UPDATE 2-Q-Cells ends LDK supply agreement, claims guarantee
* Q-Cells to apply to draw on bank guarantee Nov. 2 or 3
* LDK not immediately available for comment
* Q-Cells shares down 3.6 pct, LDK down 7.4 pct pre-market (Adds more details, background)
FRANKFURT, Nov 2 (Reuters) - Q-Cells (QCEG.DE) ended a wafer supply agreement with Chinese peer LDK (LDK.N), in a sign that the industry is continuing to struggle with the oversupply of solar cells.
Q-Cells, one of the world's largest makers of solar cells, said on Monday that LDK did not fulfil "significant contractual obligations" with regard to the supply agreement concluded in 2007.
LDK was not immediately available to comment.
"The contractual parties have differing opinions concerning the validity of the termination of the agreement," Q-Cells said in a statement.
"Discussions between the two companies and a parallel arbitration process at the International Chamber of Commerce (ICC) in Paris have not resulted in an amicable settlement yet," the company added.
Q-Cells said it made a payment of $244.5 million at the beginning of 2008 related to the agreement, adding that the payment was secured by a bank guarantee and could be reclaimed in the event of termination of the agreement.
A spokesman for Q-Cells said that the company would on Monday or Tuesday apply to draw on the bank guarantee after a Berlin court had refused an application by LDK for a temporary injunction to be issued against such a move.
By 1423 GMT, shares in Q-Cells were down 3.6 percent, while LDK shares dropped 7.4 percent in U.S. premarket trading. [ID:nN02409400]
MIXED MESSAGE
"The message for Q-Cells is mixed," said SES Research analyst analyst Karsten von Blumenthal.
"On the one hand, this will mean a cash injection for Q-Cells which would certainly be of use at the moment. Also, it is likely that wafer prices agreed on in the contract were far higher than the current market prices, so Q-Cells would have a good reason to terminate the agreement." Continued...
