Hot Features
Premium
Register for streaming realtime charts, analysis tools, and prices.
PVCS interim revenues came in at €32.6m and Ebit at -€12m. This is compared to the first six months of 2011 with revenues of €130m and an Ebit of €20m. Most importantly the cash position of the company was solidified by €90m compensation from termination of a long term contract. The Company has hunkered down in the midst of this solar storm, completely shutting its German poly production facilities, to try and preserve cash and shareholder value.
PV Crystalox is the only UK based photovoltaic solar Company. It produces polysilicon, multi-crystalline ingots and wafers in Bitterfeld Germany, Oxford England and Erfurt Germany. The Company has capacity of 750 MW and 1600mt of polysilicon, but has only been running at 20-25% of its capability due to the macro conditions of increasing Chinese oversupply and incentive reductions across all major markets.
Considering the Company has no debt and a cash pile of €127m, it is relatively well placed, leading for calls of buy backs, special dividends or a full on liquidation.
Liquidating the entire company could realise benefits in excess of the present share price if you look at the balance sheet shareholder equity value of €190m. However, the issues will be the scale of the liabilities they face in this action though. As they received a €90m boost from contract renegotiations, they will now be placed on the other side of the fence and have to make substantial payouts for breaking their obligations. The other problem is exactly what are people willing to pay for their assets, mainly the PPE of the Degussa- Evonik fed Bitterfeld polysilicon facility?
Polysilicon production is heavily reliant on energy input prices and economies of scale. Heat transfer between deposition chambers is one of the major ways Companies can reduce their cost per Kg. The smaller the production facilities the less efficient this becomes and the higher up the cost curve they lie. In China all Polysilicon producers with a nameplate capacity of less than 3,000 mt were banned from production back in 2010. So in a world of oversupply, being able to flog off the sub-scale Bitterfeld production facility is a large ask.
Buying back shares is another option to increase shareholder value. However this is predicated on what the market believes the Company needs as a cash buffer to wiggle its way through this crisis – €120m may not be enough considering another round of falling prices is highly likely as demand slackens on the new tariff structures and the relentless flood of product from China continues.
PVCS has done well to retract into its shell and stem the cash bleed. However, with the storm clouds of oversupply and demand uncertainty worsening, the €127m cash buffer might not be sufficient to tide it over with continuing obligations to staff and suppliers. The options of liquidation and returning cash to shareholders are potential game changers if the numbers can work. The problem with being a PI is we just can’t get the right information to make that call and are left taking a gamble on instinct and subjective belief. Can management pull something out of the bag – more doubtful than probable – but in their defence they look like they are keeping their options open and doing the best of a bad job. Rest assured, there are better places to put your money!
