Hemlock claims against Deutsche Solar for alleged breach of contract

08. March 2013 | Industry & Suppliers, Investor news | By:  Max Hall

U.S. polysilicon manufacturer Hemlock Semiconductor has lodged a claim against Deutsche Solar GmbH, claiming it has breached four long-term commitments to purchase polysilicon from the Michigan-based company.

SolarWorld AG's photovoltaic module factory in Freiburg.

SolarWorld AG subsidiary Deutsche Solar GmbH is being sued for alleged breach of contract by California-based poly producer Hemlock Semiconductor.

The complaint, filed Thursday, March 7 at Michigan's Eastern District courthouse, states Frank Asbeck, CEO of Deutsche Solar's parent company SolarWorld AG, threatened to put Deutsche Solar into bankruptcy and then buy back its assets at a minimal price to free it from its contractual obligations.

Hemlock's claim states that, according to "news reports and other publicly available information", Deutsche Solar, SolarWorld AG and SolarWorld America are in "serious financial hardship" and may not have the means of fulfilling the contracts in question.

The agreements, according to court papers obtained by pv magazine, relate to a deal to supply 8.4 million kg of polysilicon from August 30, 2005, to the end of 2015; 4.8 million kg from June 10, 2006 to the end of 2018; 9.99 million kg from June 27, 2007 to the end of 2019; and 1.2 million kg from January 1, 2010 to the end of 2012.

Hemlock's lawyers say Deutsche Solar agreed to pay for the amounts whether delivered or not and took delivery of polysilicon every month from August 2005 until the problems started last March.

Hemlock has lodged as evidence letters it says are from Deutsche Solar and SolarWorld seeking price and quantity concessions in March 2012 after the price of polysilicon had plummeted following the signing of the final contract, in January 2010.

It is alleged Mr Asbeck made his threat to make Deutsche Solar insolvent at the same time "in conjunction with the letters".

Hemlock's claim says the company turned to legal proceedings after Deutsche Solar declared "null and void" an invoice for $83.9 million, sent by Hemlock at the end of 2012 demanding payment for non-delivered polysilicon under the terms of the deals relating to that year.

Hemlock says Deutsche Solar has not taken delivery of any polysilicon since March 2012.

The poly manufacturer is claiming damages, including interest, to be established at trial, as well as its legal costs.

Milan Nitzschke, vice president of SolarWorld, told pv magazine, "Due to massive violation of the international trade law and unfair competition on the solar markets we are in permanent negotiations with our suppliers for solar silicon. Neither have we received a lawsuit from Hemlock nor do we comment on any possible pending legal proceedings."

A date has yet to be fixed for the claim hearing.

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