Greenfield Metallurgical Silicon Manufacturing

Transcription

1 Greenfield Metallurgical Silicon Manufacturing Understanding the basics of greenfield silicon projects Dipl. Eng. Lou Parous Executive Director Dipl. Eng. Lou Parous Executive Director phone mobile Register Office: Freiburg - Commercial Register No. HRB Managing Director: Louis C. Parous III, Dr. Wolfgang Herbst

2 Brief Introduction Corporate Focus Silicon and Ferroalloy Manufacturing Solar Manufacturing Recycling Technology PV Systems 2

3 Engineering & technical support Services Contract technical services for projects on all parts of the PV value chain from silicon metallurgy to PV modules Technical and engineering knowhow available to Project Owner Eye level technical powerhouse with experience in international projects Multi discipline and cross industry technical resource In house engineers, chemists & physicists lead projects in all technical aspects through planning & execution phase Engineering services Operations and Knowhow Independent technology audits Equipment and materials Project Management Process Optimization Owner and Lender Engineers Operator perspective with focus on lean manufacturing & value creation 3

4 Experience Project Experience across ~ 20 countries Canada USA Iceland Russia China PEA/Engineering for Ferrosilicon plant for PV systems installations, and operations support for Silicon Solar Cell and Module Manufacturing audit for Silicon Cuba Germany Korea studies for PV manufacturing Venezuela studies for PV manufacturing Chile support for PV manufacturing Algeria studies for Silicon and PV manufacturing Greece Studies for PV manufacturing UAE support for Silicon Technical Support for Silicon Malaysia Operations Support for Silicon studies for Solar Systems Trindidad studies for Silicon and PV manufacturing Brasil studies for Silicon and PV manufacturing KSA Studies and support for Silicon and PV manufacturing Oman Studies and planning for Ferrochrome 4

5 Sectors and Drivers End Markets for mgsilicon Metallurgical Silicon is used in a diverse number of industries. As a key feedstock, it is consumed in the process of making other industrial end products or consumer goods. Chemicals Silicones for plastics, paints,medical applications, cookware, and insulation Silicon is consumed in the chemical process and derivitives of silicon are further processed Wells established industry that is expanding in the emerging markets as consumer goods consumption rises Approx 2 kgs of silicon are needed for 1 kg of Silicones Aluminium Used as an alloying element to alumium for improved properties Used in both primary and secondard alumium industry Increasing use of alumimum silicon alloys is pushing higher demand of silicon Typically up to 12% silicon is used in cast aluminum alloys. Electronics and Photovoltaics Key raw material for production of polysilicon Consumed in process 1.2 to 1.4 kgs are needed for 1 kg of polysilicon Large cost componant of polysilicon production High consistancy in quality requirements 5

6 mgsilicon Greenfield Growth Do all these projects have strong fundamentals? ThorSil United Silicon Saudi Silicon SIMA PCC Islandic Silicon FerroAtlantica Oman Mississippi Silicon China Trinidad New Silicon Plants (planned or being studied) 6

7 CAPEX Operations Power Carbon Critical Impacts Examples of key factors for new entrants Carbon management and security is fundamental due to the impact this raw material has on the cost and quality of the project. Limited suppliers of low ash coal and the volatility of this commodity can introduce significant risk to the project. Long term power contracts designed for silicon operations are required. Understanding the operations boundary conditions of a particular site or country is crucial to design the correct contractual conditions that will not impede future operations or affect costs A team of operations experts is needed in all project phases to foresee risks, support engineering and planning, prepare mitigation strategies, design processes and transfer knowhow to project owner operators. Lack of experienced operations personnel is largest risk to new projects. Over-engineering, over-buying and excessive focus on turnkey offers can impede financial performance of the project for many years. Equally, purchasing substandard equipment can result in permanent operational problems for the life of the project and reduce overall project value as well as operational margins. 7

8 Production Costs What are the drivers Electricity, depreciation (capex) and raw materials make up the bulk of cost (~80%) Coal is largest raw material cost and represents a strategic risk which can be mitigated by vertical integration to coal mining or charcoal production Electricity prices have to be advantageous for long term periods. Long term incentivized power structure is needed to offset depreciation and provide long term fixed cost Hypothetical Silicon Smelter early years, all in costs Smart design and informed procurement can avoid over engineering while minimizing project and capital risks. Turn key offers are not always the best option and can bring legacy costs. Experienced start up operations teams reduce learning curves and assist in factory planning, engineering and process design to mitigate over design and higher than needed CAPEX; as well reduce electricity demand by improving KWh/ton ratios and electrode and reductant consumption 8

