REC shuttering Norway sites, stung by 3Q results

REC is permanently closing three of its Norway PV production sites, as it reports softness in its 3Q11 financials and some ugly outlooks for 2012 capacity vs. demand.

October 26, 2011 – REC is permanently closing three of its Norway PV production sites, as it reports softness in its 3Q11 financials and some ugly outlooks for 2012 capacity vs. demand.

Confirming earlier reports, REC is permanently shuttering three wafer sites in Norway: two multiwafer plants (500MW-capacity Herøya, its oldest site, and 275MW-capacity Glomfjord) as well as its 180MW-capacity Narvik cell plant, at an estimated cost of NOK400M (and NOK>600M in termination fees for wafer contracts, to hit the books in 3Q-4Q). That leaves two domestic operations: a mono facility in Glomfjord and the company’s newer multiwafer production facility in Herøya. “In the current market environment further plant closures in Norway cannot be disregarded,” the company said. In 3Q11 the company has throttled wafer output to 205MW, barely half its 2Q11 output (343MW). REC is also slashing its 2011 capex to NOK700M (down -30%).

Overall the industry’s supply is seen vastly outstripping demand. REC showed a slide compiled from various estimates (EPIA, UBS, Goldman Sachs, Barclays, Bloomberg) projecting 39GW poly capacity in 2012 for PV, tracking at a 35% three-year CAGR — but far beyond the 23GW of anticipated 2012 demand. The result: short-term overcapacity, ASPs close to cash cost, and consolidation (though long-term fundamentals from an end-market perspective remain promising).

A breakdown of REC’s 3Q11 numbers:

— Total revenues were down -13% and EBITDA down -57% from 2Q11. EBITDA of 370M was a third lower than analysts had expected.

— Polysilicon sales were down -14% from 2Q11 (sales volume and ASPs both -8%)

— Wafer sales plunged -44% (sales volumes -39%, ASPs down -17%), and EBITDA was off -21% Q/Q

— Solar module sales were down -6%, with flat volumes, -13% ASPs and -4% margins

— Solar module output was flat Q/Q at 181MW, with its Singapore operation continuing to ramp and accounting for practically all that business.

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