Sovello , which was initially known as everQ, was launched as a joint venture in 2004, with Germany’s Q-Cells holding a 24.9% stake and US-based Evergreen Solar holding 75.1%.

A year later both firms lowered their stakes to allow Norway’s Renewable Energy Corporation (REC) to buy a 15% slice.

In June 2006 the EU granted Sovello a bonus intended for small and medium enterprises (SMEs) to build its first production line for polysilicon wafers, cells and modules near Q-Cells’ headquarters in Thalheim, Saxony-Anhalt. The line utilises Evergreen’s String-Ribbon wafer-cutting technology.

In September 2006, shortly after the funds had been awarded, Sovello once again reshuffled its ownership to give all three partners an equal 33.3% share.

Although red flags were raised at the time, the EC did not begin an investigation into the matter until Sovello applied for another €35m round of state funding to build a second production facility in 2008, which the EU granted in June 2009.

The EC has now decided that the money was granted in error, having “uncovered indications that Sovello’s corporate architecture had been artificially designed to meet the criteria of the SME definition”.

The EC says in 2006 Sovello’s owners conspired to keep Q-Cells’ ownership level below the 25% threshold required to classify Sovello as an SME, despite the fact that Q-Cells’ influence within the enterprise was “considerably higher than what corresponds normally to a share of 25%”.

The EC has concluded that Sovello, by dint of its connections with its larger parent companies, did not need the SME bonus in order to move forward with its construction plans.

Calling the EC’s decision “difficult to understand”, a Sovello spokesman says the company has not yet decided whether to appeal the ruling.

Since reporting white-hot growth through the first half of 2008, Sovello, which has more than 1,000 employees, has seen its fortunes reverse. The company’s heavy losses through 2009 were fingered by REC as the principal reason for its write-down of NKr 672m ($113.7m) in the third quarter of last year.