REC warns of a brutal Q3 2012

Renewable Energy Corporation ASA (OSE: REC) has plummeted almost 20% to new lows in today’s trading after warning its Q3 2012 numbers that are to be reported on October 24 will miss analyst estimates. Preliminary figures suggest revenues of 1.5 billion NOK and a negative EBITDA of about 185 million. REC Silicon should be at break-even and most of the loss coming from REC Silicon. The company is blaming very challenging market conditions that led to a slide in both prices and volumes.

REC reports another multi-billion loss but operating cash flow remains positive

Renewable Energy Corporation ASA (OSE: REC) reported of continued pressure on market prices stemming from industry oversupply situation. After deciding to exit the business, REC Wafer is now reported as a discontinuing operation, which should be taken into account in comparing quarterly numbers. Compared to previous quarter, average selling prices for polysilicon and modules were down eight percent. Behind higher volumes, revenues from continuing operations of just below 2 billion NOK were even with the previous quarter and down from re-presented 2.4 billion in Q2 2011.

Adjusted EBITDA was still positive at 230 million NOK, helped by further cost improvements, but reported EBIT from continuing operations fell to -3.7 billion, including a 3.6 billion impairment on Singapore fixed assets. Before charges EBIT is -122 million. Discontinuing wafer operations add a further 344 million NOK negative number net of tax. EPS for total operations was -4.07 NOK. Net cash from total operating activities was 0.6 billion NOK.

The revised refinancing proposal is subject to EGM approval on July 27th. Industry shakeup is still in full swing, with over 200 solar companies having discontinued operations since 2011 and those that manage to come through the period may come out of it with stronger earnings potential. REC thinks demand is now shifting to U.S. and Asia as subsidies schemes in Europe come to an end. The falling prices have also helped the customer project economics.

REC: New financing proposal with minor tweaks

After the last refinancing plant went down the toilet when convertible bond holders refused to take a write-down on their debt, Renewable Energy Corporation ASA (OSE: REC) has today come up with a new plan that is basically more of the same, with the exception of leaving the convertible bondholders alone. A new EGM is called for or about July 27th. There is still a private placement of 1.3 billion and a subsequent offering of 375 million for shareholders who were shafted by the private placement on the table.

Chairman Jens Ulltveit-Moe’s Umoe AS, Orkla ASA (OSE: ORK) and Board member Peter Ruzicka’s Canica AS are all allocated a substantial number of shares. The difference from earlier proposition is that Umoe AS and Canica AS are taking a smaller number of shares than before and the difference is covered by Orkla. For this proposition to succeed, EGM needs to approve it and a bank debt refinancing needs to take place subject only to completion of the private placement and customary conditions. The subsequent offering is also a little bigger than before, to try to appease existing shareholders not given the possibility to take part and to cover for the loss from convertible bondholders refusal.

REC halted as convertible bond holders refuse amendments

The Bondholders’ meeting in Renewable Energy Corporation ASA (OSE: REC) held today did not approve the proposed changes to the bond loan agreement requested on June 22nd. Oslo Børs and The Financial Supervisory Authority of Norway have decided to suspend the shares and related instruments in REC ASA until further clarification of the situation. The refusal puts the entire complex refinancing plan in serious doubt. Chairman Jens Ulltveit-Moe has already declared the emission dead. The Board is now in a crisis meeting to decide what to do.

The holders of an outstanding 320 million NOK bond were asked to make amendments as a part of the wider refinancing effort. These include an extension in maturity, a new conversion price, a partial redemption and denomination with principal amount reduced from 100 to 59.3% with a part of that redeemed in cash. As far as timetable goes, the fulfilment of the necessary conditions needs to happen before July 31st

REC: Refinancing, a lot of new shares, impairments

Renewable Energy Corporation (OSE: REC) aims to extend the maturity of its debt financing and strengthen balance sheet hurt by one-off costs and general pressure on the entire industry in a comprehensive solution involving a 1.3 billion equity issue via an undocumented private placement. The Board has decided to propose to an EGM on or about July 18th to issue 866 666 667 new shares at a subscription price of 1.5 NOK for the private placement. This would nearly double the existing amount of shares at 1.83 billion plus. Furthermore the REC share will be traded ex contingent additional rights offering of 300 million NOK to the existing shareholders who were not invited to take part in the private placement from today.

