SunEdison Inc. (SUNE), the best-performing U.S. solar company this year, is in talks with a Chinese company about investing as much as $2 billion to build a polysilicon factory in China.

The plant will have “the lowest cost” in the industry if it’s in China, SunEdison President Ahmad Chatila said yesterday in an interview in Beijing. The cash cost for making the commodity used in solar panels will be less than $6 a kilogram, about $2 below the next lowest competitor, he said.

The decision is the latest sign of recovery in the solar industry after a capacity glut depressed prices and margins for manufacturers worldwide. GCL-Poly Energy Holdings Ltd. (3800) of China andWacker Chemie AG (WCH) in Germany, two of the biggest makers of polysilicon, are expanding production of the commodity that sells for $20.96 a kilogram.

The plant will have a capacity of about 20,000 to 30,000 metric tons a year with ultra-fluid-bed-reactor technology, Chatila said. SunEdison, based in St. Peters, Missouri, currently has polysilicon capacity of 17,000 tons and is also considering a plant in Saudi Arabia, Chatila said.

The company also signed an agreement yesterday with JIC Capital, the fund management unit of China Jianyin Investment Ltd., to set up a new energy fund with a total investment of $220 million. The fund will invest to build about 1 gigawatt of solar power plants in China over three years.

“Initially, we’ll start utility-scale,” and projects may include rooftop solar projects in the future, Chatila said.

More Than Manufacturing

SunEdison intends to broaden itself beyond manufacturing into building and operating power plants, Chatila said. SunEdison, he said, will “bring a great reputation for a great project that makes money for investors all the time” and “use the most advanced technique to reduce costs more than any other people.”

“China will build the most power infrastructure in the next 20 years,” Chatila said. “What’s limiting companies like us in getting into China is getting project financing, and now that’s available.”

Last month, the company filed forms that may allow it to establish a yieldco alongside its existingTerraForm Power Inc. (TERP) That entity would pay dividends from revenue coming from operating power plants.

The move would offer SunEdison exposure to assets in Asia and Africa for the first time, adding to yieldcos now operating in the U.S. and Europe.

In June, the company said it will jointly develop 1.7 gigawatts of solar power projects in China with Chinese solar wafer manufacturer Huantai Group over the next five years. Construction may not start this year, Chatila said.