Wacker Chemie reaches agreement with Yingli over poly supply deals

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Is Wacker Chemie AG the polysilicon manufacturer referred to in Yingli Green Energy’s grim 2018 annual report as “Supplier A”?

Chinese PV manufacturer Yingli this morning announced it has successfully resolved a polysilicon supply dispute with its Munich-based counterpart.

One section of a lengthy list of potential risks to Yingli’s business that is stated in the company’s latest set of figures was devoted to the polysilicon supply travails it was entangled in, having agreed generous supply deals during a global polysilicon drought ten years ago only to see the price of the solar panel raw material then plummet.

This morning’s announcement was light on financial detail but revealed a deal has been thrashed out that will see Wacker retain unspecified pre-payments made by Yingli to secure a polysilicon supply agreement which it was then unable to fulfil. Under the terms of the amendment agreed, which applies to all outstanding supply contracts between the two parties, Wacker will continue to supply Yingli’s Chinese entities with poly from next year until 2028.

Yingli caught in a web of supplier demands

The Chinese manufacturer’s annual report made mention of problems arising out of polysilicon supply deals made with various suppliers. Supplier A, which had already secured RMB1.2 billion ($174 million) from Yingli under the terms of a “take or pay” contract in 2014 – plus further exchange rate related losses of RMB77.7 million and 90.3 million in 2015 and 2016, respectively – was proving something of a thorn in the Chinese company’s side.

The annual report went on to add, Supplier A had issued a notice last December demanding termination of a long-term supply agreement plus $897.5 million in unpaid payments. The supplier then issued a request for arbitration at the London Court of International Arbitration in April this year, with Yingli preparing to write off RMB225.4 million in prepayments associated with the contract as a result.

If Wacker is the supplier in question, it appears it has secured a $32.7 million windfall from the arbitration.

Whether that is the case or not, Yingli still had supplier squabbles to iron out at the time its last annual report was published. It had been forced to forfeit prepayments to a “Supplier C” of almost RMB173 million, plus a further RMB451 million in anticipated future order shortfalls, and was also negotiating over demand letters from two further unnamed poly manufacturers.

It is all a far cry from the press release issued by Yingli in November 2008 announcing the long-term supply deal with Wacker. On that occasion, Yingli chairman and CEO Liansheng Miao remarked upon “the solid relationship between the two parties”, before adding: “Our business cooperation with Wacker Chemie, established in 2003, has developed over the years on the basis of the two parties’ long-term views of each other”.

Quite what those views are today is anybody’s guess.