Suntech Power Holdings, a manufacturer of crystalline silicon solar panels, and MEMC have mutually agreed to end their solar wafer supply deal signed in 2006.
The termination of the deal is due to accelerated fluctuations in the silicon wafers market. As per the original agreement, the term of the deal runs from 2006 to 2016. Suntech said that it will gain a one-time expense as a result of the discontinuation of R&D operations of CSG Solar.
In respect to the termination, Suntech will renounce $53 million in prepayments made to MEMC and will pay extra $67 million in four installments, which will be completed between July 2011 and April 2012. Furthermore, Suntech will seize a non-cash accounting fee of roughly $92 million that occurred from the deduction of unallowable cost connected with guarantees issued simultaneously with the agreement in 2006.
As a whole, Suntech anticipates to incur $212 million of costs related to the discontinuation of the solar wafer supply deal in the Q2 2011. As a consequence of the termination, the company is no more bound to buy the 4.6 GW of wafers from 2011 to 2016 and this will enable it to improve its silicon sourcing strategy.
Individually, Suntech will terminate its investment in its subsidiary, CSG Solar AG, and incur a non-cash charge of roughly $24 million in the Q2 2011.