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MEMC, Suntech end wafer partnership

Posted: 05 Jul 2011 ?? ?Print Version ?Bookmark and Share

Keywords:solar? wafer supply? agreement?

MEMC Electronic Materials Inc. has announced that Suntech Power Holdings Co. Ltd has agreed to pay MEMC $120 million to terminate a long-term wafer supply agreement.

Under the terms of the agreement, signed July 2006, MEMC was to supply solar wafers to Suntech over a 10-year period, with pre-determined pricing, on a take or pay basis beginning January 2007. As part of the original supply agreement, Suntech advanced funds to MEMC in the form of a loan/security deposit, while MEMC received a warrant to purchase up to 4.99 percent equity stake in Suntech.

MEMC said that since the market downturn in early 2009, issues with respect to Suntech's price and volume purchase obligations under the supply deal created challenges. The two companies amended the agreement twice in 2009, then agreed to terminate the deal entirely this week.

In exchange for MEMC's agreement to terminate the agreement, Suntech will forfeit $120 million to MEMC, including $53 million in previously deposited cash and another $67 million irrevocable letter of credit from Suntech, according to MEMC.

Suntech has accounted more than 50 percent of MEMC Solar Materials' business in early 2009 to just over two percent in the first quarter of 2011 to zero in Q2, said Ken Hannah, president of MEMC Solar Materials. "By putting this behind us, we look forward to establishing a new and beneficial commercial relationship with Suntech."

MEMC said it is still assessing the financial impact on its Q2 and full year 2011 earnings of the Suntech termination, related contract termination charges and other restructuring actions being implemented by company management in response to the market downturn.

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