REC to expand module production in 2013; massive polysilicon asset write down

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Renewable Energy Corporation’s fourth quarter financial results were masked by a massive NOK 1.8 billion (US$325.7 million) impairment on fixed assets related to its polysilicon operations (REC Silicon) in the US. REC Silicon recognized impairments of fixed assets of NOK 1,881 million (US$340.3 million) for the full-year.

The company reported fourth quarter 2012 revenues of NOK 1,687 million (US$305.2 million), approximately 12% higher than the previous quarter. The company continued to generate losses with a negative EBITDA of NOK 34 million (US$ 6.149 million) compared to a negative EBITDA of NOK 184 million in the previous quarter

However, EBIT before impairment charges was negative NOK 315 million (US$56.9 million) in the fourth quarter, compared to negative NOK 466 million in the previous quarter.

REC Silicon

The REC Silicon impairment charges were due to the significant polysilicon price declines in 2012 and restructuring activities that included Siemens-based polysilicon production halted due to production costs above ASP levels.

REC noted that polysilicon ASPs declines 14% in the fourth quarter, while module process fell 11%.

However, REC combined polysilicon ASPs declined 39% from the fourth quarter 2011 to the fourth quarter 2012.

REC Silicon also increased production of granular solar grade polysilicon and was able to reduced FBR production costs by 13% in the year. Polysilicon sales increased 16% in 2012 to about 21,700MT.

The company is targeting a granular polysilicon cash production cost at US$11.5/kg, excluding SG&A and R&D, by the fourth quarter 2013.

REC Solar

REC Solar reported module revenue of NOK 932 million in the fourth quarter, up 7% from the previous quarter.

Module sales were 19% to 202MW in the fourth quarter of 2012, compared to the prior quarter.

Total module production was 191MW in the fourth quarter, down 13% from the previous quarter.

REC reported that solar module (REC Solar) sales increased 31% to approximately 780MW for the full-year 2012. However, ASPs declined 38% in the year.

For the full-year REC Solar revenues amounted to NOK 4,087 million, down 30% from 2011, due to ASP declines.

The growth in module production output meant that the company was able to reduce costs by 45% year-on-year, and beating the ASP decline.

In 2013, REC Solar is targeting to produce 850MW of solar modules to meet expected increase demand, notably in Japan and Asia.

The company said that REC Solar expects to implement a number of new production cost reductions in 2013 that are expected to enable 45 Eurocents/Watt, including SG&A and R&D by the fourth quarter 2013.

2012 financial losses


REC reported full-year 2012 revenue of NOK 7,145 million, down 25% from 2011, primarily due to ASP declines.

EBITDA in 2012 was NOK 360 million, down from NOK 2,043 million in 2011.

After impairments of NOK 5.4 billion in 2012, EBIT from continuing operations for the year was negative NOK 6,426 million down from negative NOK 4,108 million in 2011.

Loss after tax from continuing operations was NOK 1,455 million, compared to a loss of NOK 452 million in the previous quarter. For the year 2012, REC had a loss after tax from continuing operations of NOK 5,908 million, compared to a loss of NOK 4,295 million in 2011.

Ole Enger, CEO of REC said, “REC continued to focus on operational improvements and capital discipline in the fourth quarter. Cut backs on the supply side across the industry have led to price stabilization recently, but demand visibility is low. The solar market is diversifying geographically and I am convinced that the improved competitiveness of solar will continue to create attractive opportunities for REC going forward.

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