Thalheim, 5 February 2007: Q-Cells AG (QCE; ISIN DE0005558662) has signed a long-term supply agreement with Elkem Solar (Oslo), a member of Norway's Orkla Group, thus securing supplies of significant quantities of metallurgical silicon to lock in growth in its core business until 2018.
Under the terms of the agreement, Elkem Solar will supply Q-Cells AG with contractually fixed quantities of metallurgical silicon starting in 2008. In addition to a base volume of 800 tonnes in 2008, 2,800 tonnes in 2009 and 2,400 tonnes per year from 2010 to 2018, Q-Cells AG has an option to procure an additional quantity of up to 1,600 tonnes in 2010 and between 2,500 and 5,000 tonnes per year during the remaining years of the agreement, subject to Elkem Solar expanding further.
The total quantities of silicon to be supplied under the agreement are expected to be sufficient to manufacture over 10 GWp of solar cells. This means that as soon as 2010 Q-Cells should have material to be able to produce more than 1 GWp of solar cells per year, considering the contractually secured amount of poly- and metallurgical silicon. The base quantities represent approximately 50 % of Elkem Solar’s currently planned (first plant) production volume. In addition to the above, Q-Cells has an option for up to 30 % of the production volume of each new production facility from the third plant onwards established by Elkem Solar during the term of the contract. The prices paid for the silicon are based on market prices. Prices for 2008 and 2009 are fixed, and for 2010 and 2011 50 % of the price is on a fixed basis and 50 % will be floating, depending on the respective prevailing market price. From 2012, Q-Cells will pay a floating market price that will be agreed each year.
Q-Cells and the industry expect strong market growth. This agreement will enable Q-Cells to continue to expand its strong position in the photovoltaics market and to put itself in an excellent position for the future. Furthermore, the company has once again demonstrated the benefits of its business model as a non-integrated producer of solar cells: as a focused organisation, Q-Cells can concentrate all its proprietary research capabilities on developing its cell technology and can respond swiftly to technological advances in upstream and downstream stages of the value chain. Q-Cells AG is able to build new, larger production capacities quickly and to flexibly process new, large quantities of base products. This makes it a key partner for innovative growth companies such as Elkem Solar, REC and others.
Good results in the use of metallurgical silicon for the manufacture of solar cells
By conducting extensive tests on the manufacture of ingots, wafers and solar cells, Q-Cells has confirmed that the material supplied by Elkem Solar - to be industrialized on a large scale - can achieve efficiencies and yield levels equivalent to high-purity polycrystalline silicon, which is manufactured using a much more expensive and complex process. In order to produce silicon wafers
and solar cells, the metallurgical material must currently be mixed with high-purity polycrystalline silicon. It has been shown in test series that the material can be used without mixing for production of solar cells with limited process and product adjustments. The goal is to increase the mixing ratio, which will initially be up to 50%, to reach 100% pure metallurgical silicon in the medium term. The
metallurgical silicon will make a major contribution to overcoming the continuing shortage of silicon over the long term, thus cutting the cost of photovoltaics. Q-Cells AG believes that the long term contract announced today gives Q-Cells an advantage over its competitors by securing a significant long term commitment from the producer who, in the opinion of Q-Cells, has a significant cost, quality and time-to-market advantage in the production of metallurgical silicon to be used for solar cell production.
Investment in long-term partner REC
In connection with the agreement on silicon supplies, Q-Cells AG will acquire 17.9 % of the share capital (88,456,767 shares) in REC Renewable Energy Corporation ASA, Høvik, Norway, from Good Energies. Apart from securing large quantities of metallurgical silicon, Q-Cells AG is therefore investing in the world's largest manufacturer of polycrystalline silicon and silicon wafers for the production of solar cells (solar-grade silicon) and one of the world´s leading PV companies. REC has been a long-term and strategically important partner since the production start-up of Q-Cells AG and is one of the company's key suppliers. By investing in REC, Q-Cells AG is visibly demonstrating that the company remains convinced of the huge importance of Siemens type polycrystalline and Fluidized Bed Reactor (FBR) technology for the production of solar cells. The management of Q-Cells is strongly convinced of REC´s long term prospects. The investment will further strengthen Q-Cells AG’s relationship with REC, which not only covers long term supply agreements, but also the EverQ GmbH and CSG Solar AG joint ventures.
Main shareholder Good Energies increases investment in Q-Cells
In connection with this purchase of shares, Good Energies is to increase its investment in Q-Cells. As part of a non-cash capital increase, Q-Cells will issue 34,323,579 new shares to Good Energies. A total of 3,753,595 of these shares will be issued as ordinary shares. Good Energies will then hold 29.9 % of the voting rights.
The other 30,569,984 shares are issued as preference shares. Good Energies has indicated to Q-Cells that it has no current intention to increase its holding in voting shares above 29.9 %. The preference shares are not publicly listed, can initially not be publicly traded, and do not confer any voting rights. The owners of the preference shares have the right to convert them into ordinary shares at a 1:1 ratio and to have them registered for public trading contingent upon a relatively complex stock listing procedure. The preference shares pay a modest dividend premium of 3 cents (Euro) per share. By issuing these new shares, Q-Cells AG has increased its share capital to € 109,053,307. Once the deal has been completed, Good Energies will hold 29.9 % of the company's voting shares and 49.55 % of its total share capital.
By increasing its investment in Q-Cells AG, Good Energies, one of the most important long-term investors in the photovoltaics sector, is sending a clear signal that it has great confidence in the business model and future of Q-Cells AG.
The above transactions were conducted as a share exchange at an agreed exchange ratio. They are valid upon registration of the share capital increase.
Preliminary figures for 2006
According to the preliminary results available, Q-Cells AG's total output of solar cells in 2006 came to 253.1 MWp, a year-on-year increase of 53 %. Revenue rose accordingly by 80 % to € 539.5 million (2005: € 299.4 million), while inventories grew by € 18.7 million. Earnings before interest and tax (EBIT) and net income achieved even stronger growth of 104 % and 120 % to € 129.1 million and € 87.7 million respectively (2005: € 63.2 million and € 39.9 million respectively). Additionally, Q-Cells has earned one-off extraordinary income from the first-time consolidation of the increased stake in EverQ GmbH in the amount of a single-digit million Euro sum.
Expectations for 2007
At the beginning of the year 2007, sales in the important markets in Germany and Spain continue to develop favourably. Q-Cells AG expects the trend for the remainder of 2007 to remain positive. Q-Cells anticipates growth in revenues and net income in its core business of approx. 30 % for 2007. Additionally, Q-Cells expects one-off extraordinary income from the sale of silicon to EverQ GmbH. Q-Cells expects that the subsidiary companies will realise first sales revenues from test products over the year with production starting at different stages in 2007. The start-up expenditures for the establishment of new factories of subsidiaries and associate companies and the one-off income from silicon sales are expected to amount to balanced expenditures of around € 10 million.
Aims for 2008
For 2008 Q-Cells AG sets itself the aim of realising sales revenues of approx. € 1 billion and a net income margin of 13 %. The year 2009 Due to the new agreement concerning the delivery of metallurgical silicon, Q-Cells AG expects
additional strong growth in production volume in 2009. Concerning sales revenues, Q-Cells aims to reach approx. a 40% growth.