REC to close final 650MW Norwegian wafer plant in face of negative operating results

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Following a continued downturn in operating results, Renewable Energy Corporation (REC) will close its 650MW multicrystalline wafer plant at Herøya, Norway by the second quarter of 2012. The closure of the Herøya plant, in the south of the country, will signal the end of all REC’s wafer operations in Norway after the closure of the Glomfjord monocrystalline plant on March 20, 2012.

The decision to close the plants was largely a result of REC’s having to drop average silicon prices by 15%, wafer prices by 24% and module prices by 18%, due to competition from Chinese manufacturers.

Despite REC’s EBITDA being US$79,555,075 in the first quarter, up from US$31,114,292 in the previous quarter, the company’s first quarter revenue was actually down 25% from last year’s final quarter. The disparity comes from the fact that REC received US$138,965,516 from polysilicon and wafer sales contract terminations this quarter but also incurred costs of US$63,980,667 from the closure of the wafer production capacity in Glomfjord, Norway.

Three of four employee representatives on the REC board of directors voted to oppose the closure of REC’s remaining Norwegian wafer plant as it was reported more than 1100 local jobs will be lost by the two plant closures. REC has said it will explore the possibility of using the manufacturing plant for other purposes.

REC president and CEO Ole Enger commented, “Despite solid demand growth, overcapacity continues to negatively affect the wafer prices. Our organization at Herøya has worked very hard to reduce cost and improve quality. Over the last two years annual cost reductions have exceeded 25% even though the cost position was held back by long term contracts with uncompetitive suppliers. However, with extreme competition, especially from China, and market prices down to one third of the prices one year ago, these cost reductions have unfortunately not been sufficient. Significant continued losses were to be expected from the wafer operations at Herøya going forward. We therefore have no choice but to discontinue our operations in Norway.”

REC wrote the fixed assets of its Herøya wafer plant down to zero in 2011 and the company will recognize shutdown costs for the plant in the second quarter 2012.

REC's announced its first quarter financial results on April 25 at 08.00 CET.

Following the dramatic recent reductions in the cost of polysilicon, prices are expected to stabilize by the end of 2013.

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