Renewable Energy (REC) (REC.OL) has entered into a new long-term agreement for supply of multi-crystalline silicon wafers to Taiwan-based Neo Solar Power. Under the agreement, REC will deliver wafers worth more than US$450 million.
The agreement, which runs until 2015, is structured as a take-or-pay contract which pre-determined prices and volumes for the entire contract period.
"Including this latest contract, most of our wafer production for 2010 has now been sold. This should give us a relatively good visibility on revenues and earnings going forward", says Erik Thorsen, President & CEO of REC.
The deliveries will start with limited volumes in 2nd half of 2009 and increase over the contract period. Prices are predetermined to go down over time and will depend on the customer’s ability to utilize thinner wafers.
Change of Expansion Plans
REC also announced changes to its new Singapore expansion project ("Plant IV") initially announced in April 2007. The decision was mainly driven by 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 metric tons (MT) annually, while still securing all internal and external polysilicon commitments.
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, REC said.
REC said 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 US$1 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.
"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.
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.
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