The Renewable Energy Corporation (REC) has officially announced the permanent closure of three of its photovoltaic production plants in Norway. The company has also reported negative third quarter (Q3) financial results.
Following the announcement in May that it would temporarily shut down operations at its three oldest production plants, the Norwegian photovoltaic manufacturer has now taken the decision to permanently close them. It adds that further plant closures in the country "cannot be disregarded".
The plants in question are REC’s 500 megawatt (MW) wafer facility in Herøya, its 275 MW wafer multi plant in Glomfjord and its 180 MW solar cell plant in Narvik. As previously announced, around 700 employees will be affected by the decision.
Overall, REC estimates that the total cost of closing down the facilities will be NOK 400 million (around USD$72.6 million; €52 million). Furthermore, it expects that termination fees for wafer contracts will be in excess of NOK 600 million in Q3 and Q4. The remaining sales contracts, it says, will either be terminated against contract or honored.
Weak financial performance
In terms of the company’s Q3 financial performance, it pulled in revenues of NOK 3,001 million, which is 12 percent less than Q2 2011, and a stark contrast from the NOK 4,874 million seen in Q4 2010. Meanwhile, its EBITDA took a serious knock, from NOK 871 million in Q2 to NOK 370 million in Q3.
There was a "sharp" decline in REC’s volumes and sales prices from Q2 2011 to Q3. The company’s polysilicon sales volume and average selling price (ASP), for instance, fell eight percent. In terms of its revenues, they also fell, this time by 14 percent from NOK1,615 million in Q2 to NOK 1,388 million in Q3, while its EBITDA dropped 21 percent.
Meanwhile, its wafer sales volume sequentially decreased by 39 percent and ASP by 17 percent. Revenues were also hit hard, falling 44 percent from NOK 343 million in Q2 to NOK 205 million in Q3. The company says that operational performance is slowly improving, but that costs "need to come down fast".
The sales volume for its photovoltaic modules remained the same at 181 MW, however the ASP fell by 13 percent.
While REC says that solar is becoming a competitive source of energy, and that it is approaching the cost of retail prices, supply will still continue to outgrow demand in 2012. It believes, as do many others, that the industry will go through a period of shakeout and consolidation. Overall, it states that the "challenging" market is likely to last for between one and two years.
Going forward, REC says that it will focus on the increased sale of solar grade polysilicon to the spot market. The planned capacity expansion at REC Silicon has, however, been put on hold due to the turbulent market conditions.
In terms of REC Singapore, the company is confident that its photovoltaic module manufacturing facility is operating competitively, and that there is further potential for cost reductions through technological development and improved sourcing of materials and operations. Overall, it says that production volume there went up nine percent.
In terms of its production targets, REC expects to produce around 4,600 MT of polysilicon in Q4 (Q3: 4,557 MT) and around 18,500 MT for the full year 2011; around 200 MW of multi and mono wafers in Q4 (Q3: 205 MW) and around 1,100 MW for the full year; and around 175 MW of modules (Q3: 181 MW) and around 710 MW for the full year.
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