A host of challenges would seem to be troubling Renewable Energy Corp (REC). After posting a 14% increase in revenues to NOK 2,013 million in the first-quarter 2009, the company saw its profits decline of 29%, due to spot market buying of polysilicon, higher expansion and ramp-up costs, and a build-up of module inventory as demand weakened.
The company noted in a conference call to discuss financial results for the first quarter that many customers are finding the financial conditions difficult, while PV module distributors and installers have become increasingly reluctant to hold and finance inventory. REC also noted that weak demand has caused module prices to fall 20% in the quarter.
As a consequence, REC plans to significantly reduce PV module production this quarter, cutting levels by 50%. The company expects approximately 180 temporary and contracted employees to be affected by short-term layoffs.
However, REC said that due to contracted shipments in the second half of the year, production of cells and modules should return to normal levels in that period.
Problems continued with its polysilicon expansion at Moses Lake, forcing the company to completely shut down production to repair cracks in a reactor discharge pipe. REC noted that it had discovered design weaknesses that could lead to material fatigue, causing further failures. The company will now work with project manager Fluor to design the necessary modifications to the reactor discharge pipe, resulting in no production for Silicon III plant in Q209.
This will result in a reduction in expected polysilicon production in 2009. Originally, REC expected production to reach between 10,000 and 11,000MT this year, now the company expects that figure to be approximately 9,000MT. This is of course dependent on Silicon III coming back online successfully in the third quarter.