MEMC Electronic Materials Inc. says that the company and its subsidiary, MEMC Singapore Pte. Ltd., will terminate a long-term solar wafer supply agreement with Conergy AG.
Under the terms of the supply agreement, originally signed in October 2007, MEMC was to supply solar wafers to Conergy pursuant to pre-set pricing over a 10-year period on a take-or-pay basis. As part of the agreement, Conergy advanced funds to MEMC in the form of a refundable capacity reservation deposit and also provided a letter of credit to secure the take-or-pay obligations.Â
Since the market downturn in early 2009, issues with respect to Conergy's price and volume purchase obligations under the supply agreement have created challenges to finding a mutually beneficial arrangement between the parties, leading to a reduction in the size of the supply agreement in January 2010, MEMC says. In order to resolve these ongoing challenges, the companies have now agreed to terminate the supply agreement.
Pursuant to the termination agreement, MEMC will receive payment of $21.2 million through the irrevocable letter of credit established by Conergy under the wafer supply agreement. MEMC will refund to Conergy the refundable capacity reservation deposit currently held by MEMC in an approximately equal amount. Conergy will also make payments on outstanding payables in the amount of $5.5 million.
In addition, Conergy has agreed to transfer to MEMC its portfolio of operations and maintenance contracts covering solar power plants in Germany, Italy and Spain representing up to approximately 175 MW.