PV Crystalox (PVCS-LN)

Bloomberg  May 18  Comment 
  PV Crystalox Doubles in London on Settlement to End Contract ...
Reuters  May 18  Comment 
(Repeats to additional subscribers with no change to text)
Reuters  Aug 18  Comment 
* Cancels dividend payouts, cites challenging conditions (Adds details, background)
guardian.co.uk  Jun 28  Comment 
It's gone a bit dark for solar power supplier PV Crystalox Solar. The company's shares have slumped 18.25p to 26p - a 41% decline - after it warned of weak demand for its ingots and wafers for photovoltaic cells. It said it was likely to make a...
Reuters  Mar 24  Comment 
* Sales rise 6 pct to 252.6 mln euros as shipments rise


PV Crystalox makes multicrystalline silicon ingots and solar wafers used in solar cells. The company's sales accounted for 17% of the world’s multicrystalline wafer market in 2006.[1] A majority of the company's sales in 2007, 81.4%, were to solar panel manufacturers in Germany and Japan, where the company operates its wafer production facilities.[2] As of April 2008, the company had an annual wafer production capacity of 290 MW[3] and predicts that it will produce 210 to 225 MW in 2008.[4]

Demand for PV Crystalox’s silicon wafers, which are specific to the solar industry, follows demand for solar panels. High oil and gas prices, fears of climate change, and political support for alternative energy sources are all playing a part in helping the emerging solar market develop. There is a great deal of government support for the solar industry through tax credits and subsidies, like Germany's Feed-In-Law, which help to make the technology more cost competitive.[5] Despite the government efforts, prices remain high as there is a shortage of refined monocrystalline and polycrystalline silicon; the principal inputs required to make silicon wafers and solar panels. This shortage has driven up prices for all three, making solar energy more expensive than other power sources. The average long-term contract price of polysilicon increased approximately 20% from $50-$55 per kilogram in 2006 to $60-$65 per kilogram delivered in 2007, with market prices sometimes spiking as high as $400 per kilogram.[6]

PV Crystalox's main competitors in the silicon wafer market are LDK Solar, and solar wafer manufacturing divisions of large conglomerates engaging in solar wafer manufacturing such as Deutsche Solar AG, a divisoin of SolarWorld AG, Kyocera (KYO) and M. SETEK Co.

Business Financials

PV Crystalox produces multicrystalline silicon wafers for the photovoltaic industry. The silicon ingots are processed into solar wafers which are sold to solar panel manufacturers that assemble the wafers into solar cells and solar panels. The company produces its multi-crystalline silicon ingots at its plant in Oxfordshire, UK and produces wafers out of facilities in Germany and Japan.[7] PV Crystalox used to also operate a trading and equipment segment to supplement its silicon products segment, which due to low margins was discontinued in 2008. The segment purchased and resold silicon ingots to other manufacturers and marketed a small number of spare parts made by the company.[7]

In 2007, the company produced 190 MW of silicon wafers, down 11.6% from the 215 MW produced in 2006.[8] The decreased output in 2007 was largely due to greater downtime in its wafer plants, as the company expanded its production facilities. The company primarily markets these wafers to the top solar panel manufacturers, with 74% of the company’s sales in 2007 going to 2006’s ten largest solar panel manufacturers .[2] These include companies such as Suntech Power Holdings , which entered into a 260 MW supply deal with PV Crystalox in July of 2008.[7] 81.4% of the company’s sales in 2007 came from solar panel manufacturers in the German and Japanese markets.[2]

PV Crystalox had an annual revenue of 263.4 million euros in 2007, an 8.7% increase from the 242.4 million euros in 2006.[8] In the first half of 2008, the company earned 126.28 million in revenue, an increase of 2% from the first quarter of 2007, with 0.23 million euros coming from its discontinued trading and equipment segment.[9] Despite an only 2% increase in total revenue, the core silicon products segment had revenue increase 36% over the same time period and wafer output increase 24% to 110MW.[9] The company had an operating income of 70.8 million euros (26.9% of revenue) in 2007, up from 48.3 million euros (19.9% of revenue) in 2006.[8]

Trends and Forces

Continued Worldwide Silicon Shortages Will Hurt PV Crystalox

Silicon, a necessary input to most solar panels, is one of the most abundant elements on Earth, but refined silicon has been in short supply. The bottleneck has resulted in rising prices, especially in 2006 and 2007. As solar power has increased in popularity, raw silicon producers, who previously catered only to the semiconductor market, experienced a surge in demand. Due to limited mining capacity and processing capital they were unable to keep up with the increased demand. This created a "shortage" of refined polysilicon, and caused prices to soar. To offset this shortage and dampen the effect of future fluctuations in the raw silicon market, PV Crystalox is constructing its own raw silicon production facility near its plant in Germany. The first stage is to be completed in 2009, with planned production of 900 MT per year, increasing to a total of 1800 MT per year in 2011.[2]

