Hanwha bearing fruits of Q Cells, SolarOne integration

Hanwha Q Cells ended 2015 as one of the top five module producers and the leading global cell manufacturer, by shipment volume. The company shipped some 3.2 GW of modules, at an average selling price of $0.58/W and 3.25 GW of multicrystalline silicon cells. Hanwha also produces ingots and wafers, for its own operations, delivering additional quality and cost advantages, the company claims.

"2015 was all about the integration between Hanwha Q Cells and Hanwha SolarOne," comments GTM analyst Jade Jones. "That integration really helped them to expand in 2015 – in part because the integration of manufacturing production cost competitiveness into all of the lines, the integration of the cutting edge technology that Hanwha Q Cells had over Hanwha SolarOne. There were many synergies that helped make that deal a good one and help project the company into 2016."

Polysilicon tariffs imposed by China did not affect Hanwha’s ingot and wafer production in 2015, the company reports, however, it could not guarantee that would remain the case this year.

Falling prices for polysilicon and wafers did affect Hanwha’s 2015 results. Inventories were written down to the tune of $10.2 million for the year. Some multi-year supply deals struck by Hanwha for polysilicon and wafers will continue to pose a challenge for Hanwha Q Cells, with rapid price declines in previous years resulting in suppliers "facing difficulties in continuing their business" and others unable to make good on supply after receiving pre-payments. Hanwha indicates, in its 2015 annual report, that ongoing disputes with some suppliers "can be costly and time-consuming and may significantly divert the efforts and resources of our management personnel."

Hanwha Q Cells closed 2015 with a production capacity of 3.7 GW cell, 4.3 GW module, 1.4 GW ingot and 900 MW cell. Hanwha is a 100% multicrystalline PV producer. In Q2 2015 Hanwha relocated 170 MW of cell production from Germany to Malaysia, retaining 60 MW of annual production at its Thalheim base for R&D purposes.

Construction and equipment installation on Hanwha’s new 1.5 GW Korean cell and module facilities were commenced in 2015, and the ramp is currently underway. All lines are currently installed and ramp will take place throughout this year. The company is set to finish 2016 will a nameplate capacity of 5.2 GW for both modules and cells. The Korean fab will produce both BSF and Q.antum cells although Hanwha reports that all lines at the facility are "Q.antum ready." The company spent some $200 million in 2015 on capital expenses, primarily on the Korean facility, but also on increasing module capacity in Malaysia and automating lines in China. The company expects to incur capital expenses of $180 million in 2016.

Hanwha achieved conversion efficiencies of 19.6% on its Q.antum cells – which deploy PERC cell architecture – and 18.6% with its BSF cells in 2015. Hanwha indicated in its annual report that its "advanced ingot growing and wafer… process" delivered increased productivity, reduced raw material usage and therefore lower cost-per-watt in 2015.

Downstream markets

2015 was a robust year for Hanwha Q Cells in downstream markets, although it does rely on only a small number of key markets for the bulk of its sales. In the advantageous position of being able to to supply EU and U.S. markets with tariff-free modules from its Malaysian facilities. Although, the company does note that the EU minimum import price and quota U.S. anti-dumping and countervailing duties have hampered its ability to supply product to these markets from its China manufacturing operations – the former Solarfun production site.

A major supply deal for Hanwha Q Cells in 2015 was to the U.S. market, in its 1.54 GW, 12-month contract with NextEra Energy Resources. The deal will deliver around $897 million in revenues to Hanwha Q Cells in 2016.

The company’s shipments to indirect subsidiaries of the Hanwha Group, namely its Japanese, U.S. and Korean operations, remain a major sales channel for the company. Hanwha’s five largest customers accounted for 35.3% of its revenues in 2015. Hanwha Q Cells Japan alone accounted for 10.7% of revenues in 2015. The U.S., European, Korean and Japanese markets account for over 70% of all demand for Hanwha modules in 2015. The company notes that it is "actively expanding our customer base" in India, Australia, Turkey and Latin America.

"I can’t overemphasize that the deal [to acquire Q Cells] was done at the right time when demand was growing," GTM’s Jones told pv magazine. "The supply-demand situation in 2015 was such that it was opportunistic to have that additional capacity to grow the company’s overall market share."

Hanwha reported that it is continuing to expand its PV power plant development capabilities and project pipeline, a process it began in 2010. However, it notes that this presents "significant investment and management attention" and is a segment in which it faces "intense competition from companies that have extensive experience… in the PV downstream sector."

The restructuring of the company in 2015, and particularly the transferral of production from Germany to Malaysia, did not come without expenses, and Hanwha reports incurring $22 million in restructuring costs in 2015. Severance and one-time termination payments, for some of the German workforce, and the cost of relocating production equipment are included in this figure.

Hanwha Q Cells closed 2015 with long terms debts of around $815 million, and short term debt of roughly $256 million. It has long term notes worth $100 million, underwritten by Hanwha Chemical. It has cash and cash equivalents of $200 million and restricted cash of $172.2 million.