China: REC Silicon reduces stake in 20,000 MT polysilicon JV

Share

Norway-based polysilicon manufacturer, REC Silicon ASA announced that its Asian subsidiary, REC Silicon Pte. Ltd and Chinese silicon material provider, Shaanxi Non-Ferrous Tian Hong New Energy Co. Ltd (SNF) have come to an agreement on the outstanding capital contribution that REC Silicon has to provide for their common project involving a 20,000 MT polysilicon factory in Yulin, in the Chinese province of Shaanxi.

REC Silicon said that SNF has agreed to take over all of REC Silicon’s outstanding capital contribution, totaling $169 million, and that, as a result, its stake in the joint venture will be reduced from 49% to 15.06%.

Under the terms of the agreement, REC Silicon has also agreed to pay interest totaling $652,500 to the JV, and a $10.3 million penalty to SNF.

“Within six months after the expiration of a three-year period after SNF makes REC Silicon’s outstanding capital contribution, REC Silicon will have the option to … buy back the 33.94% equity interest from SNF,” the Norwegian company stressed in a statement.

This transaction will result in an adjustment of the corporate governance of the JV, according to the new equity structure, with four of the five directors assigned to SNF, REC Silicon added.

“This agreement between REC Silicon and SNF allows the two companies to continue a very good cooperative relationship developed over the last four years in establishing a world class FBR polysilicon plant in Yulin, and at the same time, preserves REC Silicon’s opportunity to hold a 49% equity interest in the Yulin JV in the future,” said the company’s CEO Tore Torvund.

In its latest financial results, released in October, REC Silicon said it expected to bring the first silane gas and fluidized bed reactor (FBR) production online in the Yulin facility before the end of 2017.

The announcement for the project based on REC Silicon’s FBR technology dates back to February 2014. At the time, it was agreed that REC Silicon would contribute $244 million, in order to acquire a 49% stake in the JV, while the Chinese group had to pay $254 million for 51%.

REC Silicon also said at the time that it would use upfront payments from Shaanxi Non-Ferrous totaling $198 million, to meet its 2014 debt obligations and increase its financial stability.

Last September, REC Silicon announced the gradual closing of its U.S. manufacturing facility, due to the ongoing solar trade dispute between the U.S. and China.

According to a recent report from Bloomberg New Energy Finance (BNEF), a new polysilicon factory boom is underway, with production forecast to increase from around 445,600 metric tons in 2017, to 490,000 tons in 2018.

BNEF found that the growth in demand registered last year was mainly attributable to, among others, temporary scarcity of metallurgical silicon feedstock and scheduled maintenance of polysilicon factories, which led to a fairly tight balance of supply and demand in 2017.