Until recently,
LDK Solar (NYSE: LDK) and
Q-Cells looked like best buddies.
Late in 2007, LDK agreed to provide the top European solar
shop more than 6 gigawatts' worth of silicon wafers over 10
years, beginning in 2009. Q-Cells prepaid $244.5 million,
representing around 10% of the contract value, to sew up the
deal. That was common practice back in those days, when
silicon was scarce and men were men.
Suntech Power (NYSE: STP) signed a similarly
supersized dealwith Shunda, and
Trina Solar (NYSE: TSL) hit upon its own
treasure trovewith
GCL-Poly .
Q-Cells accounted for 20% of LDK's sales in 2008. The two
companies formed a European joint venture, LQ Energy, earlier
in 2009 to invest in solar projects together. Then the
harmonious relationship came to a screeching halt.
Q-Cells announced Monday that it has terminated the wafer
supply deal, pointing to a failure on LDK's part to fulfill
its contractual obligations. LDK objects to this
characterization of events, and has sought to block Q-Cells
from pulling its prepayment. Clearly tensions have been
simmering for some time now, as LDK has already gone to court
in Berlin -- and lost.
You know all is not well in solar land when formerly
friendly companies are turning against one another. This new
spat follows a similar one in which
China Sunergy (Nasdaq: CSUN) and
REC are butting heads over a long-term wafer
supply contract of their own.
While credit is flowing to many corporate borrowers these
days, liquidity is still a delicate matter in the solar
space, where many balance sheets remain strained. If Q-Cells
successfully pulls its deposit (not to mention future
business), things could get decidedly uncomfortable for
LDK.
This article was originally published as
A Solar Slap in the Faceon
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