Top shareholder has deal for Solargen Energy panels

Solargen Energy’s largest shareholder also had a 46 percent
stake in the company that has a deal to produce up to half of the
panels for the proposed Panoche Valley solar project, according to
the most recent financial filings.
Solargen Energy’s largest shareholder also had a 46 percent stake in the company that has a deal to produce up to half of the panels for the proposed Panoche Valley solar project, according to the most recent financial filings.

As Solargen Energy’s executives were talking in the fall of 2009 about the possibility of building a solar manufacturing plant in the Fresno area to supply the estimated 1.8 million panels required for its proposed farm, something else was happening.

Around the same time, the company was searching for offshore solar panel manufacturers. Eventually, Solargen’s firmest deal went to NexPower Technology Corp, a Taiwanese panel manufacturer closely related financially to one of Solargen’s largest shareholders, United Microelectronics Corp. – UMC – also based in Taiwan, according to a U.S. Securities and Exchange Commission filing.

Solargen reported it had a binding preliminary panel supply agreement with NexPower – the panels are of the photovoltaic variety – but the precise extent of the deal is unclear.

Solargen is proposing to build a 420-megawatt solar farm on 4,700 acres in Panoche. Its latest cost estimate was $1.2 billion and company plans hinge on obtaining 30 percent of the capital start-up funds from federal subsidies – and other financial incentives from the state – for alternative energy ventures. Solargen must get a county approval by December to get the outside funding, while it has to raise 5 percent of the costs upfront to obtain the outside subsidies.

Solargen on Monday, incidentally, announced it recently had raised another $4.1 million for the proposal and brought along a new board member.

“That just shows that we’re going to be able to execute and get this thing done,” Solargen Chief Executive Officer Michael Peterson said.

Solargen’s financial filings, meanwhile, have pointed out the deal is for NexPower to produce up to 50 percent of the panels for its “California Central Valley project,” according to a report from the third quarter of last year. The 2009 annual report notes two contrasting explanations of the agreement – that NexPower would supply up to half of the first 20 megawatts, and also that it would make up to 50 percent of panels for the entire project – but a company official has acknowledged that the deal is for the portion of equipment used throughout proposal’s life.

The agreement means that UMC has opportunities to profit from NexPower sales to Solargen and as a major investor, while Solargen’s financial documents did not reveal this relationship. Having a major stockholder with a significant financial interest in a critical supplier, though, at least has the potential for a conflict of interest.

Peterson believes that is not the case with this agreement.

“There’s no conflict at all,” he said. “That’s what you call partnership.”

Peterson stressed how the deal calls for Solargen using NexPower if “they meet the quality, bankability and price of the market.”

“We wanted to make sure we had an adequate supply if we need it,” he said.

UMC Group founded NexPower Technology Corp. and, according to UMC’s last annual Form 20-F SEC filing of December 31, 2009, UMC had ownership or voting rights to 46 percent of NexPower – worth about $103 million in U.S. dollars. UMC’s filing indicates that two of its key executives also are executives of NexPower. Stan Hung, director and the chairman of UMC, also is the chairman of NexPower, and Chitung Liu, chief financial officer of UMC, is a director of NexPower.

UMC Capital Corp. was listed as Solargen’s second-largest shareholder in December 2009, owning more than 3.4 million shares – which is 17.2-percent of the beneficially-owned stock. Beneficially-owned stock means it has been issued to an investor. Peterson on Monday, however, clarified that UMC Capital Corp. is now the largest beneficial shareholder.

According to the SEC filing, UMC Capital Corp. is wholly owned by UMC. Solargen’s 2009 Annual Report also states that UMC Capital’s holdings were 72.2 percent of Solargen’s Series A Preferred Stock. As recently as February 24, UMC Capital exercised an additional 480,000 Series A warrants shares at a price of $1 per share. Combined with previous reported holdings, this would top 3.9 million shares. 

A warrant is similar to an option, except the issuing company guarantees the price and duration. They give the holder the right to purchase securities at a specific price within a certain period, usually years. Warrants often are included in a new debt issue as incentives to investors.

Additionally, Solargen is expanding its potential offshore supplier base. An Oct. 5 news release from Anwell Technologies Limited, a Singapore corporation, announced that its wholly-owned subsidiary, Sungen International Limited, had signed a non-binding memorandum of understanding with Solargen Energy to supply amorphous silicon thin-film solar panels for Solargen’s large-scale solar farm projects. Sungen’s manufacturing base is located in Suzhou and Henan in China.

Peterson when interviewed Monday mentioned how UMC and an investor identified as China Trust were involved in the latest fundraising effort.

In any case, Taiwan and China companies could reap substantial economic benefits from the taxpayer funding expected for the Panoche Valley project. 

Editor Kollin Kosmicki contributed to this report.

To view the Solargen EIR, go here.

To view a previoius story on Solargen principals’ history in energy, go here.