The proceeds are supposed to be used to partially redeem 100 million Euros (about 750 million NOK) of outstanding convertible bonds, new investments and general strengthening of balance sheet. Primary insiders Umoe AS (over 266 million shares)represented by Chairman Jens Ulltveit-Moe and Canica AS (over 106 million shares)represented by Board member Peter Ruzicka were allocated significant amount of new shares in the private placement subject to among other things EGM approval and bank debt refinancing for a new 2 billion NOK bank debt facility maturing in 2015.

The company said that preliminary impairment tests indicate a 3.5 billion NOK charge in Q2 accounts primarily related to Singapore wafer, cell & module facility. This assumes further module price reductions. Additional expenses of 750 million NOK is coming from closing of wafer operations in Norway. The share which has climbed nicely in the past week, looks to be under considerable pressure at market open.

REC sales down but above estimates, to close all wafer production in Norway

Renewable Energy Corporation ASA (OSE: REC) reported Q1 2012 revenues of 2.14 billion NOK (-25% sequentially, 48% year-on-year) and EBITDA of 455 million. Volumes are high and customers are getting attractive net present value on their investments but industry oversupply is still putting pressure on prices. Against Q4 2011, polysilicon prices were down 15%, wafer prices 24% and module prices 18%. Profit for the period is -209 million.

Given the fact that levelized electricity cost from PV modules is now below retail electricity prices in many corners of the world, REC expects continued installation growth in many markets, Asia and the U.S. in particular. The feed-in-tariff adjustment in Germany and expected similar action in Italy will affect these markets. The company quoted global analysts forecast of solar installation in between 26 to 32 GW for 2012 but with high uncertainty.

Hopes of the remaining multicrystalline wafer plant in Norway to stay in operation were also dashed. The 650 MW plant at Herøya will be discontinued from this quarter. This despite cost reduction of above 25% percent within last two years. REC says it just cannot compete with the Chinese manufacturers with market prices down two thirds in a year.

About 460 employees will lose their jobs. This is fresh on the heels of Glomfjord closure. Majority of employee representatives on the Board voted against the closure. REC claims it is exploring alternatives for the facility. The book value was already written down last year, whereas closure expenses will incur in Q2. The REC share has shot up 11% for the day.

Novo overtakes Statoil as exchanges prepare for Easter

Nordic exchanges are heading for Easter holidays. Oslo already closed earlier today and Copenhagen will join it on the sidelines tomorrow. Stockholm will be open for half a day and only Helsinki has a normal trading day. Investors have been taking profits and a wobbly debt auction from Spain escalated the slide on Wednesday.

Generally there were very few company specific news. One tidbit is that Novo Nordisk has overtaken Statoil as the largest listed company in the Nordic countries, with both hovering around 65 billion Euro market cap. Various subsidy cuts across the world have really hit solar (Renewable Energy Corporation) and wind (Vestas, which also has had to digest other negative news) sectors.

REC to close Glomfjord monocrystalline wafer plant.

Renewable Energy Corporation ASA (OSE: REC) said it has decided to permanently close down its operations in Glomfjord, Norway. Glomfjord is a village in, Nordland county with a large heavy industry concentration,. REC said it was staring at continued negative operating results from the 300 MW monocrystalline wafer plant

REC started manufacturing mono wafers in 2005. The technology is the oldest way to make solar photovoltaic panels and until only recently it was more efficient and higher priced than multi aka polycrystalline. The industry dynamic has shifted as the material used in making polycrystalline wafers has plummeted due to oversupply.

