REC ASA - Calls upon bank guarantee and termina...
Sandvika, September 9, 2009, REC has decided to terminate a long-term
take-or-pay contract with the Chinese solar energy company China
Sunergy for deliveries of mono wafers. China Sunergy has not renewed
the required guarantees and the parties have not agreed on revised
terms. As a consequence, REC has called upon a USD 50 million bank
guarantee established by the customer to cover its payment
obligations.
REC has since 2006 signed several long-term take-or-pay contracts
with a range of customers. In these contracts both price and volume
are typically predetermined for the entire contract period, and no
mechanisms allow the customer to renegotiate terms and conditions.
These contracts are also typically supported by bank guarantees
established to secure part of REC's outstanding receivables.
Given the increasingly difficult market development in 2009, with
falling prices and declining capacity utilization, REC has engaged in
dialogue with its customers in order to assist them in coping with
the short-term effects of the market downturn. In most cases, REC and
its customers have been able to find solutions for 2009 which are
commercially acceptable to both parties. Should the market weakness
continue into 2010, it may be in REC's best interest to make further
contractual adjustments.
The contract in question was entered into in 2008 as a take-or-pay
contract as described above. The total contract value is estimated at
NOK 2.4 billion, covering deliveries of predefined volumes at
pre-defined prices in 2009-2015. The contract prices were at the time
of signing considerably below the spot market price for mono wafers,
reflecting the long-term nature of the commitment by both parties.
REC has made serious efforts to reach an agreement that could lay the
basis for continued cooperation with China Sunergy. As REC saw the
possibility of finding solutions of common interest, REC has
demonstrated a high degree of flexibility to discuss a range of
options that could address customer needs. Despite this, it has
regrettably not been possible to resolve the situation, and REC has
therefore decided to call upon the existing time-limited bank
guarantees to protect its interests.
In this particular contract, the bank guarantee structure requires
annual renewal, but China Sunergy has failed to provide and renew
sufficient bank guarantees in time. It is REC's intention to continue
the negotiation with China Sunergy to try to find an acceptable
solution. However, as the bank guarantees may cover only parts of the
loss, REC will also consider further legal actions to cover any such
loss.
For more information, please contact:
Jon André Løkke, SVP and Investor Relations Officer, +47 907 44 949
About REC
REC is the leading vertically integrated player in the solar energy
industry. REC Silicon and REC Wafer are among the world's largest
producers of polysilicon and wafers for solar applications. REC Solar
is a rapidly growing manufacturer of solar cells and modules, and are
also engaging in project development activities in selected segments
of the PV market. REC had revenues of NOK 8 191 million and an
operating profit of NOK 2 529 million in 2008. Close to 3 000
employees work in REC's worldwide organization. Please also see
www.recgroup.com.
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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