REC ASA - Scope change to further pursue silane...
Sandvika, September 24, 2008: REC has decided to change the scope of
the new expansion project ("Plant IV") initially announced in April
2007. The decision was mainly driven by the favorable market
conditions for silane gas and the internal need for silicon based on
the final scope of the Singapore Phase I expansion. Additional silane
volume will enable REC to potentially double the allocation to the
merchant market by adding around 2,300 MT annually, while still
securing all internal and external polysilicon commitments.
Over the last number of quarters, the improved attractiveness of the
silane gas market has become more evident. From a market primarily
driven by the demand from integrated circuits and flat panel
displays, the market share of photovoltaics has increased fast and is
expected to set the pace for future growth. In this segment, silane
gas has historically mainly been used in the production of
traditional wafer-based solar cells, but will in the future
increasingly be influenced by the development in crystalline based
thin-film market (i.e. amorphous- and tandem micro
crystalline/amorphous-silicon). Further confirmation of this
development was made in June 2008 when REC secured long-term
agreements for the supply of silane gas to major gas distributors
worth close to USD 1 billion (~NOK 5.5 billion), average sales price
under these contracts was around 15% higher than current.
"This scope change makes a lot of sense - not only from a pure
financial perspective, but also ensures improved product hedging as
well as positions REC to potentially take advantage of future
opportunities within thin-film, all while supporting a fast growth of
REC's silicon wafer based technology platform", says Erik Thorsen,
President & CEO of REC.
The scope change will allow an additional 2,300 MT availability of
silane gas per annum that can be allocated to the fast growing
merchant market for silane gas. On the other hand, this change will
reduce the polysilicon production from approximately 6,000 MT in the
original investment case to approximately 4,000 MT per annum. The
2,000 MT reductions is justified based on the final scope of the
Singapore Phase I expansion announced in June 2008.
"We are today, and will remain for the foreseeable future, the
largest producer of silane gas in the world. This decision will
additionally enable us to maintain our position as the leading
marketer to the merchant market of silane gas", says Erik Thorsen
further.
The new scope and expected cost increases in the project has
triggered additional investments of close to USD 200 million, which
includes additional silane loading bays, additional intermediate
storage tanks for liquid silane and general utilities. An additional
necessary investment decision to comply with new and stricter
environmental requirements will add investments of 50 MUSD. A project
reserve of 30 MUSD is included in the total amount.
As previously communicated, in conjunction with the first and second
quarter release, most cost elements related to procurement and
construction of Plant IV are expected to face similar price
escalations as for the ongoing expansion project ("Plant III"). In
total, including scope changes, cost escalations, investments to
comply with new environmental regulations and a project reserve,
total investments will end at approximately USD 750 million compared
with the original budget of USD 485 million. This is only somewhat
higher than what is already expected based on the cost escalations
announced earlier this year.
The estimated net present value of Plant IV has improved by around 20
percent despite the higher levels of investments. The main
contributor to this development has been the improved third-party
prices realized in later periods compared to the original business
case, especially on silane gas. As the revised scope still will fully
support all expansions further downstream in REC Wafer and REC Solar
with the necessary raw materials, the improved returns would
therefore also positively affect the REC Group overall. The
additional investment will be covered by existing available
financing.
For more information, please contact;
Erik Thorsen, President & CEO; +47 907 56 685
Jon Andre Løkke, SVP & IRO; +47 907 44 949
About REC
REC is uniquely positioned as one of the most integrated companies in
the solar energy industry. REC Silicon and REC Wafer are the world's
largest producers of polysilicon and wafers for solar applications.
REC Solar produces solar cells and solar modules and engage in
project development activities in selected segments of the PV market.
REC Group had revenues in 2007 of NOK 6,642 million and an operating
profit of NOK 2,588 million. Please also see www.recgroup.com.
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