Conergy cancels long-term wafer contract; transfers PV plants to MEMC

Initially due to run out in 2018, the two companies are said to have come to an agreement over the early termination of the 10 year US$600 million take or pay contract, meaning Germany-based Conergy can now purchase wafers at "fair market prices." Already in 2010, a reduction in the size of the supply contract was agreed upon.

As compensation, MEMC will retain a $21.2 million cash security provided by Conergy under the terms of the contract. MEMC has also said it will pay back a refundable capacity reservation deposit in an approximately equal amount. Meanwhile, Conergy must pay $5.5 million in outstanding receivables by next July 1. It adds that approximately $29.5 million worth of securities from Commerzbank AG are now available for its operational business.

In a statement released by MEMC, it was also said that Conergy will transfer operations and maintenance contracts for photovoltaic plants worth around 175 MW in Germany, Italy and Spain. "This part of the arrangement is subject to MEMC’s due diligence of the contracts which the parties expect to occur over the next 60-90 days. There can be no assurance that the parties will conclude this transfer successfully," added the statement.

As a consequence of the compensation, Conergy now expects a negative 2012 EBITDA in the mid double-digit million euro range.

In a statement released, it said, "In light of the termination of the agreement and the current course of business, the Management Board is currently also assessing whether the development of earnings could lead to a loss amounting to the half of the stated share capital of the company according to Sec 92 Para 1 German Stock Companies Act (Aktiengesetz). If this should be the case, Conergy will immediately fulfill its obligation to call in an extraordinary AGM."

The company added that the move represents another key step in its strategic realignment, which has already seen Bosch talking over its voltwerk electronics GmbH photovoltaic inverter company, and production closures in Frankfurt (Oder).