Friday, August 19, 2011

Trina Solar and the meaning of "strategic partnership"

A couple of days ago Trina Solar announced a "strategic partnership" with the well managed Australian company Origin Energy*.

I think Origin is one of the best managed companies in that space in the world (but it is not exactly cheap...)

Origin also has an Investor Relations department that in my (fairly considerable) experience is dead straight: they tell the unvarnished truth and I like them.

Anyway here is the announcement:


CHANGZHOU, China Aug. 17, 2011 /PRNewswire-Asia-FirstCall/ -- Trina Solar Limited (TSL) ("Trina Solar" or the "Company"), a leading integrated manufacturer of solar photovoltaic (PV) products from ingots to modules, today announced that through its subsidiary, Trina Solar Australia Pty Ltd, it has signed a strategic partnership with Origin Energy Australia ("Origin"), the leading Australian integrated energy company. 
Under the terms of the agreement, Trina Solar is expected to supply Origin with approximately 22 MW of PV modules over the next twelve months starting from the third quarter of 2011.   
"We are delighted to initiate our relationship with Origin, Australia's leading energy retailer and the country's largest green energy retailer with significant investments in renewable energy technologies," said John Susa, Trina Solar's Country Manager of Australia and New Zealand. "We are confident that this long-term partnership with Origin will bolster our ability to expand and strengthen our market position in the residential segment." 
"Origin, which is one of Australia's leading solar retailers, has closely reviewed the capability and quality of a number of solar module suppliers in recent months in order to offer its customers quality solar solutions. The high efficiency, scale and long term strategic positioning of Trina Solar has impressed us and we look forward to a long term relationship," said Mr. Dominic Drenen, Origin's Solar and Home Products Retail Executive.
The first thing that jumped out at me was the small-scale of this relationship. 22 MWs of panels over twelve months is about 1 percent of Trina's output - and they are selling that to a major distributor in a country where the sun almost always shines, solar subsidies are still common (albeit reduced) and where the only local factory has just closed.

In other words it is not much of a "strategic partnership".

But just to make sure I wrote to the Investor Relations department of Origin.


Hi John,

Origin has not put out a release as it is simply part of our ongoing supply arrangements and not material in its own right.  Trina is one of a number of suppliers we use.

Cheers,
Angus


Angus Guthrie
Group Manager, Investor Relations


Now we can rephrase the Trina Solar press release more accurately: Trina has sold some solar panels to Australia's Origin Energy. No details as to price were announced. Trina is one of a number of suppliers used by Origin Energy. This deal is material to neither party.

Chinese Companies and Strategic Partnerships

The phrase "strategic partnership" has come to mean customer - often small customer. But it is genuinely confusing as it sounds important.

When I was looking at Longtop Financial Technology (a company now trading on the pink sheets in pennies) I came to the conclusion that much of the company did not exist. Certainly there were large claimed businesses that just could not be found.

But we were confused by Microsoft (on their website no less) listing Longtop as a "partner". You can still find the listing here. This relationship was of course hyped by Longtop but when I checked "partner" just meant "customer".

And I write this only as a warning: be very wary of any Chinese company claiming to have a "strategic partnership" when what they mean is small commercial sale. It is yet another sign of an over-promotional management team.




John

*In my past career I purchased (for clients) almost 5 percent of Origin Energy at under $2 a share. It was cheap. I sold it for just under $4 a share and thought I was clever. The stock price is now $13.72. That was not my best decision and I had full understanding of how good this company was.

4 comments:

jimmy james said...

This sort of thing was popular during the dot-com era too.

If you've got a great partnership with some other company, pound the table about it; if not, pound the table about your great customers; if you don't have any of those, pound the table about your suppliers. And I suppose if you don't have any of THOSE, pound the table about those evil short-sellers.

I seem to remember Diana Corp doing all of those at various points.

Tom said...

Trina at least produces real solar panels.

But a lot of these fraudulent Chinese companies seem to produce more press releases than they do products!

John Hempton said...

Tom: absolutely fair comment...

Bryan Willman said...

Actually, for Microsoft "partner" can mean multiple things.

High ranking technical people inside the company are (or were) called "partners".

But many of Microsoft's products are not sold to end users, but rather to some entity that will integrate the software with hardware and sell the result on.
So in a very real sense, Dell or Jo's Whitebox Computers are "partners" in that they are in practice very much joint producers of the end-consumer product.

It really is very different from a supplier of some component selling to a large Mfg, since what the customer largely sees is Windows or Office.

But it's also a very common commercial relationship, and effectively every computer maker on Earth (at times in history including Apple) is a "partner" of Microsoft.

So no, saying that you have a partnership with them doesn't normally warrant a press release, though your marketing materials will surely point out that your PC runs windows or your phone win phone 7.5.

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