Silicor Sees Cost Advantage in $1 Billion Icelandic Solar Plant

  • Evercore helping secure finance for solar-grade silicon plant
  • Facility to be Iceland’s largest industrial project in decade

Silicor Materials Inc. expects to complete financing in the next two months for a $1 billion plant it says will produce solar-grade silicon for at least 40 percent less than existing facilities.

Construction on Iceland’s largest industrial project in a decade will start next year, according to Silicor Chief Executive Officer Terry Jester, who said investment bank Evercore Partner Inc. will help raise the final $150 million of financing from metals or solar companies and financial institutions.

The 19,000 metric-ton capacity plant at Grundartangi, about 40 kilometers (25 miles) north of Reykjavik, will be the first to produce large-scale quantities of upgraded, purified silicon using a metallurgical process. Jester said that means Silicor’s cost of producing solar-grade silicon will be less than $10 a kilogram compared with about $17 or $18 for traditional polysilicon production.

“For us, the value proposition is simply cost reduction,” Jester said in an interview in Geneva.

That market price for solar-grade silicon is currently about $17 per kilogram, but will probably decline to about $15 by the end of the year, before falling further in 2017, said Xiaoting Wang, an analyst at New Energy Finance in Hong Kong.

Pricing Trend

“There is a big oversupply,” she said. “The pricing trend is not very encouraging for whoever is going to build new plants.”

Traditionally, solar-grade silicon is made by a chemical purification process that produces what is called polysilicon. Silicor says its smelting-like method uses aluminum to sweep the impurities out of metallurgical silicon to produce material pure enough to be used to make wafers for solar cell panels.

The technology is based on a process developed by Canada’s 6N Silicon Inc., which Silicor purchased in 2010. While a Silicor plant in Toronto produced solar-grade silicon on a small scale, it’s now shuttered because production costs were too high to be profitable with the current market price for solar-grade silicon.

The Iceland plant, which will take about two years to build and create about 450 full-time jobs, will cost about a third less to build than an equivalent polysilicon facility, Jester said. Silicor’s metallurgical process also uses about a third of the energy to produce a kilogram of silicon, even as it benefits from Iceland’s cheap geothermal-generated electricity.

Customer Orders

Closely-held Silicor, controlled by private equity firm Hudson Clean Energy Partners, isn’t the first company to attempt to produce solar-grade silicon by a metallurgical process on a large scale. Timminco Ltd., a Toronto Stock Exchange-listed company saw its market value soar to more than $3 billion in 2008, before crashing when it failed to produce enough pure material to meet targets. Timminco filed for bankruptcy protection in 2012.

Jester said Silicor’s process is different from Timminco’s and has been fully proven with over 1,000 runs at the small-scale Toronto plant. Silicor has already sold its solar silicon to more than 20 customers and has pre-orders for the Iceland plant from seven clients.

With global solar capacity forecast to grow to 100 gigawatts by 2020 from about 70 gigawatts in 2016, the capacity of the Silicor plant would represent about 4 percent of global demand for solar-grade silicon.

“The plant is effectively sold out at this point,” Jester said.

Next Project

Silicor arranged a $105 million equity financing last year with investors including Hudson and some Icelandic pension funds. It’s also arranged debt financing led by KfW, the German development bank, covering about 65 percent of the project. Euler Hermes SA extended a loan guarantee. Silicor qualifies for the German export credit agency financing because the plant will use equipment from Germany’s SMS Siemag LLC.

Once construction of the Iceland plant is under way, Silicor will begin scouting locations for its next project, Jester said. The location will likely be a metals hub with access to cheap electricity such as Quebec, the Middle East, Norway or China, she said.

Silicor won’t consider building its next plant in the U.S. unless Chinese tariffs on solar silicon imports are lifted. Production from the plant in Iceland, which will benefit from government tax reductions, isn’t subject to Chinese tariffs.

“It’s the biggest thing that has been done in Iceland in over a decade,” said Jester, adding that the facility will be carbon neutral as there is demand for the aluminum byproducts created by the process. The company has also agreed to purchase 26,000 trees from Iceland’s forest service to offset its economic impact.

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