For silicon wafer vendors like PV Crystalox, the higher silicon prices mean higher production costs and lower margins. Higher silicon costs ultimately decrease demand for silicon as the cost is passed on to consumers through PV Crystalox’s customers and into the solar PV market. In the silicon PV industry, the cost of the silicon accounts for approximately 45% of each module’s manufacturing cost.[10] This means that when silicon prices rise silicon PV manufacturers are forced to either absorb the extra cost, or pass it on to consumers. The price of silicon has increased with the average long-term contract price of polysilicon increasing from $50-$55 per kilogram in 2006 to $60-$65 per kilogram delivered in 2007, with market prices sometimes spiking to as much as $400 per kilogram .[11]

The increased demand in the world market has caused severe shortages, but these shortages are being addressed by silicon manufacturers and likely will not last much longer. Hemlock Semiconductors began production from its new facility in June of 2008, a facility that is expected to produce 9,000 metric tons a year, and perhaps as much as 36,000 metric tons per year after improvements slated for 2011. This alone dwarfs worldwide silicon production in 2005 of only 26,000 metric tons.[12] Although the demand for silicon is expected to stay quite strong, these and other additions are likely to ease the silicon shortage and soften prices for PV Crystalox.

PV Crystalox Stands to Benefit from Chinese Growth

In 2007 sales of silicon wafers to Chinese manufacturers accounted for only 6.3% of PV Crystalox’s sales, but the company is establishing new relationships in the area and looks to increase sales in the growing Chinese market.[2] According to the International Energy Agency (IEA), China's energy demand will surpass that of the United States soon after 2010, based on what it considers a conservative growth rate of 6.0% per year. [13] Chinese energy demand is expected to grow by 3.2% every year and double between 2005 and 2030, with potentially higher growth rates resulting in even greater energy demand.[13] Part of the increasing demand is a result of China’s growing transportation needs. The IEA expects Chinese oil demand for transport quadruple between 2005 and 2030, with new vehicle sales exceeding those of the United States by 2015.[13] To meet the growing needs, China will need to add 1,300 gigawatts to its electric generating capacity by 2030, more than the total installed capacity in the United States in 2008.[13] To meet this demand, China will need to invest 3.7 trillion dollars in energy infrastructure to meet the energy needs in 2030.[13] By 2010, on route to these goals, China hopes to build solar installations that will generate around 300 megawatts of solar power for the country.[14]

Environmental Concerns, High Oil, and High Gas Prices Make Solar Panels More Appealing

As the price of oil has skyrocketed and the average citizen has become more aware of their environment, there has been a strong push for the development of economic alternatives, especially renewable sources of energy. The push for clean energy has benefitted the solar industry, which has averaged 41% growth per year from 2001 through 2008, and is projected to continue in the future.[15] Since silicon wafers, like the ones produced by PV Crystalox, are found in 90% of solar panels [16] the needs of the rapidly expanding solar industry provides an opportunity for PV Crystalox to grow. In 2007 alone, there was 2,826 MW of PV solar installations, over a GW more than the 1,744 MW installed in 2006.[17] With the expansion of the industry and increased investment, PV solar energy has made great strides in the last five years as the panels have become more efficient and costs of production have decreased. According to the Department of Energy’s Solar America Initiative, the hope is that with continued research and more companies entering the market, PV solar power will become a competitive source of commercial electricity by 2015.[18]

As a source of renewable energy, solar has a wide appeal as it is a virtually limitless resource, and once installed, can produce electricity without emitting harmful pollution. In developed countries that heavily use air conditioners the times of peak electricity usage are during the hottest, sunniest days of the year; the same days when solar panels can produce the most energy. Solar comes with limitations, however, most notably the poor efficiency of PV modules, which is further reduced by the need to convert DC from solar cells into AC current. Moreover, solar is weather dependent and intermittent, requiring storage or back-up systems to supplement during times of weak generation. In 2007, solar power accounted for only 0.06% of the world’s electricity, and with continued annual growth of 35% would still only represent 5% of world’s electricity in 2020. [19]

Government Incentives Spur the PV Market and Help PV Crystalox

Solar is not an economic choice in today’s energy market due to the large initial investments that are required and the efficiency of available panels. The large initial installation costs and uncertainty about the panels’ longevity deter most electric generators from investing in solar power plants. Other, more conventional electric sources have proven to be more predictable and cost effective. As a result, commercial and private PV systems have become reliant on subsidies and other government incentives to make them economical. These incentives have been spurred by rising energy prices, fears of climate change, and desires for energy independence.

In Germany, one of PV Crystalox’s largest markets, the Feed-In-Law provides subsidies for solar generated electricity that began in 2004 at 45.7 euro cents/kWh for ground and 57.4 euro cents/kWh for building installations, set to decrease at a rate of 6.5% and 5% per year, respectively.[20] In early June of 2008, the German government changed the 2004 law to have a 10% decrease in 2009, and a 7 and 8 percent decrease the following years. This sets the subsidy levels for 2009 installations at about 34.2 and 48.8 euro cents/kWh.[21] Although the lower subsidies are less favorable to the solar industry and will not do as much to improve demand as the previous rates, the decrease was much less than anticipated, and still help to make solar more competitive in the energy market.[21]

