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Wednesday, August 09, 2006

Secretive solar start-up, Solarvalue AG, reveals solar grade silicon production plans through joint venture bid for TDR-Metalurgija in Ruse, Slovenia

Back in March 2006, Solarvalue AG (, the next level company based in Berlin, Germany, teamed with W&P Profil Maribor to bid for a controlling 90.78% stake in TDR – Metalurgija, a producer of calcium carbide and ferro-alloys, owned by Holding Slovenske elektrarne (HSE), Slovenia’s largest electric power provider for a undisclosed amount. The tender offer is under review by HSE, and Solarvalue expects bid approval is possible as early as September.

Solarvalue AG was established in June 2005 and has raised approximately €15 million in share capital to date. Dr. Karoly Horvath is the founder of Solarvalue AG and controls about 71% of the shares through SV Holding GmbH. Falken Fonds is the second largest shareholder with about 16% of the shares, and the remaining shares are held by insiders.

Solarvalue AG has formed a subsidiary, Solarvalue Production d.d., in Ruše, Slovenia, to produce Solar Grade Silicon (SGS) from high quality metallurgical grade silicon leveraging an existing arc furnace at the TDR d.d. facility. Solarvalue has developed a three process approach to produce metallurgical silicon from low impurity raw materials and refine it into SGS. The Solarvalue SGS process has been validated by independent silicon consultant, Ted Ciszek, (, and Solarvalue has produced preproduction SGS samples at the facility. SGS production is scheduled to start at the end of 2006. Initial production volume targets or ramped capacity potential have not been announced. Solarvalue and their undisclosed strategic partners expect to invest about €30 million to get SGS into full production. John Mott, a composite materials expert and entrepreneur, is slated to become Chief Operating Officer (COO) of Solarvalue Production d.d. to realize SGS production.

Solarvalue AG has expanded their business strategy since a company presentation at the Fall 2005 German Equity Forum in Frankfurt. Solarvalue is now integrating the entire solar value chain, bidding for TDR d.d. to produce solar grade silicon, and acquiring Sunovation for polycarbonate modules and sales channels. Leveraging their solar grade silicon, Solarvalue believes they can exploit the solar industry’s polysilicon shortage and plans to develop international strategic partnerships with solar wafer, cell, and module manufacturers with idle production capacity. Solarvalue will market and sell their own branded solar modules to customers worldwide. Solarvalue co-founder Claudia Boehringer has remained as CEO to drive the growth and partner integration strategy, and Stefan Powels is Chairman of the Solarvalue AG Supervisory Board. Solarvalue AG has nominal plans for an IPO sometime in 2007 depending on the production ramp of solar grade silicon and market conditions.

Assuming the tender offer is successful, Solarvalue has laid out aggressive plans to get solar grade silicon into production in three to four months. Solarvalue’s progress toward this aggressive goal can be judged by a number of objective milestones. I have based these milestones in part on the recent announcement by JFE Steel regarding their development and production of solar grade silicon from “metallic” silicon.

After they upgrade or augment the TDR d.d. facilities with refining furnaces, Solarvalue will need to develop a stable process and deliver sample production SGS material to solar wafer and cell partners for qualification. Solar cell manufacturers will expect the Solarvalue SGS material to deliver the same cell efficiency and reliability as their existing products. Once the SGS material is qualified, Solarvalue will need to ramp production in order to become a relevant silicon supplier. Mainstream solar wafer and cell production requires approximately 10 metric tons of silicon feedstock to produce 1MWp of solar cells. Although I do not have a clear understanding of the TDR d.d facility’s SGS production capacity potential, I would judge the success of Solarvalue’s production ramp by cumulative deliveries of the first 10 metric tons of SGS and then 100 metric tons. =If= Solarvalue can achieve all these milestones, by no means a certainty, they will need to implement an SGS production capacity expansion program for 500 to 2000 metric tons of annual production in order to drive a solar value chain for 200MWp of solar module production. The SGS capacity target is dependent on Solarvalue’s plans for integration: complete SGS integration or a blend of integration, take or pay contracts, and spot market silicon.

In my opinion, if the tender offer is accepted in September, Solarvalue will be lucky to complete the first milestone and deliver sample SGS material, in significant volumes, from a stable production process to solar wafer and cell manufacturers for qualification by the end of 2006.


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