S. and China. Ms. Shaw received a B.A. from Tufts University.

Mr. Xuejun Qi was hired as Director of Production to oversee improvements in production processes. Mr. Qi has over 12 years experience in manufacturing management and was previously Director of Manufacturing at Samsung Electronics.

Upcoming Events in Wuxi, China

Annual General Meeting of Shareholders

Suntech will convene its annual general meeting of shareholders on December 18, 2007 at Company headquarters in Wuxi. Ordinary shareholders of record as of November 9, 2007 will be entitled to attend the meeting. There are no matters requiring shareholder consideration at this time.

Investor and Analyst Day

Suntech management will host an investor and analyst day in Wuxi on Tuesday, December 11, 2007. For more information, please contactsuntech@tpg- ir.com.

Third Quarter 2007 Conference Call Information

Suntech management will host a conference call today, Thursday, November 15 at 8:00 a.m. Eastern Time (which corresponds to November 15, 2007 at 9:00 p.m. Beijing/Hong Kong time) to discuss the company's results.

To access the conference call, please dial +1-617-614-3528 (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 Suntech's website at http://www.suntech- power.com under Investors: Events.

A telephonic replay of the conference call will be available until November 27, 2007 by dialing +1-617-801-6888 (passcode: 15787946).

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 fourth quarter 2007 and full year 2008 data regarding sales volume, capacity and revenues 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 amortization expenses incurred from 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 third 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.  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)

                                                   As of             As of
                                                  June 30,       September 30,
                                                    2007              2007

    ASSETS
    Current assets:
      Cash and cash equivalents                    519,963           588,553
      Restricted cash                              127,372            92,814
      Inventories                                  198,385           164,297
      Accounts receivable                          225,758           236,038
      Value-added tax recoverable                   36,135            51,374
      Advances to suppliers                         76,970            65,021
      Other current assets                          22,781            73,139
    Total current assets                         1,207,364         1,271,236

    Property, plant and equipment, net             185,255           227,442
    Intangible assets, net                          77,121            81,072
    Goodwill                                        27,580            29,439
    Investments in affiliates                        6,661            10,313
    Long-term prepayments                          144,486           144,391
    Long-term loan to a supplier                    99,134            99,748
    Other non-current assets                        13,189            12,713
    TOTAL ASSETS                                 1,760,790         1,876,354

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Short-term borrowings, including
        current portion of long-term bank
        borrowings                                 328,036           369,716
       Accounts payable                             59,135            47,252
       Other current liabilities                    38,010            50,431
    Total current liabilities                      425,181           467,399

    Long-term bank borrowings                       28,686            25,430
    Convertible notes                              500,000           500,000
    Accrued warranty costs                          14,298            18,154
    Other long-term liabilities                     34,619            31,839
    Total liabilities                            1,002,784         1,042,822

    Minority interest                               18,289            18,488

    Total shareholders' equity                     739,717           815,044

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                      1,760,790         1,876,354



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

                                        Three months Three months Three months
                                             ended        ended       ended
                                         September 30    June 30  September 30
                                             2006         2007        2007


    Total net revenues                      162,969      317,377     386,652
    Total cost of revenues                  125,742      253,043     306,626
    Gross profit                             37,227       64,334      80,026
    Selling expenses                          2,889        6,961       8,329
    General and administrative expenses       7,050       15,122      11,543
    Research and development expenses         2,038        4,171       4,094
    Total operating expenses                 11,977       26,254      23,966

    Income from operations                   25,250       38,080      56,060
    Interest expenses                        (1,869)      (6,005)     (6,508)
    Interest income                           4,119        8,811       8,071
    Other income (expense)                    1,707        3,234      (1,612)

    Income before income taxes               29,207       44,120      56,011
    Tax provision                            (1,617)      (2,425)     (3,532)

    Net income after taxes before
     minority interest and equity in
     earnings of affiliates                  27,590       41,695      52,479
    Minority interest                           301         (515)        763
    Equity in earnings of affiliates            838          123          16

    Net income                               28,729       41,303      53,258

    Net income per share and per ADS:
    - Basic                                    0.19         0.27        0.35
    - Diluted                                  0.19         0.25        0.32

    Shares and ADSs used in
     computation:
    - Basic                             148,324,230  151,143,225 152,187,168
    - Diluted                           154,930,224  168,862,744 169,784,511


      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 September 30, 2006

                                                             Effect
                                                               of
                                                     Share- Purchase Restruct-
                                                     based    Price    uring
                                       GAAP  Compen- Alloca- Expenses Non-GAAP
                                     Results sation   tion             Results
    Gross profit                       37.2    0.3     0.5      --       38.0
    Gross margin                      22.8%                             23.3%

    Income from operations             25.3    3.5     1.0      --       29.8
    Income from operations margin     15.5%                             18.3%

    Net income                         28.7    3.5     0.6      --       32.8
    Net income margin                 17.6%                             20.1%

    Net income per share and per ADS
    -Basic                             0.19                              0.22
    -Diluted                           0.19                              0.21



                                           Three months ended June 30, 2007

                                                             Effect
                                                               of
                                                     Share- Purchase Restruct-
                                                     based    Price    uring
                                       GAAP  Compen- Alloca- Expenses Non-GAAP
                                     Results sation   tion             Results
    Gross profit                       64.3    2.6     --       --       66.9
    Gross margin                      20.3%                             21.1%

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

    Net income                         41.3    7.1    0.4      0.1       48.9
    Net income margin                 13.0%                             15.4%

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



                                         Three months ended September 30, 2007

                                                             Effect
                                                               of
                                                     Share- Purchase Restruct-
                                                     based    Price    uring
                                       GAAP  Compen- Alloca- Expenses Non-GAAP
                                     Results sation   tion             Results
    Gross profit                       80.0    2.8     --       --       82.8
    Gross margin                      20.7%                             21.4%

    Income from operations             56.1    6.6    0.8       --       63.5
    Income from operations margin     14.5%                             16.4%

    Net income                         53.3    6.6    0.5      0.8       61.2
    Net income margin                 13.8%                             15.8%

    Net income per share and per ADS
    - Basic                            0.35                              0.40
    - Diluted                          0.32                              0.36

    (*) 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 China:
     Rory Macpherson
     Investor Relations Manager
     Suntech Power Holdings Co., Ltd.
     Tel:   +86-510-8531-8922
     Email: rory@suntech-power.com

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