Taiwanese solar cell makers Neo Solar Power Energy Corp (新日光能源), Gintech Energy Corp (昱晶能源) and Solartech Energy Corp (昇陽光電) yesterday inked a letter of intent to merge via a share swap in an bid to compete with global rivals.

The resultant entity would be the world’s second-largest solar company in terms of installed capacity, the companies said.

The firms plan to sign a trilateral merger agreement in late December and aim to complete the transaction in the third quarter of next year, they said in a joint statement.

“The nation’s solar power industry has been struggling for years. We believe the merger will create a competitive business model,” Neo Solar chairman Sam Hong (洪傳獻) told a news conference at the Taiwan Stock Exchange.

By melding each company’s capabilities, the new firm is to offer vertical integration services from solar cell and module manufacturing, to photovoltaic systems assembly, Hong said.

The new entity would also have a more competitive cost structure, given its larger scale, he said.

The new company would have a total installed capacity of 5 gigawatts (GW) of solar cells — about 10 percent of the global market based on the projected worldwide installed capacity of 500GW this year, Hong said.

The companies also plan to expand their combined annual production capacity of solar modules to more than 3GW two to three years after the merger, compared with their current 1GW, Hong said.

The firms also aim to sell 1GW of photovoltaic systems annually within five years, he said.

Based on the letter of intent, Gintech shareholders will be able to swap each of their shares for 1.39 common shares of Neo Solar, while Solartech shares can be swapped for 1.17 Neo Solar shares, the companies said.

After Gintech and Solartech are absorbed into Neo Solar, the company is to be renamed United Renewable Energy Co (UREC, 聯合再生能源), the statement said, adding that Hong is to be the chairman and Gintech president Pan Wen-whe (潘文輝) is to serve as chief executive officer.

The deal was granted the government’s verbal support ahead of the announcement, as it is in line with the administration’s policy of developing the nation’s renewable energy industry and increasing the contribution of “green” power to the nation’s energy grid to 20 percent by 2025, Hong said.

The firms are to soon apply for capital injections from the National Development Fund and government affiliate Yao Hua Glass Co (耀華玻璃), Hong said.

It is too early to say how much UREC will receive from the government and whether it would hold a seat on the company’s board, Hong said.

The National Development Council said it has not yet received the application, but added that it supports the consolidation of solar firms to increase production capacity and competitiveness.

In a separate announcement, Neo Solar yesterday said it is to acquire 46.1 million shares, or 24.11 percent, of General Energy Solutions Inc (永旺能源) for NT$20.7 per common share in the open market from today to Nov. 6.

The company is making the move in a bid to increase its ownership in General Energy from 75.89 percent to 100 percent.

“We believe we can provide better renewable energy solutions via Neo Solar’s manufacturing strength and General Energy’s power plant building and managing capabilities,” Neo Solar said in a news release.