MEMC Electronic Materials, Inc. (NYSE: WFR) has signed a non-binding Letter of Intent (“LOI”) with Motech Industries, one of the top producers of solar cells in the world, for the supply of solar wafers to Motech.
Under the terms outlined in the LOI, MEMC will supply solar wafers to Motech over an 8-year period, with pre-determined pricing, on a take or pay basis. Sales of the wafers over the 8-year period would generate at least $1.6 billion in revenue to MEMC. The LOI also provides that Motech would provide an interest-free loan/security deposit to MEMC, which would be used for the expansion of MEMC’s manufacturing capacities.
Additionally, Motech would transfer to MEMC, for an undisclosed amount, ownership of the solar wafer manufacturing business with an annual manufacturing capacity of at least 120 megawatts. As part of the agreement, MEMC will also receive a warrant to purchase a 5% equity stake in Motech. The effective date of a definitive agreement, if executed, is expected to be July 2006.
Commenting on the signing of the LOI, Nabeel Gareeb, MEMC’s Chief Executive Officer, said, “We are pleased at the prospect of partnering with such a fast growing and respected solar cell manufacturer as Motech. This arrangement sets us up to be one of the leading suppliers of solar wafers, by solidly establishing our direct participation in this 30%+ CAGR industry. We believe we will be able to add significant value to the evolution of the solar wafer market by leveraging our technical and operational core competencies developed through 40 years of supplying wafers to the highly demanding semiconductor industry.”
Leo Cheng, Chairman and President of Motech Industries said, “The signing of this LOI further strengthens the long-term future of both companies. For Motech, this agreement means a stable and competitive source of supply for solar wafers, from a company that has been making wafers for over four decades. A supply agreement of this size in a constrained market will help Motech achieve significant growth in revenue and market share.”
The LOI reflects the parties’ intent to conclude a definitive agreement by July 2006. MEMC cannot assure that the definitive agreement will be concluded within this time frame, or at all. Execution of the definitive agreement is also contingent on due diligence by MEMC and its advisors, agreement on all material terms and other customary closing conditions for transactions of this nature.
MEMC is currently conducting similar discussions with other solar product manufacturers for the future supply of solar wafers.
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