Yingli Green Energy has been issued with a US$897.5 million charge by an unnamed polysilicon supplier, according to its latest quarterly results.
Yingli said it acknowledged that some of its subsidiaries had “not fully performed some of [their] long-term polysilicon supply contracts on their original terms” and that invoices and letters of demand had been received from polysilicon suppliers. These include one claim for US$897.5 million.
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According to Yingli: “On December 15, 2017, one of our subsidiaries received a notice of termination from one of such suppliers notifying the Company of its decision to terminate its long-term polysilicon supply contract with the Company with immediate effect and claiming US$897.5 million of payments due and payable by the Company under the contract.”
The module maker remains in talks with the supplier in an attempt to stave off legal proceedings.
Yingli has previously announced long-term supply agreements with OCI and GCL Poly.
Disputes over polysilicon and wafer contracts are not new. In 2015, SunEdison was obliged to cede around US$25 million in deposits and agree to instalments totalling US$85.5 million. REC, Crystalox and Hemlock have all received substantial payments as a result of cancelled contracts in recent years.
Widening losses, shrinking cash reserves and the growing impatience of bond holders make the possibility of a penalty all the more damaging for Yingli.
Cash and cash equivalents fell to RMB439.3 million (US$66.0 million) by the end of Q3 compared to RMB658.2 million (US$99.7 million) at the end of Q2.
2017 guidance
Despite the company seeing quarterly shipments hit by the post-feed-in tarrif (FiT) reduction in China (597.7MW in Q3, compared to 1,146.6MW in Q2), guidance for the whole of 2017 was revised upwards to 2.8-2.9GW.
The company made an operating loss of RMB2,266.7 million (US$340.7 million) but highlighted consolidation efforts, particularly in Europe, as one means to addressing this.
“Geographically, the distributed generation (DG) projects maintained strong development momentum and became the main driving force in China market,” said Liansheng Miao, chairman and CEO, Yingli Green Energy.
“Therefore, the Company adjusted its market strategy and developed more small and medium scale customers to penetrate the DG market. In Europe, the Company continued to restructure its overseas sales network in Europe with the aim to better serve customers from Europe, Africa and Latin America, increase the operation efficiency, and decrease the operation cost,” he added.
Yingli blamed the Q3 figures on a combination of falling average selling prices (ASPs) and the sharp drop-off in demand in China.