MEMC acquires SunEdison in bid to further build downstream solar business

Major changes to MEMC’s business model going forward have been announced with the acquisition of solar energy services provider, SunEdison LLC. The privately held company, which includes Applied Ventures, the investment wing of equipment supplier Applied Materials as an investor, has been purchased for US$200 million.  SunEdison has built approximately 80MW of generating capacity, primarily in the U.S. to date and a claimed pipeline of over 1.5GW spread over several years.

"This acquisition will provide a third engine of growth for MEMC," said Ahmad Chatila, CEO of MEMC. "MEMC will now participate in the actual development of solar power plants and commercialization of clean energy, in addition to supplying the solar and semiconductor industries with our traditional silicon wafer products."

MEMC expects to close the deal by the end of the year and will pay 70% in cash and 30% in MEMC stock. The agreement also includes an additional US$89 million earn-out provision, should SunEdison meet performance targets in 2010.

During a conference call to discuss the acquisition its latest quarterly financial results, MEMC noted that SunEdison had plans for new installations totalling 100MW in 2010.

SunEdison will continue to operate with the SunEdison name, as a subsidiary of MEMC. SunEdison’s COO/CFO, Carlos Domenech, will continue to lead the unit and is expected to be named as executive vice president of MEMC and president of SunEdison, reporting to Chatila.

MEMC and Q-Cells International, a subsidiary of Q-Cells SE that specialises in building and operating PV power plants, established a joint venture in July 2009 to tap into the downstream solar energy market. MEMC made an initial US$100 million investment in the JV, which is building a 50MW solar plant in Bavaria that will be sold to a third party.

It was not clear from the call whether the Q-Cells JV would continue past the major Bavarian project, since SunEdison has some stalled projects in Europe, and part of the business plan going forward is to expand SunEdison’s business internationally, therefore potentially competing with Q-Cells International.

It would seem that with the acquisition of SunEdison, MEMC is making further inroads into the project arena and leveraging its US$1 billion in cash and short-term investments to fuel demand for its solar wafers while project financing remains difficult, even though demand for projects remains strong.

MEMC also reiterated in the conference call that it had no intention of entering the module market to further integrate process steps, though it does expect a significant percentage of projects undertaken by SunEdison in the future to use its wafers in projects. However, Chatila noted that SunEdison would be free to select whichever technology best fits the project for future customers, keeping SunEdison as an independent operator, serving customer needs first.

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