SAN JOSE, Calif. Landing its second major customer in the solar arena, MEMC Electronic Materials Inc. has signed a deal worth up to $3 billion with startup Gintech Energy Corp. of Taiwan.
Under the terms, MEMC will supply solar wafers to solar-cell maker Gintech over a 10-year period, with pre-determined pricing, on a take or pay basis beginning in the second half of 2007.
Sales of the wafers over the 10-year period would generate between $2.5-to-$3 billion in revenue for MEMC. As part of the definitive agreement, Gintech will advance funds to MEMC in the form of an interest-free loan or security deposit.
The funds will be used by MEMC for expansion of its manufacturing capacity. In addition, MEMC will be eligible to purchase a 10 percent interest in Gintech, as well as acquire the rights to an approximate 1.7 hectare parcel of land located within the Hsinchu Science Park.
"With this announcement, MEMC now has agreements to supply solar wafers worth between $7-$9 billion dollars in revenue over the next decade," said Nabeel Gareeb, MEMC's chief executive, in a statement.
MEMC suppliers wafers to the semiconductor and solar sectors, but solar represents its fastest-growing business. The company also makes and sells polysilicon, the key material for raw wafers.
Gintech was founded in 2005 and is supported by several top executives from the petroleum, petrochemical, semiconductor and electronics industries in Taiwan with insight into the global trends of renewable energy.
In July, MEMC said that it has discontinued its short-lived solar wafer agreement with Motech Industries Inc. of Taiwan and will instead work with rival Suntech Power Holdings Ltd. of China. Motech is the largest solar-cell maker in Taiwan, while Suntech is the biggest in China.
MEMC will supply solar wafers to Suntech over a 10-year period. Sales of the wafers over the 10-year period would generate between $5 billion and $6 billion in revenue for MEMC. In addition, MEMC has received a warrant to purchase an approximately 4.9 percent equity stake in Suntech.
MEMC inked the deal with Suntech for good reason. Fueled by a new national renewable energy policy, China is moving towards a huge solar production ramp on all fronts of the domestic supply chain: polysilicon feedstock, wafers, cells and modules.
Enacted earlier in the year, China's renewable energy program is a $3.5 billion plan that aims to boost domestic solar production to 500 megawatts (MW) of annual capacity by 2010, according to Piper Jaffray Inc. China plans to expand its solar capacity to 3-gigawatts (GW) in 2020 and by 60-GW by 2050, according to the firm.