MEMC changes partners in 10-yr, $6B solar wafer pact

July 6, 2006 – Three months after tentatively agreeing to an eight-year, $1.6 billion deal to supply wafers to Taiwanese solar cell producer Motech Industries Inc., MEMC Electronic Materials Inc. has found greener pastures in a new deal with Beijing-based Suntech Power Holdings Ltd.

Under terms of the non-binding letter of intent, MEMC will supply solar grade silicon wafers to Suntech for a 10-year period with predetermined pricing, beginning in 1Q07. Sales over the duration are expected to generate $5-$6 billion in revenues for MEMC. Suntech also will advance an undisclosed amount of funds to MEMC, in the form of an interest-free loan or security deposit, to be used for expansion of MEMC’s manufacturing capacity. In addition, MEMC will receive a warrant to purchase up to a 4.99% equity stake in Suntech.

According to a statement from MEMC, discussions with Motech indicated the parties “would be unable to reach mutually acceptable definitive agreements within the prescribed timeframe.” Recent news reports pegged Motech as the No. 9 solar cell maker worldwide, and the top provider in Taiwan with about 50% market share.

MEMC has been actively pursuing the solar market for supply of its wafers, a segment seen growing at a >30% annual clip, noted MEMC CEO Nabeel Gareeb. “Suntech is a fast growing player in the solar market, and we are pleased with the prospect of helping them achieve a leading role in the marketplace,” he added.

For Suntech, the deal ensures a future supply of silicon wafers for solar cell manufacturing, a segment whose appetite for silicon wafers has strained supplies in recent months, and likely will continue to tighten for at least the next year until new dedicated capacity for the solar segment can be brought online.

Suntech had six PV cell manufacturing lines with an aggregate annual capacity of 150MW at the end of 2005. It claims customers in Germany, Spain, China, and the US.

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