Solar struggles don’t deter supplier for San Antonio mega-project

By Nolan Hicks and Neal Morton

SAN ANTONIO — The chairman of Nexolon Co. Ltd., owner of a key supplier in CPS Energy’s massive solar power project, rejected questions Monday about the financial stability of his company and reiterated his commitment to the project.

However, Chairman Woo Jeong Lee acknowledged that the ongoing downturn in the solar industry, triggered by an oversupply of solar components, has taken a toll on his company’s finances.

“We have been performing (in) this harsh industry situation better than others — not the best — but better than most of others,” Lee said in a meeting with the Express-News Editorial Board.

He also serves as president of Nexolon America LLC, a U.S. subsidiary of South Korea-based Nexolon Co. that is expected to build a solar panel manufacturing facility at Brooks City-Base. The plant is part of a deal reached between CPS and San Antonio-based OCI Solar Power in July to build five solar power plants that will produce a combined 400 megawatts of power.

Due largely to a collapse in solar-panel prices, Nexolon Co. saw its revenues from 32 percent in the second quarter of 2012 to $100.7 million, from $148.6 million in the same period the year before. At the same time, its $6.4 million profit in the quarter turned into $25 million loss by June 30.

Read more: Silicon glut costly for CPS partners

That showing, combined with a heavy debt load and less than $20 million in cash and cash equivalents on hand of June 30, have prompted questions about Nexolon’s capacity to build a plant here.

But Lee said the company’s looking to shore up its balance sheet, though he didn’t outline specific steps.

“We believe that we will improve that situation over the next (few) years,” Lee said. “I believe strongly and quite confidently we will be able to manage our finance structure.”

Tullos Wells, an attorney for Nexolon in San Antonio, waved off Nexolon’s recent losses as a cause for concern.

“Everybody in this business worldwide who is a player — and we’re a player, you know — had losses,” Wells said. “The notion that, ‘Oh, my God, we lost $60 million. We’re going to be on the street tomorrow’ — we don’t know where that came from. That doesn’t make any sense based on where this industry is and who we are and the people we’re in business with.”

Lee, meanwhile, said an end to the global market turmoil could be in sight. A turnaround would depend on two conditions. The solar industry’s recovery, and thus Nexolon’s, would require a significant reduction in solar panel production — which Lee said is occurring through consolidation — and demand would have to continuing its upswing.

The Nexolon chairman also said the company has set aside most of the capital it would need to build the plant at Brooks City-Base, a decommissioned Air Force base on the Southeast Side that’s being redeveloped. But Lee declined to provide further details about financing for the facility.

He also said the agreement between Nexolon and OCI Solar, as well as OCI Solar’s deal with CPS, protect taxpayers and ratepayers from risk if the deal does not pan out.

However, CPS, Nexolon America and OCI Solar have refused to talk about the contract in detail, citing confidentiality clauses.

“The city of San Antonio really (can) appreciate the company CPS and their leadership because they put (a) really, really nice, complicated and strong contract on us (and) our consortium,” Lee said. “That means you guys are never going to lose anything.”

In a February 2012 presentation at a JPMorgan Chase investors conference, Nexolon described the CPS deal as a key part of its effort to overcome tough times. Lee reframed the pitch Monday, describing the San Antonio plant as a beachhead for a much larger push into North and South Americas — reaching beyond the CPS pact.

Under the terms of the agreement, San Antonio-based OCI Solar and its consortium of suppliers are required to make a capital investment here of least a $100 million and to create at least 800 good paying jobs. Nexolon’s plant is expected to account for about half of the required job creation.

Read more: Solar power can help the Texas grid meet power needs

The deal between CPS and OCI Solar — the main contractor, owned by South Korea-based OCI Co. Ltd. — only required the investment and job creation to take place in the CPS service area, which includes all of Bexar County and portions of the six surrounding counties.

To encourage Nexolon to house the plan at Brooks, the city and Brooks Development Authority offered the company a package of economic incentives, including tax abatements, San Antonio Water System fee waivers and — most controversially — a 10-year lease on 86 acres of land at Brooks worth $17 million for $5 million. Additionally, the company would have the option to purchase the land at no extra cost during that 10-year period.

BDA’s city-appointed board of directors is expected to vote this week on the land deal after delaying the vote last week, citing ongoing negotiations between the authority and Nexolon.

The land deal has drawn the ire of City Council’s more conservative members, who believe that offering the Brooks property at a steep discount is too risky. News last week of Nexolon Co.’s financial troubles spurred additional criticism.

“I hope everything works out. However, you also need to look at all the possibilities,” said District 9 Councilwoman Elisa Chan, chair of the council’s Economic and Community Development Committee.

“If they can’t survive, they can’t survive. If they do go under, they own the land and can do whatever they want with the land,” she said. “We have nothing in our agreement with Nexolon that if you go under, we take the land back.”

But Nexolon’s executives and lawyers said the company’s contract with OCI Solar includes provisions that if Nexolon’s project turned sour, it would face multimillion-dollar penalties.

However, Lee declined to offer specifics and said he hoped that critics would draw confidence from his company’s commitment to the area.

“We don’t start our new business just (for) four to ten years,” he said. “We always think (that) we’ll stay here permanently, for good. We’re going to invest more and more, and have more people here.”