Solarfun: Costs to Weigh on '08 Margins

The Chinese solar-power company expects to ship at least 35 megawatts worth of solar products in the first quarter. It noted, however, that severe winter weather in China hindered operations last month and that it "continues to be affected by the relatively tight supply and increasing costs of polysilicon."

Spot prices for polysilicon have been escalating, Solarfun said, and it expects those trends to continue throughout the year. The company forecast lower gross margins for the first quarter and full year as a result.

Chief Executive Harold Hoskens called 2008 "a mix of opportunities and challenges." However, he said the company is "well-positioned" to add market share, increase its size, improve efficiency and expand its supply chain.

Solarfun has 160 megawatts worth of sales contracts for all of 2008, more than double last year's 78.4 megawatts. It has secured slightly more polysilicon than it will need for its contracted volumes.

The company is increasing its production capacity from the current 240 megawatts of annual generating ability to 360 megawatts by the middle of the year.

A one-megawatt plant running continuously at full capacity can power 778 households each year, according to the U.S. Department of Energy. Solar technology has lower capacity since its power generation is constrained by availability of the sun.

In early morning trading, American Depositary shares of Solarfun gained $1.43, or 12.5 percent, to $12.89.