Greentech Lead America: Ascent Solar Technologies, a provider of thin-film photovoltaic modules, has signed a framework agreement for the establishment of a joint venture with the Government of the Municipal City of Suqian in Jiangsu Province, China.
Strategically located between the Yellow River and the Yangtze River, Suqian is one of the fastest growing prefecture-level cities in China, boasting a GDP of $25 billion, in 2012, and growing nearly 13 percent annually.
Under this agreement, in the first phase, Ascent and Suqian will form a joint venture entity in which Ascent will have majority interest of up to 80 percent. The JV will build a factory to manufacture Ascent’s proprietary Copper-Indium-Gallium-Selenium (CIGS) photovoltaic modules on flexible thin films.
Ascent will contribute proprietary technology and intellectual property, approximately $1.6 million in cash and certain equipment from its Colorado facility. Suqian will provide cash of approximately $32.5 million as well as rent-free use of a 270,000 square foot factory that is currently being built in the Suqian Economic and Industrial Development Science Park.
This factory is expandable to 1,000,000 square feet for phases two and three of the agreement. The total project size of Phase one of the alliance is expected to be approximately $160 million.
Ascent will have the right to purchase the factory anytime within the first 5 years at the initial construction cost, as well as the right to purchase Suqian’s ownership interest in the JV for a modest nominal cost above Suqian’s cash investment.
Suqian will also provide a package of additional incentives including a multi-year corporate tax holiday, coverage of substantial operational costs for scientists, engineers and management personnel, and significant housing subsidies and tax incentives for key employees of the JV.
As Phase two and three of this program are implemented, Ascent will have the option to purchase approximately 1.3 million square feet of land zoned for commercial usage at a favorable cost, as well as the right to arrange sale or lease of land and factory rights to suppliers and support industries brought in by Ascent, which may generate additional meaningful cash flow for the JV.
According to Victor Lee, president and CEO of Ascent, the partnership enables the company to accelerate its paradigm shift into consumer electronics and specialty market applications given China’s very large and growing consumer base and readily available contract manufacturers for its EnerPlex range of consumer products.
The alliance with Suqian, as it develops over the next six years, will also provide a means for Ascent to build positive cash flow from numerous sources, including control of the real-estate rights in the Suqian Economic and Industrial Development Science Park.