Fiscal year 2023 was a very challenging one for Meyer Burger Technology. In the first half of the year, Meyer Burger confirmed its position as a leading premium solar manufacturer and production capacity in Germany was expanded as planned. However, as the year progressed, it became clear that dumping prices from Chinese suppliers in Europe, coupled with a sharp rise in Chinese production overcapacity and a lack of market protection, led to unprecedented distortions in the European solar market, which had a serious impact on Meyer Burger’s earnings.

While the first half of the year showed good growth with sales of CHF 96.9 million, sales in the second half of the year fell to CHF 38.1 million. Total sales in the financial year therefore amounted to CHF 135.0 million. Despite the decline in sales, the volume of solar modules produced increased to 650 megawatts, while module inventories rose significantly to around 365 megawatts. The operating result was adversely affected by the underutilization of production capacity in Germany and impairment losses on production materials and finished products, as well as costs for operating of the production facilities in Germany and the further expansion in the USA in 2023. Inventories increased to CHF 130.8 million due to solar modules and cells produced but not sold, especially in the second half of 2023. These inventories had to be written down for accounting purposes, resulting in an impairment of CHF 51.7 million. In total, this led to in a negative EBITDA of CHF 163.6 million. Excluding these impairments, the negative EBITDA would have been CHF 111.9 million. EBIT totaled CHF –250.2 million and was negatively impacted by unscheduled depreciation of CHF 56.8 million on property, plant and equipment and intangible assets following an impairment test due to another special effect. Together with a negative financial result (CHF 42.6 million), this triggered a loss for the period of CHF 291.9 million (CHF 183.4 million excluding the one-off effects from the additional inventory write-downs and the unscheduled depreciation on property, plant and equipment, and intangible assets). Meyer Burger’s restricted and unrestricted cash and cash equivalents amounted to CHF 181.0 million as at 31 December 2023 and CHF 113.3 million as at 29 February 2024.

Focus on US production

In order to proactively respond to the negative market constellations in Europe, which are dependent on political decisions, Meyer Burger took strategic steps back in the summer of 2023 and announced that it would shift its business focus to the USA. As part of this strategic adjustment, it has decided to build its own solar cell factory in Colorado Springs, Colorado, in addition to the module production facility at the plant in Goodyear, Arizona, which was announced back in 2021. The US solar market is highly attractive. The market conditions there allow the solar industry to flourish, benefiting from a stable cost base, fixed offtake agreements and excellent price levels. Government support programs such as the Inflation Reduction Act (IRA) also contribute to the market potential on offer.

As the business climate in Europe continued to deteriorate, Meyer Burger decided in February 2024 to focus on production and profitable growth in the USA and to start preparations for the closure of its Freiberg site in Germany, which would take effect at the end of April. In the meantime, the Group halted module production at the site in the first half of March, which is expected to result in significant cost savings from April onward. Solar cell production in Thalheim (Bitterfeld-Wolfen), Germany, will continue for the time being to support the ramp-up of module production in the USA. The engineering and R&D sites in Switzerland and Germany are not affected by these measures and will continue to contribute to the business outside Europe with their technological developments.

Financing on multiple levels

In order to finance and secure the promising activities in the USA. - namely the completion of the solar cell production in Colorado Springs, Colorado, and the solar module production in Goodyear, Arizona, with an annual production capacity of 2 gigawatts each - Meyer Burger is pursuing a multi-layered financing strategy. The implementation of this strategy is expected to close the current funding gap of around CHF 450 million, which has arisen in particular due to the underutilization of production capacities in Germany, the build-up of inventories in connection with the sharp fall in prices for solar modules on the market, combined with (Chinese) overcapacities, and the previously announced costs of the further expansion in the USA.

Firstly, Meyer Burger’s Board of Directors is proposing a capital increase of CHF 200 to 250 million, which will be voted on by shareholders at an Extraordinary General Meeting on 18 March. This capital increase shall enable our shareholders to invest in the attractive US business, where Meyer Burger has a unique offering backed by long-term offtake commitments and strong growth potential.

In parallel, and following a detailed due diligence process, the federal government of Germany has approved an export agency credit guarantee for financing to be provided by a commercial bank with a targeted amount of up to USD 95 million. Funding is expected to be provided in the second quarter of 2024 following the entry into long-form credit documentation and the satisfaction of certain conditions. Meyer Burger is also targeting advanced manufacturing production tax credit financing (known as 45X) in the amount of up to USD 300 million, with a term of five to six years, to be provided by a leading global investment bank from the end of the second quarter of 2024, subject to due diligence and entering into the requisite binding agreements. Meyer Burger believes the 45X financing is feasible based on the partial monetization of an estimated USD 1.4 billion in future tax credits.

Finally, we are seeking a USD 200 to 250 million loan from the Federal Financing Bank under the Title 17 Clean Energy Financing Program, guaranteed by the US Department of Energy (DOE).

Following the successful completion of Part I of the DOE process, the Group was formally invited in February 2024 to submit Part II of an application for such a loan. The DOE’s invitation to submit a Part II application is not an assurance that it will invite the applicant into the due diligence and term sheet negotiations process, that it will offer a term sheet to the applicant, or that the terms and conditions of any such term sheet will be consistent with the terms proposed by the applicant. These matters are wholly dependent on the results of the DOE’s review and evaluation of the Part II application and the DOE’s decision on whether to proceed.

Not all of these measures, if obtained, would have to be fully utilized to close the current funding gap. However, the various options can provide Meyer Burger with a safety net for achieving the desired liquidity. The capital increase is an essential building block, ensuring additional liquidity, to finance Meyer Burgers’s future operations.

EBITDA potential of CHF 250 million per year

The long-term prospects for Meyer Burger as the only Western supplier of high-efficiency heterojunction technology remain attractive; the potential in the USA alone is considerable thanks to existing offtake agreements. Assuming that cell and module production at the US sites can be ramped up as planned, the Group expects to generate an annual EBITDA of around CHF 250 million per year in the medium term from its business in the USA.

This is because Meyer Burger’s heterojunction SmartWire technology remains extremely powerful, our products are characterized by a high energy yield, durability and reliability, and our promising technology roadmap is intact. We are therefore convinced that, under fair market conditions, Meyer Burger is competitive and will achieve sustainable profitability with its US sites. This underlines the attractiveness of the company.

Outlook

Meyer Burger expects that the proceeds from the potential financing sources, together with those from the rights issue, will enable it to commence module production in Goodyear, Arizona by the end of the second quarter of 2024 and cell production in Colorado Springs, Colorado toward the end of 2024. This would provide the basis for returning to commercial success and creating shareholder value.

In parallel, Meyer Burger is continuing to pursue potential strategic partnerships with companies that could provide funding assistance, support industrialization, and drive revenue through customer access, possible exposure to new geographical areas and/or technology licensing. These potential partnership business models could help drive higher long-term growth and reduce capital intensity.

Letter to Shareholders
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