Québec Silicon Joint Venture has Solar implications

Dow Corning acquires a 49 percent stake in Bécancour Silicon.
Leading Polysilicon manufacturers are lining up silicon metal supplies in anticipation of continued Photovoltaic (PV) industry growth.

TimmincoInvestorMay2010slide8 Just before “Timminco Reports Continued Improvement for Financial Results in the Second Quarter of Fiscal 2010”, Timminco Limited (TSE:TIM) announced “Timminco to Form Joint Venture With Dow Corning at Becancour Silicon Metal Facilities”. In an estimated $39.7 million transaction, Dow Corning Corporation acquired a 49 percent stake in the Bécancour Silicon Inc., (BSI), a wholly owned subsidiary of Timminco. Upon completion of the transaction expected around September 30, 2010, Dow Corning and Timminco will form a joint venture named “Québec Silicon” based on the existing silicon metal (metallurgical silicon) assets of BSI “including property, plant, equipment, and certain net working capital items, and BSI’s quartz mining lease in Lac Malbaie, Québec.

Québec Silicon’s initial annual silicon metal production capacity of 47000 Metric Tons (MT) will be split between BSI and Dow Corning based on their ownership stakes. Given that Dow Corning stopped UMG Solar Grade Silicon Production, it is not surprising BSI retains ownership and control of their solar grade silicon purification operations and facilities. BSI also retains their customers and will honor existing silicon metal contracts with their production allocation.

From Timminco, I understand the evaluation of the expanded silicon metal production project in Iceland (please see “Timminco Pursuing Opportunities to Expand Silicon Metal Production”) continues and is independent of the Québec Silicon joint venture.

As discussed in Of Silicon Metal, Solar Grade, and PV-1201, Dow Corning acquired Globe Metais Indústria e Comércio S.A., in Pará, Brazil (now Dow Corning Metais do Pará Ltda), and a 49 percent stake in Globe’s WVA Manufacturing LLC in Alloy, West Virginia USA, from Globe Specialty Metals, Inc. (NASDAQ:GSM) last November.

Per Mr. Jarrod Erpelding with Dow Corning Corporate Communications:

This agreement, as well as the acquisitions we announced in November, will provide us with an efficient, sustainable, secure supply of high-quality, chemical-grade silicon metal that is the cornerstone of nearly all of Dow Corning products, silicones from Dow Corning and our polysilicon through our joint venture Hemlock Semiconductor..

The agreement will increase Dow Corning’s supply of silicon metal, which provides security of supply now and the ability to meet future needs.

Timminco and Dow Corning have had a long and successful relationship.

While the closing is subject to “regulatory approvals and the consent of BSI lenders”, BSI can receive up to a $10 million performance bonus after closing by achieving production cost and capacity improvement goals. Should the transaction not close, BSI and Dow Corning have an alternative silicon metal supply arrangement for the delivery of 20000 MT in 2011.

More upstream silicon metal integration
With “WACKER Finalizes Acquisition of Silicon-Metal Production Site in Norway”, Wacker Chemie AG (ETR:WCH) completed the acquisition of Holla Metall from the FESIL Group (Norway). The still active Holla Metall webpage states:

For FESIL, Holla Metall is a cornerstone plant with a stable, competent workforce combined with modern equipment and technology. Four furnaces at Holla produce high quality SiMetal. Holla has developed its own process for granulating SiMetal. No one else has this process.

WackerCapitalMarketsDay2010slide28 Perhaps Wacker has special process plans for the granular silicon metal? The Holla Metall facility has 48000 MT of annual silicon metal production capacity, enough to address one third of Wacker’s current demand.

Dow Corning and Wacker use silicon metal as a raw material for the production of both polysilicon and silicones. Certain silicone products from both companies target PV module applications.

Dow Corning’s joint venture approach has expanded their silicon metal supplies to augment internal captive production via minority investments in North America. In addition, Dow Corning has avoided the $6,000 to $7,000 per MT capital cost and 3 to 5 year lead time required to construct a greenfield silicon metal plant as noted in Timminco’s May 2010 Investor Presentation.

In a bit of irony, Dow Corning and Wacker have two silicone joint ventures: Pyrogenic Silica and Siloxane.

5 comments

  1. Thanks for covering this Ed. I believe that there has been long interest in the chem-grade silicon.

    With both Wacker and Hemlock expanding, both companies ultimatey need to secure more secure supply.

    Regards, David

  2. Jacob Riis says:

    REC decided in 2008 to build their next polysilcon plant in Bécancour, Quebec.
    You can read more here: http://www.recgroup.com/view?feed=r/136555/pr/200808/1245943.xml or http://www.siteselection.com/issues/2008/nov/North-American/

    Now it’s 2010 and we haven’t heard anything from REC about the new plant. Perhaps they have delayed or dropped the investment. The solar business is very different now compared to 2008. But I believe that REC in their polysilicon is one of the leaders, both seen from a $ cost pr kilogram and from a technology view.

  3. steinar says:

    REC is so strapped of cash that their future poly plans has been dropped. They’re apparently looking for partners to license their fbr-technology though.

  4. Jacob Riis says:

    Do you have a source that the plant in Quebec has been dropped? It is likely but I haven’t heard anything official about it. They still have 4,5 billion NOK in unused credit facilities ( about 725 million $ dollar ) But then again they are still spending some money on new expansions and they do not earn a lot of money from their business. So you are right that they are strapped of cash.

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