9 February 2012
IQE raises £10.5m and invests in CPV cell developer Solar Junction
Epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has signed a strategic investment agreement and an exclusive epiwafer supply agreement with Solar Junction Corp (SJC) of San Jose, CA, USA, which manufactures III-V multi-junction solar cells for concentrated photovoltaic (CPV) modules.
SJC was founded in 2007 with seed funding from New Enterprise Associates (NEA), plus Draper Fisher Jurvetson and Advanced Technology Ventures. The firm’s solar cell incorporates proprietary patent-pending lattice-matching technology (developed at Stanford University) based on dilute nitride materials, enabling it to more optimally partition the solar spectrum for maximum efficiency. In April 2011, SJC achieved record energy conversion efficiency of 43.5% for a commercial production cell (raised from the previous record of 42.3%).
IQE has placed 43,750,000 new ordinary shares with institutional investors - via bookrunners Espirito Santo Investment Bank and Canaccord Genuity Ltd - at a price of 24 pence per ordinary share to raise £10.5m ($16.7m). Net proceeds will be used to:
- fund an equity investment to take a 9% stake in SJC (about $5m);
- purchase high-volume molecular beam epitaxy (MBE) production tools dedicated to manufacturing epiwafers for SJC’s cells ($8m); and
- fund the cost of ancillary quality control equipment, process transfer and to establish initial wafer manufacturing at IQE ($2m).
SJC is in the process of raising about $20m, mostly to fund its move into high-volume chip manufacturing. As part of this funding, IQE will be SJC’s strategic epitaxy partner (via an exclusive seven-year epiwafer supply contract and exclusive rights to supply all of SJC’s products), enabling it to benefit from IQE's materials intellectual property and expertise in high-volume MBE-based epiwafer manufacturing. In exchange, IQE secures a partnership for developing CPV technology with SJC and exclusive access to SJC's on-going R&D program at no additional cost.
“Solar Junction has developed a world-beating technology that significantly increases cell efficiency, a crucial factor in the economics of CPV systems,” says IQE’s chief executive Dr Drew Nelson. “A combination of Solar Junction’s core materials IP and technology, together with our own IP and manufacturing capabilities, provides a compelling route to significantly higher cell efficiency and cost-effective, high-volume production,” he reckons.
SJC is currently in qualification with major CPV system makers, being close to full International Electrotechnical Commission (IEC) certification with its lead customer. In early February, Solar Junction signed a multi-megawatt CPV cell supply agreement with system maker Semprius Inc of Durham, NC, USA (which has also just set a new record for PV module efficiency of 33.9%). IQE’s investment in SJC is therefore expected to accelerate the epiwafer maker’s strategy to become a global supplier of CPV wafers for solar power markets.
“This is a potentially transformational opportunity,” says Nelson. “It is expected to facilitate a significant acceleration in our well established CPV strategy and it provides us with an outstanding opportunity to become a key epi supplier to the CPV market.”
As the cost of CPV power generation has fallen rapidly, the CPV market has reached an inflection point in terms of cost comparisons with fossil fuels and is promising impressive growth potential, comments Nelson. At SJC’s record 43.5% cell efficiency level, in sunny regions the cost of electricity generated using CPV can be lower than other technologies, including fossil fuels and renewables. This is reflected by the number of CPV solar power installations under construction, or announced during 2011, growing to almost 690MW, compared with a total installed base of 28MW at the beginning of 2011. IQE says that, using their combined IP, IQE and SJC have a roadmap to increase CPV cell efficiency to over 50% in the next few years.
For CPV systems, a 10% increase in relative efficiency (e.g. from 40% to 44%) delivers an estimated reduction of 10% in the total cost of energy generation. The future cost of energy generated by CPV is expected to continue to decline rapidly in the coming years, driven by increasing cell efficiency, increased concentration levels, and the ramp up in production.
According to analysts at Greentech Media and Strategy Analytics, the CPV market will grow to 1.5GW by 2015. Based on this, IQE expects the epi market for CPV to grow to about $250m by 2015 and, at that continued growth rate, to equal the total wireless epi market in 2017. “We look forward to developing our CPV offering further alongside our strongly growing opto-electronic business and our well established wireless-related products,” says Nelson.
After completing the investment in February, IQE expects process transfer from SJC, installation of the new MBE tools and their qualification with SJC's customers to take the remainder of 2012, with sales of CPV wafers starting in 2013. IQE anticipates receiving $1.2m of R&D income in 2012 and so expects the investment to be earnings neutral in 2012.
Process optimization for the new tools during their first two years is expected to increase IQE’s throughput and revenue. Once the new tool sets are running at full capacity, IQE expects to achieve above-average EBITDA margins. Based on the current expected timetable for customer qualifications, the investment should be earnings enhancing in 2013.