December 4, 2009 / 12:48 PM / 10 years ago

UPDATE 3-Q-Cells, LDK end legal row, continue wafer contract

   * Q-Cells won't pursue collecting $244.5 mln bank guarantee
* Joint business activities of companies remain unchanged
* Q-Cells to deliver cells to LDK in future
* Shares in Q-Cells turn positive, up 3.12 pct
* Shares of LDK rise 7 pct
 (Updates LDK share movement)
 By Christoph Steitz
 FRANKFURT, Dec 4 (Reuters) - Q-Cells QCEG.DE, one of the
world's largest makers of solar cells, renegotiated a contract
with the Chinese company LDK Solar LDK.N, a move that gives
the German company flexibility over component wafer supplies.
 An industry oversupply of solar parts, such as wafers, has
caused prices for components to drop by up to 50 percent,
leading analysts to question Q-Cells' future as it piled up
losses of nearly 1 billion euros ($1.51 billion) this year.
[ID:nL8642967] [ID:nLR576752]
 Both companies on Friday struck a deal not to take legal
action against each other, freeing up Q-Cells to focus on its
ongoing restructuring.
 As part of the agreement, Q-Cells said it would not seek a
$244.5 million bank guarantee secured by a German bank as part
of the original LDK contract, which was signed in 2007 and fell
apart last month.
 Q-Cells and LDK said the contract, under which LDK supplies
wafers to Q-Cells from 2009 to 2018, would remain intact, but
with conditions changed.
 "Q-Cells and LDK Solar have agreed to increase the
flexibility of delivery schedule. Flexible pricing based on
market levels and Q-Cells' preferred customer status will apply
for the entire remainder of the contract term," the companies
said in a joint statement.
 "This is good news for Q-Cells, although they now will not
have the $244.5 million guarantee," said SES Research analyst
Karsten von Blumenthal.
 "The contract is much more flexible now and Q-Cells does
not have to source that many wafers which eases the pressure,"
Blumenthal said.
 Shares in Q-Cells turned positive on the news and were up
3.12 percent at 1513 GMT, outperforming the S&P global clean
energy index .SPGTCLEE, which stood 1.78 percent higher.
 The news also lifted shares of LDK, which were up 7.3
percent at $8.99 in trading on Friday on the New York Stock
Exchange.
 Q-Cells had made a prepayment of $244.5 million shortly
after it signed the contract with LDK in late 2007, when wafer
prices were much higher. [ID:nLB171076]
 The row between Q-Cells and LDK had raised questions about
the viability of a separate joint venture project which was set
up in April.
 However, the companies said they were improving their
cooperation, with Q-Cells set to supply cells for LDK's module
production, while LDK's panels would then be used in Q-Cells's
solar parks.
 ($1=.6634 Euro)
 (Additional reporting by Laura Isensee in Los Angeles; Editing
by Sharon Lindores)
 ((christoph.steitz@thomsonreuters.com; + 49 69 7565 1269;
Reuters Messaging: christoph.steitz.reuters.com@reuters.net))
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