MEMC, Evonik settle trichlorosilane supply disputes

MEMC, Evonik settle trichlorosilane supply disputes

6:11 AM, 6th September 2012
MEMC, Evonik settle trichlorosilane supply disputes
Ahmad Chatila, President and CEO, MEMC.

ST PETERS, US: MEMC Electronic Materials Inc’s affiliate, MEMC Electronic Materials, SpA and Evonik Industries, have agreed to settle and resolve disputes related to two long-term take-or-pay supply agreements for the supply of trichlorosilane (TCS) to MEMC’s Merano, Italy polysilicon facility. MEMC will pay Evonik a total of €70 million in full settlement of all obligations. These payments will be made in installments over the next five quarters, including payment of €10 million in the current quarter.

Part of strategic restructuring strategy in December 2011, MEMC indicated it would idle the Merano facility and would consider closing the facility unless dramatic feedstock, power and other cost reductions were achieved. As a result of this decision, MEMC terminated the two long-term supply agreements with Evonik. In connection with the restructuring, MEMC recorded significant restructuring accruals in the 4th quarter of 2011.

As part of the settlement agreements, MEMC will acquire the Evonik TCS production plant, which is located on MEMC’s Merano site. At this time, a decision to restart the MEMC Merano facility has not been made, although settlement of the supply agreements is a significant step toward achieving these cost reduction goals. Both plants will continue to be idle pending resolution of a number of cost-related discussions with the Italian government and other parties.

“We are pleased that we were able to work collaboratively with an important supplier like Evonik to reach an amicable settlement. Our partners at Evonik recognized the seismic shift in solar that occurred in 2011 and worked with us to find a solution that benefitted both parties,” commented Ahmad Chatila, President and CEO, MEMC.

As a result of these settlement agreements, MEMC expects to recognize a material benefit to operating income in the 3rd quarter 2012 due to the favourable settlement of these agreements. The 3rd quarter installment payment is likely to reduce cash balance of €10 million.

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