REC expects better financial performance in second-half of year

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Massive investments in polysilicon through to solar cell and module expansions in three continents over the last couple of years are finally coming to an end and Renewable Energy Corp. (REC) expects to benefit from significantly lower production costs across its fully integrated business model. That was a key theme of its first-quarter financial conference call. But declining prices throughout the production chain mean that execution will be a key factor to better financial conditions going forward. 

The company has been losing money since the economic crisis took hold in the fourth quarter of 2008. However, losses have been falling quarter-on-quarter, with REC posting a loss of NOK 125 million in the first quarter.

Although executives declined to give specific near-term guidance on financial performance, it was clear from the call that the company is more confident of business conditions due to the capacity additions and lower manufacturing costs as well as drawing a line under extensive capital spending.

REC’s FBR expansion plans are coming onstream and the quality levels of its polysilicon climbing to meet customer requirements. FBR production is growing at REC Silicon, and continued qualification of the material is under way with new customers. However, this is a slow process but the company noted that good progress is being made.

Interestingly, President/CEO Ole Enger noted that customers are not only demanding better pricing but higher quality polysilicon and wafers. Polysilicon contracts pricing has remained under pressure though not as intensively as in 2009. The demand for higher quality wafers is due to the balanced supply and demand dynamics as well as the need for PV manufacturers to boost conversion efficiencies with the help of higher-grade polysilicon and wafer.

Total polysilicon production in the first quarter was 3,322 MT, of which 2,441 MT was solar and electronic grade. FBR production continued to increase, reaching 1,721 MT in the quarter. However, approximately 700MT was below acceptable grade and was sold at a significant discount, because of the need for further refining by customers to reach solar-grade specification. This could have therefore contributed to the 14% decline in polysilicon prices in the quarter.

Higher wafer capacity and improving utilization saw wafer production increase to 272MW in the first quarter, of which 9MW came from its new advanced facility in Singapore. However, REC produced just 16MW of monocrystalline wafers from its new plant in Glomfjord but no production from the pullers producing five-inch wafers in the quarter. As with polysilicon prices, wafer ASPs declined 16% in the quarter, indicating perhaps that slowing price declines often muted because of strong end-market demand have not actually been as widespread as touted.

Solar cell production also improved quarter-on-quarter to 67MW, up from 45MW in the fourth quarter of 2009. The new fab in Singapore contributed 24MW of that total. Module production also increased to 48MW, up from 39MW in the previous quarter. Singapore contributed 11MW of module production in the quarter. However, ASPs decline 4%.

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