Wacker taking long view on its $2.6 billion project in Bradley County

Chemical company to resume polysilicon production, continue expanding despite trade threats, fires and changing markets

Construction crews work on the $150 million expansion of the $2.5 billion Wacker Chemical plant in Charleston, Tenn., where an explosion last September forced the company to idle production for nearly eight months.

CHARLESTON, Tenn. - The German-based chemical business making one of the biggest private investments ever in Tennessee is taking the long view on its $2.6 billion project in Charleston, Tenn.

Since announcing its plans to build a polysilicon production plant in northern Bradley County a decade ago, Wacker Chemical has faced trade barriers, shifting markets and, most recently, a piston failure that ignited a plant fire and shut down production for nearly eight months.

Although Wacker slowed down its initial construction plan when tariffs weakened one of its prime markets, the company ultimately decided to keep and even expand its chemical plant here, making a key element in solar panels and semi-conductors. By next year, the company will also make pyrogenic silica, an agent used in such products as toothpaste, cosmetics and paint.

"Dr. (Peter-Alexander) Wacker and other officials have told us they like to think in 100-year horizons and they made a very determined, long-term analysis and decided they were here to stay," said Doug Berry, vice president of economic development for the Cleveland/Bradley County Chamber of Commerce who has worked with Wacker since 2009. "I think it is a fundamental difference in the longer-term view taken by more closely held corporations that still have more family interests involved like we see in more European companies compared with the more short-term Wall Street-driven decision making in much of America."

In contrast to Wacker, one of America's biggest polysilion makers, Hemlock decided in 2013 to abandon a $343 million plant built in Clarksville, Tenn., after the United States and China were unable to resolve trade differences over solar panels and their incredients. When China imposed a 57 percent tariff on U.S. polysilicon, Hemlock laid off roughly 500 workers before any product had even been produced.

In response to the Chinese tariffs, President Trump announced in January a 30 percent import tariff would be assessed on all imported cells and modules in 2018, with the tariff declining to 25 percent in 2019, 20 percent in 2020, and 15 percent in 2021.

The escalating trade war over solar panels presents a major challenge for the new Wacker plant here since the facility targeted China as one of its main markets to sell its polysilicon to where most solar panels are produced in China and other Asian countries. But even with the tariffs in place, Wacker moved ahead with its U.S. plant, the first ever outside of Germany for Wacker.

Wacker did recently win a victory in the U.S. Trade Court, which recognized unanimously that the requested tariffs on the silicon metal from which Wacker makes its polysilicon here were without merit.

Wacker is resuming production here this spring of its ultra-refined and pure polysilicon here after a spending months rebuilding equipment and part of the plant that was damaged last September when a fire knocked out a key part of the production process, hydrogen recovery system where gas is recirculated. The explosion at the site shook the Bradley County community, led to several hospitalizations and temporarily shut down some area schools and roads.

Although there was ultimately no major risk to the general public from the incident, a state investigation of the Wacker fire found five serious violations and two "other-than-serious" violations ranging from failing to properly train employees to not following generally accepted good engineering practices. In full-page newspaper ads, Wacker apologized "for any confusion or anxiety the incident at our Wacker-Charleston plant may have caused."

Even with production idled, Wacker opted to keep its 650 employees here on staff, using them to help make repairs and to sharpen their production training and skills.

Mary Beth Hudson, a chemist and engineer who has been with Wacker for 20 years and now heads the Charleston plant, said the company "has become stronger and better" after the fire and "the global Wacker organization has demonstrated tremendous support of the Charleston site."

Within its closed loop system that recycles and reuses most of its materials at the sprawling Charleston facility, "every part of the plant is dependent upon another part of the plant," Hudson said.

"It was not the heart of the plant, but it was kind of like the lungs," she said of the location where the explosion occurred. "Like in the human body, without being able to breathe, you can't really function."

The original construction of Wacker's Charleston plant took about two and a half years "so rebuilding that part of the plant in months is, in some instances, really amazing to get to where we are today," Hudson said.

In a recent conference call with analysts, Wacker Chemie CEO Rudof Staudigl said Wacker has continued strong production of polysilicon in Germany and will resume product generation this spring in the U.S. at the Charleston plant.

"Many competitors chose to curtail production and went into maintenance mode. Our German operations ran at full capacity with a good costs performance during the quarter," he said.

Wacker Chief Financial Officer Tobias Ohler said the company expects polysilicon sales will be similar to last year despite the production slowdown this winter and the company expects to recover its losses from the Charleston fire and shutdown from its insurance, which has already paid 100 million euros, or nearly $117 million in U.S. dollars.

"Our insurance should compensate us fully for the Charleston incident," Ohler said.

"Overall we expect to ship this year about as much as last year," he added. "We see sales in polysilicon being down by high single-digit percentage, EBITDA (earnings before interest, taxes and depreciation allowances) should come in above 2017."

Silicon is the second most abundant product in the country. Suppliers to Wacker take quartz and produce metallurgical grade silicon, which is roughly 97 to 98 percent pure. At the Charleston plant, Wacker purifies that to ultra-high purity level necessary for the product to be used in semiconductors and solar panels. Wacker's process results in a ultra-high purity polysilicon product with imperfections measured in parts per trillion.

Last year, the $2.5 billion plant began adding a $150 million expansion last summer to turn a byproduct of its polysilicon production into pyrogenic silica for use in a variety of over-the-counter products.

"We remain committed to our employees and this community," Hudson said.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.