PV Crystalox Solar Plc, a maker of solar wafers and ingots for photovoltaic panels, more than doubled in London after saying it will get a 90 million-euro ($114 million) cash settlement for ending a customer’s contract.
The stock rose a record 121 percent to 9.45 pence. The pretax gain will be booked as income in the first half, the company said today in a filing. The payment to break the contract with an unidentified customer is more than triple the 24.6 million euros of pretax income the company had in the first half of 2011, according to data compiled by Bloomberg.
PV Crystalox, based in Abingdon, England, is set to book more revenue from not selling than from selling this year, an indication of how solar component makers are reeling as prices plunge due to factory overcapacity and cheaper Chinese imports. Spot wafer prices tumbled 70 percent since April 2011 “and are below industry production costs,” the company said today.
“This money allows PV Crystalox to either survive for longer in tough markets or to return cash to shareholders,” Andrew Shepherd-Barron, an analyst at Peel Hunt in London, said by phone. “Investors may say, ‘We’d like some of that money back, in the form of a dividend or buyback.’”
Shepherd-Barron raised his recommendation to buy from hold today.
Solar companies have renegotiated or torn up contracts with customers, sometimes for a break fee, because the spot price for components such as wafers or cells has fallen several times below their multiyear contracted sales price. Even after today’s increase, PV Crystalox shares have plunged 95 percent from a high of 199 pence in June 2008.
PV Crystalox is talking with other customers about changing or ending their contracts. They are for less money than the settlement announced today, which was struck in a deal outside of continuing arbitration, company board Secretary Matthew Wethey said in an interview.
“This is by far the biggest one,” Wethey said. The board is considering various options for using the 90 million euros, and a dividend or a buyback are two of many alternatives being considered, he said.
Separately, PV Crystalox today cut its forecast for first-half shipments by about 30 percent. The company reduced its estimate to 55 megawatts to 70 megawatts from a previous 80 megawatt to 100 megawatt forecast because of the “extremely challenging” market to sell its products.
“As a result of this adverse pricing environment, we have to date been unable to reach agreement on acceptable wafer prices and volumes” for the second quarter of this year with some of the company’s contract customers, the solar-wafer maker said.
Production of polysilicon, a principal component for its products, remains suspended at PV Crystalox’s plant in Bitterfeld, Germany, the company said.