The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

REC Gives Up Vertical Integration, Splits Wafer and Module Divisions

With plummeting prices in the past few years, many upstream solar companies have expanded further downstream in the value chain to maximize their growth prospects and profits. But here's the Catch-22: in many cases this expansion of solar market exposure has multiplied the cost pressures from all directions in the market's relentless march to lower costs overall. Increasingly it's made more sense for solar cell and module companies to just procure the material rather than make it internally. The next big wave of industry consolidation might well start with vertically integrated manufacturers.

And so Renewable Energy Corp. (REC), which had both silicon and solar module businesses, has now decided to cleave them into independent listed entities. "We recognize that it will be increasingly demanding to grow and maintain a leading position with a vertically integrated business model," stated REC president/CEO Ole Enger. The units already have "limited operational synergies" with separate structures for operations, R&D, and sales & marketing, the company acknowledges, so evolving them into a pure-play solar company and a pure play silicon company will put both units "in a favorable position for attracting capital, and well equipped to streamline the market approach and stay in the forefront in terms of technology development," he said. (Splitting the two units also makes them more attractive for possible M&A interests, according to a financial analyst quoted by Bloomberg.)

At last year's Intersolar North America, Jan Jacob Boom-Wichers, managing director of the Americas region for REC Solar US, touted the company's vertical integration strategy, which he said was not just for "vertical integration's sake" to better secure components, but to take advantages of its lower manufacturing cost profiles, specifically its fluidized bed reactor technology. He also noted the company's size and stability, from revenues to a relatively low (below 50 percent) debt/equity ratio. Watch the entire interview below.

Times have changed, though. In a slide deck outlining the planned separation, REC indicates that despite somewhat improved spot prices for both polysilicon and modules over the past couple of quarters, poly-Si prices are still barely half what they were a year ago, and solar module prices are down 15 percent. Another slide shows how there's around 45 gigawatts of industrywide poly-Si capacity at cash cost below US $25/kg (where REC is currently at), vs. current spot-market prices for poly-Si at around $16/kg.

The details of the transaction involve offering all the shares of REC Solar to existing REC shareholders in a NOK 800 million (€102 million) fully underwritten offering from the end of September to mid-October. REC Silicon will remain with the parent group REC ASA with Enger as the top exec, though the current headquarters in Sandvika, Norway will eventually "be downsized significantly" and corporate functions transferred to the U.S. operation. (REC already had been ramping down its Norwegian solar wafer division.) REC Solar, the module side of the business, will have its headquarters in Singapore and be led by Øyvind Hasaas. That unit has about 1500 employees, and expected output of around 775 MW this year.

A year ago REC Solar eked out a profit of on NOL 1.145 billion in sales; for the next three quarters it lost NOK 334 million (half of that in 3Q12) and sales fell by 35 percent. In the first three months of 2013, though, the unit spun a NOK 75 million profit on its best sales in a year (NOK 1.07 billion), enjoying higher selling prices and reduced inventory. The unit has a net debt of NOK 1.7 billion and an equity ratio of 53 percent. It has an undrawn bank credit facility and guarantee facility, both NOK 400 million and both maturing in April 2014.

Lead image: Split road sign, via Shutterstock

Untitled Document

RELATED ARTICLES

How India Goes Solar Could Change the World

Susan Kraemer, Correspondent Indian Prime Minister Narendra Modi’s proposals for a draft National Renewable Energy Act raising renewable deploymen...

Listen Up: Questions You May Ask About Rooftop Solar

The Energy Show on Renewable Energy World I’ve spent a lot of time over the past 15 years talking to homeowners about rooftop solar. More kitchen table chats a...

Changing Power Market Dynamics Open Up New Opportunities for STE

Frederick Redell There are two major tends driving the U.S. power sector. First, a large number of new technologies are becoming comme...

U.K. Plans to End Aid to Small-Scale Renewables in Blow to Solar

Alex Morales, Bloomberg The U.K. proposed to end an assistance program for small-scale renewable energy projects as part of a drive to cut th...

PRESS RELEASES

Array Technologies’ DuraTrack HZ v3 Continues to (R)evolutionize at SPI

Array Technologies, Inc. (ATI) prepares to showcase its recently launched tracking syst...

Appalachian's Energy Center assists counties with landfill gas to energy projects

The Appalachian Energy Center at Appalachian State University recently completed a proj...

Early Bird Registration Deadline for GRC Annual Meeting is This Week

The deadline for early-bird rates for registration for the biggest annual geothermal ev...

Redesigned HydroWorld.com Video Gallery

Hydropower news and information, and interesting promotional announcements are now avai...

FEATURED BLOGS

Transitioning to Net-Zero Living

Judith and Jeffrey adore living in Belfast, Maine – a quaint harbor town of Belfast, Maine. They previously res...

The True Cost of Electric Vehicles in Australia

In order to avoid increased congestion, further greenhouse warming and lessen Australia’s reliance on imported ...

The Coming Multi-trillion Dollar Energy Investment Drive

In coming years, a multi-trillion dollar low-emission energy investment drive will get underway. Three catalysts wil...

The Perfect Elevator Pitch

The elevator pitch is a concise statement that grabs attention and communicates value, ideally leading to a next step...

FINANCIAL NEWS

Jim is Contributing Editor for RenewableEnergyWorld.com, covering the solar and wind beats. He previously was associate editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, ...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

1-1/2 Day Photovoltaic System Fundamentals Workshop

Participants will learn how to assess the solar resources available at a...

Solar Power International 2015

International Energy and Sustainability Conference 2015

The fourth International Energy and Sustainability Conference will be he...

COMPANY BLOGS

The Perfect Elevator Pitch

The elevator pitch is a concise statement that grabs attention and commu...

3 Reasons To Follow-Up

It’s very important to begin nurturing your relationship with a cu...

LSX crowns the Jewel of Kahana

Located on Maui, Hawaii, the Jewel of Kahana is a beautiful ma...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS