5N Plus forced to reshape supply contracts with First Solar

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Although efforts to diversify away from dependence on supplying purified rare earth material to First Solar is a challenge, a handful of thin-film rivals have been successful. Specialty metals firm 5N Plus has had to renegotiate its supply agreements with its biggest customer in the sector: First Solar. In accepting lower prices for cadmium and tellurium, 5N Plus will supply substantially all of the CdTe material required by First Solar.

However, revised production targets by First Solar and a temporary shutdown of manufacturing lines in Germany mean that quantities shipped to First Solar are expected to decline in the first-half of 2012.

First Solar said in its most recent quarterly conference call that it would be reducing utilization rates to a range of 60-70%, which will reduce production in 2012 to within a range of 1.5-1.8GW.

The new supply deal with First Solar come into effect on April 1, 2012 and was said to replace three existing supply contracts. Though pricing figures were not disclosed, the specialty metal refiner noted that prices had been adjusted lower and increasingly in-line with ‘more competitive environments in both the solar and material-feedstock markets.’
Although First Solar has been able to claim a low-cost advantage over conventional crystalline silicon PV manufacturers, the rapid fall in polysilicon prices and continued capacity expansions of polysilicon production have virtually eliminated the cost advantage gap.

5N Plus noted that it would incur certain impairment charges as a result of the changes, which include the write-off of fixed and intangible assets amounting to US$12.2 million and write-downs of inventories of US$33.4 million in the fourth quarter and US$34.8 million for the seven-month fiscal year ended December, 2011. Of these, US$21.5 million were said to be associated with a write-down in tellurium.

“We are pleased to have strengthened our relationship with our main customer in the solar market, First Solar, in an extremely challenging environment,” commented Jacques L'Ecuyer, president and chief executive officer. “We expect our new Supply Agreement with First Solar to be in effect for a number of years and although we have had to adjust our terms and conditions to reflect the new market dynamics, we are confident that we are now better positioned than ever to take advantage of growth opportunities in the solar market.”

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