Spain, another significant player in Europe’s solar market, is paying a similar Feed-In-Law with a 2008 maximum rate of 45 euro cents/kWh, regardless of installation location. The future of Spain’s subsidy rates remain uncertain, as proposals are being discussed to cut them by as much as 35%. The proposals also make them resemble Germany’s split subsidy system with rates of 29 euro cents/kWh for ground installations and 33 euro cents/kWh for building installations in 2009.[22] These rate cuts stand to make solar power less attractive, as did the lower subsidies in Germany, but represent less of a threat to PV Crystalox's growth, as sales in Germany account for more of the company's revenue.[2]The United kingdom have recently finalized their own feed in tariff rates for pv solar installations, from April 2010 rates equivalent to 45 euro cents per kwh for retrofit domestic systems and 42 euro cents per kwh for new build will be available these payments are index linked and guaranteed for 25 years from the date of installation.This should transform the local market.

Competition and Market Share

In 2006, PV Crystalox held 17% of the multicrystalline market.[1] The company had an annual production capacity of 290 MW as of April 2008.[3]

  • Kyocera (KYO) - A large electronics and semiconductor corporation, whose silicon wafer division held 13% of the multicrystalline market share in 2006.[1] The company also produces solar panels, consumer electronics products, and telecommunications equipment.
  • LDK Solar had a production capacity of 420 MW of polycrystalline silicon wafers at the end of 2007 and sold $501 million worth of solar wafers.[23] LDK held 8% of the multicrystalline wafer market in 2006.[1]
  • M. SETEK is one of the world's largest suppliers of monocrystalline silicon wafers and entered into the polycrystalline market in 2007. It predicts production of 2800 tons of polysilicon in 2008[24] and is involved in significant longterm contracts with JA Solar Holdings, (JASO), Suntech Power Holdings (STP) and SunPower (SPWR), among other leading solar panel manufacturers.[25]
  • ReneSola entered the monocrystalline solar wafer market in 2005, and the polycrystalline market in 2007.[26] The company did not hold a significant portion of the market in 2006, but expanded its production capacity in 2007 and has established itself as a global supplier of silicon wafers.
  • Renewable Energy Corporation - The largest multicrystalline wafer producer, this vertically organized solar company had a 2006 market share of 24%.[1] In 2007 the company had an annual monocrystalline wafer production capacity of 38 MW and a polycrystalline production capacity of 468 MW.[27]
  • SolarWorld AG - A vertically organized German solar company that operates in all levels of the solar industry, from raw materials to module sales. The company had a multicrystalline wafer market share of 19% in 2006.[1] Deutsche Solar AG, a division of Solar World AG, had an annual production capacity of 350MW of silicon wafers at the end of 2007, and is expanding rapidly. By 2009, Deutsche Solar expects to have over 750 MW of annual capacity, with other divisions of Solar World adding an additional 320 MW annually.[28]
  • Sumco Corporation - A Japanese silicon company that produces wafers for semiconductors and solar panels, and held 6% of the multicrystalline solar market in 2006.[1] As of December 2007, the company was able to produce 900,000 wafers per month and plans to reach a monthly production capacity of 1,660,000 wafers by March of 2010.[29]


  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 CIBC Initiating Coverage on LDK, July 18th, 2007
  2. 2.0 2.1 2.2 2.3 2.4 2.5 PV Crystalox Annual Report 2007 Page 9
  3. 3.0 3.1 PV Crystalox Company Presentation
  4. PV Crystalox Annual Report 2007 Page 11
  5. Fast Solar Energy Facts German PV Market
  6. TSL 20-F 2007 Pg. 7
  7. 7.0 7.1 7.2 Google Finance PVCS
  8. 8.0 8.1 8.2 PV Crystalox Annual Report 2007 Page 14
  9. 9.0 9.1 Interim Report 2008 PV Crystalox
  10. Solar Buzz: Fast Solar Energy Facts
  11. TSL 20-F 2007 Pg. 7
  12. Clean Tech ‘What silicon shortage, asks Hemlock’ June 3, 2008
  13. 13.0 13.1 13.2 13.3 13.4 AFX News Limited IEA forecasts for Indian, Chinese energy demand 11.07.07
  14. China Aims to Clean up in Solar Power. Business Week
  15. Industry Growth and Policy Progress on the Agenda at Solar 2008
  16. Solar Buzz: Fast Solar Energy Facts
  17. Solar Buzz: Fast Solar Energy Facts
  18. DOE’s Solar America Initiative Draft Pg 5
  19. PV Crystalox Annual Report 2007 Page 4
  20. Fast Solar Energy Facts German PV Market
  21. 21.0 21.1 German Solar Subsidies to Fall Less Than Forecast, GreenTechMedia
  22. Spain Could Reduce Solar Subsidies by 35%: GreenTechMedia
  23. LDK Solar 20-F 2007
  24. Investing in Silicon Suppliers
  25. M Setek Company Profile
  26. SOL 20-F 2007 Pg. 1
  27. REC Website Monocrystalline and Polycrystalline
  28. Solar World Annual Report 2007
  29. SUMCO to Strengthen 300mm Wafer Production Capacity Jan 30, 2008
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