Motech Industries Inc (茂迪) yesterday saw its share prices slump by nearly the 7 percent daily limit, after it announced the termination of a proposed partnership with one of its major suppliers, MEMC Electronic Materials Inc.
Shares of Motech, the nation's largest solar cell maker, dropped NT$55 to close at NT$744 on the GRETAI Securities Market.
In a joint statement released on Thursday night, the two companies said that they had agreed to end talks on a NT$50 billion solar wafer supply deal.
"Over recent days it has become apparent that the parties would be unable to reach mutually acceptable definitive agreements within the prescribed timeframe, and therefore MEMC and Motech have agreed to discontinue discussions regarding their previously announced Letter of Intent," the statement read.
On April 18, Motech signed a non-binding Letter of Intent with MEMC, a US-based maker of silicon wafers and polysilicon materials for semiconductor and solar applications. According to the let-ter, MEMC would supply polysilicon to Motech at a fixed price for eight years in return for a 5 percent stake in the Taiwanese firm.
Unable to work out a final deal with Motech, however, MEMC turned to a Chinese solar cell maker. In a separate statement issued on Thursday night, MEMC said it had signed a Letter of Intent with Suntech Power Holdings Ltd (尚德太陽能電力).
MEMC will supply solar wafers to Suntech for a 10-year period, with pre-determined pricing on a take or pay basis beginning in the first quarter of next year, MEMC's statement said.
The sales of the wafers would create revenue of US$5 billion to US$6 billion, it said.
MEMC would also receive a warrant to purchase up to a 4.99 percent equity stake in Suntech.
As the solar business booms, the world's solar cell manufacturers are scrambling for polysilicon and looking to lock in a steady supply of solar wafers.
MEMC chief executive officer Nabeel Gareeb has estimated the solar cell market will grow by more than 30 percent a year.
Analysts have expressed concern about Motech's business prospects after the loss of the MEMC deal.
A Motech official, however, said the company had secured enough materials to supply its production lines through the first half of next year. It was also in talks with other companies and was expected to sign deals with two European suppliers soon, said the official, who declined to be named.
Macquarie Securities maintained its "outperform" ratings on Motech yesterday, saying that the MEMC incident would not influence the firm's profit outlook this year.
Motech's sales grew by 54.1 percent to NT$2.81 billion (US$86.7 million) for the first half of the year.
Macquarie expects Motech to see after-tax earnings of NT$2.65 billion, or NT$30.4 per share, a 110.5 percent increase over last year.
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