North Coast Solar Stocks

September 11, 2009

China Sunergy Initiates Legal Proceedings Related to REC Supply Agreement

Filed under: CSUN — Tags: , , , , — Jason @ 7:30 am

Friday September 11, 2009, 7:30 am EDT

NANJING, China, Sept. 11 /PRNewswire-Asia/ — China Sunergy Co., Ltd. (CSUN), a specialized solar cell manufacturer based in Nanjing, China, announced today that it has initiated legal action with respect to bank guarantees related to its June 2008 supply agreement with REC, under which REC would start its performance from Jan 1, 2009 onwards.

In response to China Sunergy’s filing, the court in China has issued a ruling and served to the China representative office of Nordea Bank, and the related Chinese banks respectively, suspending the payment of an aggregate amount of USD50 million in bank guarantees.

Also, on September 11, the local court in Norway granted an injunction with respect to the payment with an aggregate amount of USD50 million in bank guarantees.

The court in China issued the ruling on the basis, among other things, that REC SITECH AS, the original beneficiary of the USD50 million bank guarantees, was legally dissolved in January, 2009, the starting period of its performance of the agreement. According to the guarantees as issued, the right to claim payment cannot be transferred, meaning no other entity, including REC Wafer, can call upon bank guarantees on behalf of REC SITECH AS.

Although the intended dissolution of REC SITECH AS was planned and approved prior to its signing of the supply agreement, REC SITECH AS neither officially notified China Sunergy of its intended dissolution nor sought China Sunergy’s prior written consent in the required manner as of today. Until very recently, REC continued to claim that REC Wafer Norway was a change of name of REC SITECH AS. To date, REC has not made any shipments of wafer to China Sunergy under the agreement.

China Sunergy initiated talks with REC in good faith in 2009, seeking a mutually agreeable solution to the challenging market situation and a strong and sustainable long-term partnership. The company made notable concessions to REC, including new product mix and higher purchasing volume. While both parties were negotiating the remaining few key terms of an amendment to the contract, REC suddenly and unilaterally terminated the agreement.

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