Alpen Steel | Renewable Energy

LDK Solar Shrs Tumble; Q-Cells Terminates Supply Deal (Updated)

LDK Solar (LDK) shares are getting clobbered this morning on new that Q-Cells (QCE.F), the German solar cell company, has terminated an agreement under which LDK supplied Q-Cells with solar wafers.

In a statement, Q-Cells said it terminated the deal because “LDK did not fulfill significant contractual obligations.” Q-Cells noted that the original deal had called for the supply of a fixed amount of silicon - 43,000 tons - for the years 2009 to 2018, with wafer supplies of about 1,000 tons for 2009. The company said it paid $244.4 million to LDK under the agreement - and that the payment “can be reclaimed in the event of termination of the agreement.”

The German company said that it is in conflict with LDK “concerning the validity of the termination of the agreement.” Q-Cells added that direct discussions between the two companies, as well as a parallel aribitration process have not yet reached a settlement.

Q-Cells notes that under the agreement, the right to reclaim the payment is secured by a German bank. The company said an application by LDK Solar for a temporary injunction to be issued against a drawing down of the bank guarantee was refused by the District Court in Berlin. “Q-Cells will therefore make use of the possibility to draw down the bank guarantee linked to the payment made,” it said.

LDK today is down 99 cents, or 14.6%, to $5.79.

Update: In a statement, LDK said it “vigorously disagrees” with Q-Cells position.

“During rounds of discussions and negotiations, LDK Solar has clearly stated to Q-Cells that it has not only procured feed stock for the manufacturing of the solar wafers under the contract, but has also manufactured the requisite quantities of the solar wafers ready for shipment to Q-Cells at its indication of willingness to accept,” the company says. “LDK Solar made deliveries during the first quarter of 2009 pursuant to purchase orders of Q-Cells under the supply agreement. Subsequent to March 2009, LDK Solar suspended deliveries at the request of Q-Cells in order to engage in various negotiations with Q-Cells in the interest of reaching a mutually agreeable amendment to the supply agreement. During the negotiation process, Q-Cells unilaterally claimed, and has now publicly announced, the termination of the agreement. LDK Solar believes this termination is without any valid basis.”

LDK Solar says it “firmly believes that it has performed substantially on all of its obligations under the supply agreement, and is ready to perform the additional obligations under the agreement that are currently contingent upon cooperation of Q-Cells, such as its willingness to accept the additional deliveries of LDK Solar’s solar wafers pursuant to the supply agreement.”

The company said it “intends to vigorously defend its rights and interests as a result of Q-Cells’ wrongful termination of the supply agreement, breach of the supply agreement and wrongful drawdown from our bank guarantee, including the contractually provided arbitration yet to start at the International Chamber of Commerce.”


                                                         Tech Trader Daily

                                   News, analysis and insights from Barron's Silicon Valley bureau.
 By Eric Savitz


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