The proposed deal would have seen LG Electronics and Conergy form a joint-venture solar energy company with LG taking a 75 percent stake in Conergy's new solar module production line in Frankfurt. The venture was due to start operations before the end of this year.

The two companies have only been talking for two months but LG said "current worldwide economic uncertainty and changes in strategic direction" have triggered its change in heart.

LG said it is still open to working with Conergy, which has a distribution network across 20 countries, but didn't specify in what context the two might cooperate.

LG Electronics, one of South Korea's largest electronics companies, is aggressively expanding into the solar energy field and last month announced plans to invest 220 billion won (US$167 million) to replace an aging PDP (plasma display panel) production line with the two solar production lines. Both new lines will be able to produce 120 megawatts worth of solar modules per year. The first is expected to begin operation in the first quarter of 2010 and the second a year later in the first quarter of 2011.