Glomfjord closure is expected shortly and some 200 employees will lose their jobs. Board approval was not unanimous as majority of the employee representatives voted against the decision. REC has already written down the book value of the assets. The closure leaves REC wafer unit with multicrystalline production sites in Herøya, Norway and Tuas, Singapore. The stock continued its recent retreat with another 5% slide.

REC: China to further support domestic industry

China’s Ministry of Industry and Information Technology announced on Friday that the country aims to increase production of solar panels and materials, newspaper China Daily writes. The cost of domestic solar power is to go down to 0.8 yuan per kWh by 2015 and further to 0.6 RMB by 2020. Five-year plan states that cost of solar panels will go down swiftly as well.

Under the plan the leading polysilicon manufacturers in the country are required to reach 50 000 ton production capacity and leading solar panel makers to reach 5 GW. It is said that China will further help solar companies increase sales. Solar technology firms are asked to increase conversion efficiency and 80% of solar equipment and materials are to be produced domestically. Renewable Energy Corporation (OSE: REC) has continued to slide after the news of a subsidy cut in Germany triggered a correction.

REC down as Germany cuts subsidies

Renewable Energy Corporation (OSE: REC) retreated along with the rest of the industry as prospects in the world’s biggest solar market just got a lot dimmer as German authorities are removing up to 30 percent of the subsidies in two phases. The first and larger cut should come on March 9th as photovoltaic incentives are lowered.

Yearly installations have skyrocketed as Germany is doing away with nuclear power. The government’s aim is to reach 66 GW by 2030 with annual instalments between 2.5 and 3.5 GW. At 2011 record pace of 7.5 gigawatts, it would not take long to get there from the current 25 GW level.

The news was already pretty much common knowledge but it was expected to happen a little bit later. This means that 2012 revenue and earnings estimates are now revised lower. REC closed the day down by almost 9% at 4.36 NOK.

REC predicts margin improvement and expects solar industry consolidation

Renewable Energy Corporation ASA’s (OSE: REC) fourth quarter revenue slid a further five percent sequentially to 2.87 billion NOK. EBITDA slumped much worse to 178 million. This is due to weak solar market, aggressive polysilicon pricing to keep volumes up and capacity cuts in Norway. REC also made 2.5 billion impairment on Singapore operations during the quarter. EPS from total operations was around 2.5 NOK per share in the minus.

REC says that the steep module price decline means that end-users are now getting favourable returns on PV systems investments. Overcapacity is still gripping the market. There was some recovery towards the end of Q4. Wafer sales contract termination damages contributed 690 million into Q4 income.

REC is among the largest producers of polysilicon and wafers for solar applications and is rapidly growing in solar cells and modules manufacturing. Polysilicon spot prices were fown 59% in 2011 and multi wafer and module spot prices backpedalled 40% and 69% respectively. Full year EPS for 2011 was over -10 NOK. Revenues were 13.4 billion with EBITDA at 2.9 billion.

REC feels that the prices are now bottoming out as capacity is being cut across the industry. The company aims to partake in the expected industry consolidation. It will continue to aggressively vie for market share in silane as that is the area where REC has leading market and cost position.

REC expects demand shift from Europe to Asia and the US in 2012. Focus will be on cash-flow and restructuring of operations in Norway. The group is targeting 30% cost reduction in 2012. This should show in improved margins from H2 2012 onward. The stock has responded with an 8% pop.

REC swings wildly on closures in Norway, industry consolidation beckons

Renewable Energy Corporation (OSE: REC) started Wednesday trading on the minus as it announced planned temporary shutdowns of up to 50% of capacity of the monocrystalline wafer facility in Glomfjord, Norway. This comes on top of earlier announced measures of a 60% halt at Herøya and REC now expects to produce 105 MW multi- and monocrystalline wafers in Norway in Q1 2012.

Investors first focused on the ”continued weak spot market for wafers”, which was given as the reason for the production halts, but then started hoping these measures are a mere prelude for more cuts and permament closures of the unprofitable facilities. REC’s Singapore factory and US polysilicon facilities operate at full capacity.

