A Treasure Trove for Trina?

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Chinese solar stocks like Yingli Green Energy (NYSE: YGE), JA Solar (NYSE: JASO), and LDK Solar (Nasdaq: LDK) are all screaming skyward today. Color me curious.

This broad move could very well be driven by news coming out of the big conference under way in Munich. For example, First Solar (NYSE: FSLR) apparently isn't alone in its grid-parity giddiness. Many other players now expect solar to become competitive with fossil-derived electricity within a few years.

It's interesting that this optimism is outweighing the outlook on polysilicon availability. Remember Suntech Power (NYSE: STP) stating that it was strategically back-end weighting its 2008 output to take advantage of increasing availability? Well, prices keep pounding higher, and while some analysts see an easing later this year, others don't see any let-up before late 2009.

The news out of Trina Solar (NYSE: TSL) today is a case study in renewed optimism. The integrated player just announced a big polysilicon supply deal with an outfit called GCL Silicon Technology. I've never heard of GCL, but that's because it's more commonly known by the name of its operating subsidiary, Jiangsu Zhongneng. This company is a new entrant, having just begun poly production in September. More important, Jiangsu has already burned at least one other PV player.

In an early 2007 agreement with China Sunergy, Jiangsu agreed to sell the cell maker at least 30% of its total output for 2007 (200 tons), 2008 (700 tons), 2009 (1,200 tons), and beyond. Then in June, Jiangsu cut a deal with a subsidiary of Solarfun Power (Nasdaq: SOLF), contracting to deliver 50 tons in 2007, 700 tons in 2008, and 1,200 tons in 2009. That would be fine, if over the course of those few months Jiangsu had developed a reasonable expectation that it would exceed its former capacity goals for 2008 and 2009. Unfortunately, even the preliminary targets now appear completely out of reach.

In 2007, Jiangsu delivered about half of what it promised to Solarfun. That firm has lowered its expectations for future deliveries, and I've seen some Goldman Sachs numbers that put Jiangsu's production capacity about a year behind schedule. Eventually, Jiangsu may become a great player in polysilicon, but it has yet to prove itself a dependable partner. Trina investors ought not to get too worked up over this deal.