Norwegian polysilicon and silane gas company REC Silicon ASA is fast approaching its effective exit from the solar market after revealing in its second-quarter update it had sold off the last 62 MT of PV-grade poly produced at its plant in Moses Lake, Washington, which has been shuttered for over a year.
The import duties applied on U.S.-made polysilicon by the Chinese authorities which have effectively shut REC out of the world’s biggest market prompted the company to close its Moses Lake fluidized bed reactor facility in the second quarter of last year. As a result, the company’s solar materials division generated revenue of only $300,000 in the April-to-June window as it contributed a $2.3 million hit to earnings before interest, tax, depreciation and amortization, following a $2.8 million deficit to the bottom line in the first three months of the year.
The only solar-grade poly produced by REC Silicon during the second quarter came, ironically, via its 15% stake in a joint venture based in China, with that fab manufacturing 1,063 MT of fluidized bed reactor material plus 19 MT of Siemens polysilicon. A $4.7 million payment owed by REC Silicon to the JV has been pushed back until late this year, according to the financial update released by REC on July 23.
China-U.S. trade deal
The much-heralded Phase I Trade Agreement negotiated between the Trump administration and China in January included a commitment by the latter to purchase U.S. polysilicon but the onset of Covid-19 on U.S. soil – and subsequent breakdown in relations between The White House and Beijing – have made that glimmer of hope for REC Silicon increasingly appear to have been a false dawn.
The Norwegian company is now increasingly reliant on the polysilicon it produces for the semiconductor industry and the sale of silane gas, with both products produced at its other fab, in Butte, Montana. However, even that vestige of manufacturing activity could be threatened, with REC Silicon announcing plenty of interest from potential suitors in purchasing the facility. The delay to the due diligence processes which would foreshadow any sale of the site, caused by Covid-19 disruption, may be all that is keeping REC from continuing to manufacture on U.S. soil at present.
The company opted to take out an $8.3 million coronavirus aid, relief and economic security (CARES) loan from the U.S. government, which included $4.4 million allotted to its solar materials business. That assistance, awarded under the Payroll Protection Program, however, ties the company into maintaining its present headcount and salary levels on pain of having to repay the lifeline.
Stuck in the middle
The company remains at the mercy of the governments of China and the U.S. with three ever-present historic threats looming over it: An indemnity loan related to the bankruptcy of a former subsidiary in 2012, in relation to which it has refused a claim received last year for NOK150 million ($16.4 million); a pending property tax reassessment by Grant County, Washington related to 2012, upon which assessments for 2013 and 2015 are contingent; and a Norwegian Central Tax Office reassessment for 2009-11.
It is perhaps not surprising the company opted against issuing any guidance for the current quarter or the full-year, citing Covid-19 uncertainty as the reason.
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