PV Crystalox Solar – Another liquidation play

Added a 9% portfolio weight to PVCS at 21.68p a share.

This is a solar manufacturer which has just won an arbitration case against a customer who refused to pay up.  This has been quite well covered in the Investors Chronicle and elsewhere so only a short post on this.

Their market cap is £34.7m.  The arbitration win is worth £30m, less the cost of 22.9m solar wafers the company is supposed to supply.  Looking at http://pvinsights.com/ the most that can cost is $0.80 a wafer, lowest $0.60.  This gives a net payment of £30-£13.6/£10.2.  This means a payment of £16.4 – £19.8m.

The award is supposedly binding – via the ICC.  I don’t think there is any appeals procedure.

As at the interims the company held €27.86m worth of cash – or £24.5m.

They also hold €7m of inventories, from the 2016 Annual report some of this is silicon wafer – held at estimated selling cost.  Depending on exact specifications I would imagine that could be used to settle the liability of 22.9m wafers the company is supposed to supply.

In addition they have €2.3m accounts receivable / prepaid expenses and a €2.9m payable.

If we net all this out we get to a further £5.6m.

So the valuation comes to £46.5m – £49.9 – less a bit (£2m?) for ongoing costs / wind up costs – so we are at £0.28 to £0.30p a share – or hopefully a 30% – 38% profit.

There might be more in this than that.  They have £70.5m worth of plant – written down to £1.7m in the 2016 accounts.  Is this really only worth that ? I suspect it could be worth more, but I dont have any real evidence of or for this.

There may be a marginally profitable business here – they made £1.3m EBIT in 2016.  I personally would prefer the business wound up.

The company has also lost £88m since 2011.  This may create tax loss carry forwards worth something to somebody.  I am not an expert in this area at all so it’s only a hypothesis.

Shareholders – Management own 27%, Funds 30%, others the rest so management are not overly dominant and may act rationally in respect of the capital.  The outcome of a strategic review is due shortly – hopefully this will act as a positive catalyst.

As ever comments are appreciated.




11 thoughts on “PV Crystalox Solar – Another liquidation play”

    1. I know but can’t tell you I’m afraid as I promised the guy who told me I would keep it quiet.

      Sorry I can’t be more helpful.

      They have enough cash on their BS to pay the award.

    1. Answer to this has disappeared…

      Management have a decent size stake, they know they can’t compete with the Chinese – why waste their own money. Shareholders allowing them to sink more money into a bottomless pit is a clearly bad idea. Much of the shareholder base wants money back.

      It is obviously a bit of a risk – and I have some concerns on this. These are solar guys so may want to continue…

  1. Hi Rob,

    I see that you have exited the position but I’ve been looking into this to try and workout a valuation and wanted to share.

    On possible UK shutdown costs not reported at the interims:

    UK facility = 50 employees.

    Knocking off 5 to account for management and the odd employee kept on = 45.

    Taking average tenure of 10 years, and an average age between 22 – 40 = entitlement to max redundancy pay of £14670 x 45 = €7.4m

    Cost of escaping leases:

    €2m?, based on reported UK lease commitments of £1.8m due over 5 years.

    I haven’t ascribed any value to UK plant and machinery, although as you mentioned there could be gains realised considering book cost is £33m relative to net BV of £962k.

    Balance sheet values:

    PPE @ 80% = 921.6 (could be a lot more if German plant undervalued)
    Cash = 27867
    Tr Rec = 1103
    Inv @ 80% = 5890
    Prep Exp @ 80% = 1008 (mostly polysilicon inventory)

    Total Asset Value €36790

    Total Liabilities (€2985)

    Arbitration award ~€34m (I think Neo Solar will pay)

    Est. UK shutdown cost (€9m)

    22.9m wafer supply €12180 (wafer spot price $0.75 x 22.9m = $16.7m = €13.5m. Cost price to PV at 10% margin = 13.5/1.10 = €12.18)

    Contingent tax asset (not included in valuation) €50m – UK tax asset €17.95 = €32m x 20% tax rate = €6.4m


    1. BV + Award – Shutdown cost = €54.805m = £48.8m/161.5 shares = 30p

    2. BV + Award – Shutdown cost – Supply of 22.9m Wafers = €42.625m = £38m/161.5 shares = 23p

    With possible further upside from asset gains.


    1. Hi Joe,
      Small problem with your figures.
      14670*45 isnt 7.4m.
      It is 660k
      Not that mine were better I didnt take into acccount shutdown cost nearly enough instead I took a wild guess.

      I also didnt exit the position I halved it.
      Not sure lease will need to be paid – could it be sold on instead ? Depends how conservative you want to be.

  2. Also you might want to take into account Europe operations.

    Will be interesting to see what happened – not my finest hour this one – live and learn.

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