April 30, 2009 - Amid several recent examples of silicon supply contract renegotiations (and for equipment too), one partnership has taken an unusual turn: Conergy plans to sue MEMC in order to terminate (and renegotiate) their already-reduced 10-year contract, days after MEMC indicated it wouldn't budge on the terms.
The German firm, one of four MEMC customers in the solar arena, says it will use "legal means if necessary" to cancel its contract, which was signed in Oct. 2007 and already reduced in half to ~$4B last summer. Renegotiations began anew earlier this year, it claims, with the latest proposal to let MEMC keep its prepayment and forge a new one-year supply contract; if a deal isn't reshaped by the end of this month (April 2009) Conergy plans to take legal action, citing "legal doubts over the enforceability of some contractual provisions and the validity of the contract as a whole." In a statement last week appended to its quarterly financials, MEMC said that it did not want to amend the deal, which it said "remains in full force and effect."
"Given MEMC's price flexibility in working with its solar wafer customers in recent months, Conergy's stance seems a bit perplexing," writes Deutsche Bank analyst Stephen O'Rourke, in a research note. "Despite a seemingly confrontational development, we believe contract re-negotiations are ongoing," though he adds that he is "skeptical" of Conergy's legal doubts.
While we wait to see what happens between the two contentious partners, the news is already having an effect in Asia, where other PV manufacturers struggling in the macroeconomic and industry slowdown may feel emboldened to challenge their own long-term supply deals, many of which were forged during the peak at high prices. MEMC customers Gintech Energy and Tainergy Tech in Taiwan, and Suntech Power in China, have long-term deals with MEMC, and may likely follow Conergy's lead in order to pressure MEMC to cut prices, report the Taiwan Economic News and Digitimes.