US subsidies bring down European solar plant
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Swiss solar panel maker Meyer Burger is to close its solar panel plant in Freiburg, Germany to focus on subsidies available in the US.
The company is convening an extraordinary general meeting to approve a rights issue of up to CHF250 million to finance the completion of the plants in Colorado and Arizona.
The implementation of the plan is intended to close the financing gap of CHF 450 million, which should enable the group to achieve positive cash flow in the medium term and is a direct result of the subsidies available in the US under the Inflation Reduction Act.
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The company says there is still no decision on political support measures to address the current market distortions caused by oversupply and dumping prices for solar modules, the group has decided to begin preparations for the closure of its Freiburg site, which would come into force at the end of April. As a first step, the group will stop production in the first half of March, which should lead to significant cost savings from April. Sales activities in Europe are not affected by this and will continue. As usual, customers receive full product guarantees of up to 30 years.
In parallel and after a detailed due diligence review, the German federal government approved an export credit guarantee for financing from a commercial bank with a volume of up to USD 95 million.
The company is also seeking Advanced Manufacturing Production Tax Credit (45X) financing of up to $300 million with a term of 5 to 6 years, to be provided by a leading global investment bank. With an estimated $1.4 billion in future US tax credits under the U.S. Inflation Reduction Act, Meyer Burger believes the 45X financing is achievable at scale.
The Group plans to use the funds to complete its solar cell production in Colorado Springs, Colorado (USA) and its solar module production in Goodyear, Arizona (USA), both of which are currently in progress. Construction is underway and each should have an annual production capacity of around 2 gigawatts.
This will enable it to continue its cell production in the USA around the end of 2024 and its module production in the USA in the second to be put into operation in the quarter of 2024. This would correspond to the previously communicated schedule. Assuming that cell and module production at these locations can begin operations as planned, the Group expects to be able to generate annual EBITDA of around CHF 250 million from its activities in the United States in the medium term.
Meyer Burger has also decided not to make certain investments in connection with the completion of the solar cell factory in Colorado Springs as long as there are uncertainties regarding the availability and successful implementation of additional financing options.
Solar cells are expected to come from other sources in the meantime, including the factory in Thalheim.
“We presented a comprehensive concept on January 17, 2024. Today we can announce concrete progress,” said Gunter Erfurt, CEO of Meyer Burger.
“The rights issue is an attractive proposition for our investors as it allows them to invest in the highly profitable US business, where we have a unique offering supported by long-term offtake commitments and the potential for strong growth. In addition, the stronger focus on our US business makes us independent of political decisions in Europe.”
Franz Richter, Chairman of the Board of Directors, stated: “The plan presented enables Meyer Burger to leverage its world-leading technological position to drive commercial success, generate returns for investors and deliver outstanding products to our customers.”
The closure is supported by investors.
“Due to the lack of European protection against unfair competition from China, almost four years of hard work by Europe’s outstanding employees is at risk. At the same time, Meyer Burger is rapidly approaching the opening of its module factory in Arizona and is building a 2 gigawatt cell factory in Colorado,” said the board of major shareholder Sentis Capital.
“The United States political system has demonstrated multiple times that there is a strong bipartisan commitment to protecting US-based companies from unfair competition. We also have great respect and trust in the employees and management team at Meyer Burger. For this reason, Sentis, as a shareholder, is once again willing to support Meyer Burger to benefit from a very profitable business model in the United States, which is already secured by long-term offtake agreements.”
Daniel Menzel, Chief Operating Officer of Meyer Burger, added: “We will now use all our experience from the successful production ramp-up in Germany, the high product quality achieved and the excellent production metrics that we have achieved over the last three years. We want to ramp up solar module production in the USA as quickly as possible in order to be able to supply our purchase partners and customers quickly.”
In parallel, Meyer Burger is also looking for strategic partnerships with companies that could provide capital, support industrialization and increase sales through customer access, possible development of new geographical areas and/or technology licenses. These potential partnership business models could contribute to higher long-term growth and reduce capital requirements.
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