REC to separate silicon, solar divisions

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Norway’s Renewable Energy Corporation (REC) on Thursday announced a plan to separate its REC Silicon and REC Solar businesses.

While the group’s current headquarters are located in Sandvika, Norway, corporate operations for the two newly independent companies will be transferred to new head offices in Singapore for the solar business and the U.S. for the silicon division.

The group has been consistently decreasing its presence in Norway since last year while re-focusing its operations overseas.

REC will establish REC Solar and REC Silicon as independent listed companies. The group said the move would improve the financing of both companies, with REC Solar established as a debt-free leading provider of solar panels and solutions. The REC parent said it would ensure the companies would have a strong financial base that would provide "a competitive advantage and a solid fundament for both companies going forward."

Ole Enger, REC president and CEO, said: "With these new entities, we are able to launch two independent and strong companies in an industry which is rapidly maturing."

Enger said the current senior management of the solar and silicon segments would head up the new companies after a transitional period.

Dividing the company along the segment lines will place the two new entities in favorable positions for future growth, according to Enger.

"Solar has become a highly competitive source of energy and we strongly believe the solar industry will experience significant growth over the coming years," Enger said.

"We recognize that it will be increasingly demanding to grow and maintain a leading position with a vertically integrated business model. By launching a pure play solar company and a pure play silicon company, both companies will be in a favorable position for attracting capital, and well equipped to streamline the market approach and stay in the forefront in terms of technology development," he added.

The group will launch the separate entities through a financial transaction whereby REC offers 100% of the shares in REC Solar to the existing REC shareholders. In the transaction, REC Solar is valued at NOK 800 million (€102 million) and the offering is fully underwritten by REC’s largest shareholders.

REC Solar have a net cash position of NOK 300 million (€38 million) and apply for a listing on the Oslo Stock Exchange.

"With an equity ratio of 67%, REC Solar will be uniquely positioned as one of the few debt free solar panel suppliers in the industry," the group said.

As part of the plan, the REC brand and trademark will be owned by the new Singapore-based REC Solar, headed by CEO Oyvind Hasaas, while the parent company and the associated silicon business will be rebranded in due time.

The REC parent group will receive proceeds of NOK 500 million (€63 million) from the transaction and hold a net debt of about NOK 1.7 billion (€216 million), with an equity ratio of about 53%.

The transaction is pending approval by REC shareholders through an extraordinary general meeting and by REC bondholders.

Second-quarter results

REC also announced second-quarter figures: the company saw revenue climb 21% from the first quarter to NOK 1.54 billion (€196 million) but compared to the same period last year, it represented a 22% drop.

The group managed to narrow its loss (before interest and tax) by more than 65% to NOK 58 million (€7.38 million) compared to the first three months of the year, while earnings before interest, tax, depreciation and amortization (EBITDA) rose from NOK 43 million (€5.47 million) in the first quarter to NOK 152 million (€19.3 million).

The improved figures mainly reflected higher shipments and prices at the REC Solar division as well as higher sales of electronic grade polysilicon relative to solar grade polysilicon at the REC Silicon unit.

REC Solar reported second quarter revenue of NOK 1.07 billion (€136 million) and an EBITDA of NOK 75 million (€9.5 million). The company said solar panel production increased, reflecting low production in the first quarter. Solar panel shipments and selling prices increased 24% and 6%, respectively, compared to the previous quarter.

REC said the slowdown in the largest solar markets in Europe was being offset by growth in other markets, particularly Asia.

The REC Silicon division reported second quarter revenue of NOK 498 million (€63.4 million) and an EBITDA of NOK 106 million (€13.5 million). The company said polysilicon production was stable with unchanged production volumes compared to the previous quarter. Solar grade polysilicon sales volume dropped 30% compared to the previous quarter, however.

REC said it built up its inventory to better serve Asian customers and based on an anticipated increase in selling prices. Selling prices in the period climbed 19% compared to the previous quarter, reflecting increased prices for solar grade polysilicon and a higher share of sales of electronic grade polysilicon.

Looking forward, the group said further polysilicon price increases are expected over the next quarter and strong solar panel demand growth from Asia means a positive outlook for the industry.