Suntech Finds Silicon in Siberia

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Now we have a better idea of why Suntech Power, with half a billion dollars in convertible notes on its books, wanted to make it an even billion. The Chinese solar company is buying a minority stake in Nitol Solar, a Russian polysilicon producer, for “up to $100 million, subject to the satisfaction of certain conditions.”

That last phrase was ominously vague, but what is more certain is that the two companies need each other. Suntech is in a race with other solar-panel makers to expand capacity in a market facing tight polysilicon supplies. Nitol plans to produce as much as 3,700 metric tons of Siberian polysilicon by next year.

Meanwhile, Nitol Solar, a subsidiary of a Russian company that’s been making chemicals since the Stalin era, could use the money. To finance its expansion, it announced an IPO on the London Stock Exchange in January, then pulled the plug on the plan a month later, citing market conditions. It had hoped to raise up to $300 million.

In recent months, Nitol has signed polysilicon contracts not just with Suntech, but also with Evergreen Solar and Trina Solar. It’s not clear what perks, if any, Suntech will receive with its $100 million investment, but judging from the estimated $1 billion valuation of Nitol for its proposed offering, Suntech will own about a 10 percent stake.

The rhetoric about compliance with environmental laws in the jointly issued release detailing the deal is notable: Suntech touts its “commitment to environmentally responsible manufacturing and compliance with environmental laws,” while Nitol highlights its “recycling process to ensure the clean and safe manufacture of purified polysilicon.”

Maybe the Washington Post’s exposé on polysilicon makers, which cited a Chinese supplier of Suntech, struck some executive nerves?

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