9 Carbon Source A strategic issue Aside from electricity, Carbon is the 2 nd highest cost factor for mgsi producers but as same impact on financials as Quartz Most greenfield plants depend on less than 5 carbon suppliers Carbon source is not the same as carbon suppliers as coal for Silicon is washed limited facilities for washed coal Experienced mgsi producers have developed their own carbon sources and sell to their competitors, effectively influencing the competition cost structure 9

10 Carbon Impact How carbon prices affect ASPs for Silicon source: viridis.iq, Kevin Fowkes (Alloy Consult) 10

11 Electricity prices Energy is not the make or break it used to be but still critical Power costs can heavily influence profitability Many new projects underestimate the complexity of power costs on their operations Long term (10-15 years) power prices are crucial to new projects Long term fixed power prices are required. Serious projects commit to power contracts early in project development Local power environment must be considered in power contracts Interruptions, flex tariffs, peak hours, etc. need to be understood from the operations perspective Power is not always the only driving force on OPEX (see graph) Some high power regions have lower OPEX mitigating factors off set OPEX 11

12 CAPEX High capital costs Impact on early project life Chinese versus Western equipment Turn Key versus Project Integration Warning Over engineering can cost you in operational cost as much as Under engineering Don t assume highest cost means highest quality proper design is the critical issue Equipment suppliers tend to promote financing as a way to lure customers then the trap occurs with upgrades and other tactics Guarantees - a double edged sword that limits the input of the project owner 12

13 CAPEX Reduction Enticements and Incentives Malaysia Import duty, sales, and excise tax exemptions Pioneer Status 5 year tax holiday Losses can be carried forward past holiday period Investment Tax Allowance 60% of qualifying capital expenses counted as an allowance to reduce taxable income 5 year period Favorable land rates Favorable energy rates (~$0.40/kwH) Saudi Arabia Low cost energy (~$0.020/kwH) Free land No income tax 51% Saudi ownership required Interest free SIDF loans for up to 50% of the fixed assets, pre-operating expenses and start-up working capital. Loans are provided for a maximum term of 15 years with the repayment schedule designed to match the projected cash flow of the borrowing projects. 25% minimum equity for project owner Iceland Duty free imports for materials VAT deferral Partial depreciation allowed Direct Cash grants allowed in some cases Favorable land leases below market prices Fixed ceiling on the rate of income tax for 10 years (i.e.2% reduction) Security clauses in terms of new taxation Stamp duties and municipal property tax reduced 50% reduction on general social security charges Training budget from state UAE Industrial free zone (no import taxes or duties) Industrial port No income tax Discounted energy price (~$0.040/kwH) Discounted water price (~$0.003/gallon) Provision of high-quality infrastructure and services including power, water and sewage, gas, waste disposal and telecommunications. 13

14 Level of Technical and Operations Experience in the Project Team Operations Experience Critical risks to new projects Current trends for greenfield expansion in Silicon Tier 1 or Tier 2 producers which have in house expertise and manpower New entrants which depend on technology providers and one-man consultants Technology providers do not operate silicon factories! Result is that new silicon projects will not all be on the same footing in regards to quality, consistency, project timing, profitability, flexibility and technical acuity New entrant Greenfield projects need multidisciplined teams of silicon operations experts to support project owners Tier 1,2 projects New entrants Level of Project Risk.to provide a counterbalance to technology provider, and.to ensure smooth project start up and product quality targets,.as well as increase the flexibility of the factory to meet new market demands for the PV, Aluminum and Chemical sectors 14

15 What is important? Where most projects go wrong Typical Myths of project sponsors Important Ranking of critical project aspects Myth: we can do it with a small team and a couple of one man show consultants Needed Critical Strong Project Sponsor Dependable and Trainable Labor force Reliable Equipment Experienced Operations & Knowhow Transfer Solid Off Takers Experienced LOCAL EPC Long Term Finance Incentivized Power Costs Location & Access to Market Focused PM Integration team Strong regional market Raw Materials Fact: No, you cant. You must have a project management team in the early stages that has direct experience in both equipment and operations. This can normally only be done with significant outside help. Myth: we don t need any help until after we sign the EPC and Equipment contract Fact: These contracts can have long lasting implications on the profitability of the project many years after the equipment supplier has left the site. If you wait to get operations experience until after these contracts are signed, you have made a mistake before you even start Myth:...we are buying a turn key package so we don t have to worry because we have guarantees Fact: The guarantees are related to specific performance metrics that can be measured and evaluated over a short time. These have nothing to do with the long term viability of the factory. Others Myths: we can sell this project to a Tier 1 operator the equipment supplier knows best we can worry about operations later we have the best raw materials our off takers want more than we can produce 15

16 Thank you Contact details: Dipl. Eng. Lou Parous Executive Director phone mobile Register Office: Freiburg - Commercial Register No. HRB Managing Director: Louis C. Parous III, Dr. Wolfgang Herbst