REC plans to split company

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Renewable Energy Corporation ASA (REC) said it plans to split polysilicon and module production operations into two separate companies, ending its fully-integrated business model.

The transaction is expected to close in October 2013, following a shareholders meeting bondholders’ approval, according to the company.

REC Solar, which is primarily its manufacturing operations for ingot/wafer and cell/module production in Singapore will become an independent company and listed separately on the Oslo stock exchange, valuing the equity of REC Solar at NOK 800 million (US$133.2 million) after major REC shareholders already agreeing to guarantee 100% of the offering.

Debt laden, REC recently failed to gain shareholder agreement on issuing further shares in the company as it continued its financial restructuring efforts.

The move to establish REC Solar as a separate entity with a NOK 300 million cash injection and an additional undrawn credit facility of NOK 200 million would make the company almost debt free and potentially able to raise further capital to expand capacity and penetrate more markets, while potentially expanding its downstream PV project business where the majority of module manufacturers are heading to become PV energy providers like SunPower and First Solar.

REC noted that the reason for the split was due to the expected longer-term growth of the solar industry as it was becoming an increasingly competitive source of alternative energy, yet required capital to operate in a fully-integrated business model was difficult due to access to capital for the sector.

However, the split of operations opens both its polysilicon and module manufacturing operations to consolidation, a position REC management had previously touted when it was going through a restructuring of its wafering and module operations in Europe.

The company said that after the transaction to split REC Solar from the group the company expected to report its REC Solar operations as discontinued operations and recognize a loss of about NOK 1.3 billion in the third quarter financial report.

REC Silicon, its polysilicon operations in the US will remain within REC Group.

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