November 3, 2009 - Saying negotiations have broken down over alleged unfulfilled contractual obligations, Q-Cells AG is terminating the 10-year, 6GWp supply deal with China's LDK Solar inked barely two years ago, and wants to reclaim a $244.5M payment made earlier this year.
The original "take or pay" agreement specified that 1,000 tons of silicon would start shipments in 2009 (ramping to 5k tons/year in 2013, to an eventual total of 43,000 over the contract lifetime). In a statement, LDK noted that it delivered on schedule for 1Q09, and for March it had procured material, made, and readied delivery awaiting Q-Cells' "indication of willingness to accept," but suspended delivery -- at Q-Cells' request -- as part of a contract renegotiation.
In its own short statement, Q-Cells noted that it plans to draw down on a bank guarantee to recover the money, a move LDK says "violates the purpose of such bank guarantee;" a Berlin court originally blocked such a move but recently lifted its injunction so that it could be hashed out in the contract renegotiations, LDK claims.
General market sentiment seems to think LDK gets the worst of this spat. The supply contract was one of many long-term deals signed back when silicon prices were high; after a long tailspin the tables have turned (many other contracts have been ripped up too), and losing a top cell maker customer like Q-Cells means headaches on both sides of the business for LDK. Without that money, LDK is in sore need of financial support, according to Oppenheimer analyst Sam Dubinsky, quoted by the Wall Street Journal.
