Conergy to Sue MEMC Electronic to End Silicon Contract

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 |  Includes: CEYHF, SUNEQ
by: Greentech Media

By Ucilia Wang

Conergy said Monday it plans to sue MEMC Electronic Materials (WFR) to end a 10-year contract for buying silicon wafers, the materials for making solar cells.

Germany-based Conergy, which makes solar cells and assembles them into panels, said efforts to renegotiate the contract and get better terms failed. As a result, it intends to file suit in New York City and ask a judge to invalidate the contract.

The negotiation to amend the contract began earlier this year. MEMC, based in St. Peters, Mo., said last week that the contract talk stalled, and that it didn’t expect to sign a modified contract. MEMC posted $214 million in sales for the first quarter, down nearly 50 percent from the same quarter in 2008, the company said last week. The company reported a first-quarter net income of $2 million, or 1 cent per share, compared with $70.3 million, or 31 cents per share, from the year-ago period.

Conergy didn’t divulge details of the contract dispute, except to say that it was able to reach some agreement on the financial terms but not on “various auxiliary conditions.” The two companies signed the contract in late 2007, before the financial market crisis severely crimped demand for solar power components and materials, leading to much lower prices than anticipated.

Conergy and MEMC amended their contract once before. In July last year, the compaies announced that they had agreed to reduce their 10-year wafer agreement from about $7 billion to $8 million to about $4 billion.

Many solar cell and panels makers all have talked about efforts to re-negotiate their silicon contracts to get better prices. Meanwhile, producers of silicon and other components used for making solar panels are scaling back production or factory expansion plans.

Two weeks ago, Pocatello, Ind.-based Hoku Materials said it had modified its silicon contract with Wealthy Rise International, a maker of ingots and wafers in China. The new agreement reduced the 10-year contract from $455 million to $136 million. Hoku also will delay delivering silicon by three months to June 30, 2010, the company said.