On Monday the long awaited industry consolidation seemed to get started as Chinese company LDK Solar Co. made a takeover bid for Germany’s silicon-based solar cells and panels manufacturer Sunways AG. With inverters, modules and solar systems production, Sunways AG is a technology leader in photovoltaics industry and as such obviously interests the Chinese. Sunways and LDK have been cooperating for a long time with LDK supplying wafers to Sunways. LDK has also been making big losses lately.

China US trade spat may provide temporary reprieve to Renewable Energy Corporation

Norway's Renewable Energy Corporation (OSE: REC) is seen as one potential beneficiary of escalating trade dispute concerning solar products between the United States and China. The United States International Trade Commission (USITC) last month agreed to proceed with an investigation on whether the Chinese are dumping solar panels to the U.S. market on the grounds of domestic manufacturers complaining on too low prices from Chinese competitors.

USITC is forging ahead with antidumping and countervailing duty investigations on silicon photovoltaic cells and modules from China with preliminary countervailing duty determination due next week. The move is seen by many as protectionist in nature and has been met with fierce criticism from the Chinese authorities, who in turn accuse the Americans of subsidizing their industry.

Renewable Energy Corporation lost over 80% of its stock market value in 2011 as wafer, polysilicon and solar cell prices all came crashing down on global oversupply and financing concerns. This came on top of continued cost disadvantage that the company’s aging Norwegian factories are at. REC is now aggressively cutting capacity in Norway and if the US were to introduce tariffs on China, REC’s products might become more competitive. REC views the U.S. market as one of the largest growth opportunities in 2012.

Plenty of Renewable Energy Corporation shares up for grabs for the wicked

Pareto Securities acting as the sole manager and bookrunner will attempt to sell between 40 and 95 million shares in Renewable Energy Corporation (4-9.5% of the share capital on REC) before the market opens in the morning.

The timing of the sale comes on the heels of REC’s participation in the Goldman Sachs Clean Energy Conference in New York. It may however prove unfortunate given the disappointing news from the Eurozone, which may cause considerable turmoil at market open tomorrow. Renewable Energy Corporation has also been suffering from weak performance of production facilities in Norway and is planning to shut down capacity. Recently dark clouds have gathered also in REC Silicon, which has been able to subsidize other company divisions with good profits and cash flow. REC share price is currently near all-time lows.

As far as potential sellers goes, Orkla ASA (OSE: ORK), owner of nearly 40% of shares made it clear few months ago, that they aim to divest their holdings in 2012. The second largest owner Hafslund ASA, (OSE: HNA), which currently holds a little less than 9% of shares has previously sold some of its REC holdings. There may be more than one party attempting to sell.

***Update:*** a little under 70 million shares were sold at 3.4 NOK per share. Shortly after the trade Hafslund flagged it had sold those shares and now has under 2% left. REC is down over 10% to 3.2 NOK in early trading. Later during the day, Hafslund also found buyers for the remaining 19 million shares. Plenty of different institutional investors bought shares.

Private investor buys heavily into REC

Dagens Naeringsliv writes that Jens Ulltveit-Moe, a famous Norwegian investor and former Chairman of Petroleum Geo-Services (OSE: PGS) has become the largest private shareholder in Renewable Energy Corporation (OSE: REC). Ulltveit-Moe told DN that he has bought further 100 million worth of shares in REC this week on top of his previously acquired 1.42% ownership to reach 2% of total shares.

Renewable Energy Corporation was up 35% for the rest of the week after releasing its interim report this Tuesday. Some of that advance should be as a result of short covering. Norway's Trade Minister Trond Giske is to hold an emergency meeting with local municipalities in connection with REC’s plans of shutdowns in Norway. Ulltveit-Moe tends to agree with the opinion that REC’s production has no future in Norway.

Comments regarding Orkla's second quarter of 2011

Industrial conglomerate Orkla Group’s (OSE: ORK) quarterly numbers were weighed down by the recent share price decline in Renewable Energy Corporation (OSE: REC) and thus diluted earnings per share were minus 2.6 NOK. For such a wide reaching company like Orkla, obviously there are sectors performing better and worse. It just so happens that REC’s share was up more than 20% today on the heels of a 10% advance yesterday.

As far as group companies are concerned, Swedish extruded aluminium profiles manufacturer Sapa AB continued to show profit growth and Norwegian biorefinery firm Borregaard experienced strong markets. Orkla’s hydropower business returned to normalcy. The sale of Elkem to China National Bluestar Group Co this January still affects comparisons. Orkla got the 12.8 billion NOK receivable from Bluestar during Q2.

Development In branded consumer goods division Orkla Brands was affected by higher raw material prices. There is typically lag before the company is able to pass on those costs to end-user (supply contract lenght issue). Profit was therefore lower for the division than in corresponding quarter of 2010. Orkla says that price rises will be implemented in second half of 2011. Results for Orkla Brands Russia and Bakers were weak. Orkla said last March, that it is planning to sell Bakers, which is Norway’s leading bakery company. The process is still ongoing.

Orkla is guiding for continued high volatility in raw material prices. The company says restructuring of Russian operations will contribute positively. Sapa expects slower growth than in the first half of the year going forward and Borregaard still has favourable market conditions. Second half normally has seasonally lower activity for Orkla companies as a whole. Orkla was up 2% today. Orkla’s full interim report is available here.

REC swings wildly after predictably weak second quarter

Renewable Energy Corporation (OSE: REC) has opened with wild swings after fears of a weak second quarter were realized. EBITDA was down to 871 million Norwegian Kroner from 1449 million and revenues were a little under 3.4 billion NOK, which was down 17% from Q1.

Current cost position is below target for FBR polysilicon and in line with the target in the new 1.3 billion Euro wafer, cells and modules factory in Singapore. REC continues to be able to make money in REC Silicon, its best bet for long-term competitive advantage, this time delivering 55 percent EBITDA margin. The solar market weakened significantly in Q2. Wafer prices were down 21 percent and module prices 14 percent compared to first quarter. The market for solar modules improved in June compared to April and May.

As was announced earlier, cell and wafer production in Norway will be temporarily shut down in the third quarter. REC is taking impairment charges of NOK 6.5 billion mainly in Norway. This pushed the bottom line sharply into negative and loss for the period was -6 681 million NOK. REC feels that current prices have improved competitiveness of solar towards other source and that end-users are now getting attractive value. REC foresees improving operations towards the end of the year.

The stock price has tanked in recent weeks, so pretty much all of these news were priced in. The trading range so far today is from 7.7 NOK to 9 NOK and currently REC is trading up 3% at 8.5 NOK. Full interim report is available here.

Hafslund Q2 2011

Norwegian power company Hafslund’s (OSE: HNA) second quarter results came out on 8th of July. The company had a solid cash flow from normal operations. Hydropower production returned to normal and sales price was up 11% in one year’s time. The float of Hafslund share is very low as city of Oslo and Fortum (OMX: FUM1V) own 53,73 and 34,10 percent of shares in Hafslund respectively.

Hafslund owns 8.93 percent of stocks in Renewable Energy Company (OSE: REC) and REC’s declining stock price has a mammoth of an effect and ate away most of the EBITDA this quarter. In the presentation to analysts in item ’Group cash flow statement’ EBITDA should read including REC or simply EBITDA as opposed to excluding . The REC investment is valued at fair value and the value impairnment charged to operating profit. As of today, REC share price has continued to decline notably.

REC competitor warns

Renewable Energy Corporation (OSE: REC) is down over 6% to another long time low of 8.5 Krone per share after one of its Chinese competitors ReneSola (NYSE: SOL) (ADR) warned its second quarter revenue will miss forecasts by a wide margin due to falling wafer prices and a challenging solar module market. ReneSola believes its situation will be eased by still decreasing manufacturing costs, something REC Wafer factories in Norway will have a hard matching.