REC Group Capital Markets Day 2008

2008 Margin outlook triggers the solar stock to sell off through Blue Monday.
Search underway for a potential expansion site to locate about 25000 MT of polysilicon production capacity.

Beginning with their Capital Markets Day 2008 event on Friday, January 18, 2007, Renewable Energy Corporation ASA (OSL:REC) shares declined 38.6% in two trading days before rallying 13.2% on Tuesday, January 22, 2007.

Per this Reuters report, REC sees margin dipping in 2008, rising from 2009, by Aasa Christine Stoltz, the margin drop in 2008 is caused by a doubling of expansion costs. REC Group CEO Erik Thorsen said:

There is a concentration of ramp-ups (of projects) in 2008, which we will benefit from in 2010 and onwards. That's why we are indicating that our expansion costs will go from 2.5 percent in 2007 and ending at about 5 percent.

While there are eight Capital Markets Day presentations about technology, business divisions, projects, and finance available on the REC website, I found the REC Silicon Presentation by Executive Vice President Gøran Bye the most interesting and relevant.

Here are a few key points from REC Silicon presentation.

REC Silicon projects 125000 to 160000 MT (Metric Tons) of total realistic polysilicon production capacity through 2012 or enough for about 11 to 16 GW (GigaWatts) of crystalline silicon solar modules. In REC Silicon’s view, one-quarter (25%) or less of all announced, planned, and rumored polysilicon capacity expansions by new entrants (Tier 2 and Tier 3) will succeed by 2012.

From 2006 to 2008, REC Silicon forecasts the silane (SiH4) gas merchant market will have greater than 30% CAGR (compound annual growth rate) to about 3000 MT in 2008. Silane gas demand is driven by semiconductors, flat panel displays, and photovoltaics. As reported in Key a-Si thin-film solar cell chemical subject to price pressure by Nuying Huang and Esther Lam at DIGITIMES (subscription may be required), supply fears are increasing silane prices for amorphous silicon thin film module production. REC Silicon plans to leverage the silane demand trend by continuing to service the merchant market and is implementing a take-or-pay, long-term contracts strategy.

Beyond approved investments of about NOK (Norwegian Krone) 6.5 billion or USD $1.19 Billion, REC Silicon announced the search for a potential expansion site to locate about 25000 MT of polysilicon production capacity consisting of four 6500 MT Moses Lake Reference Plant scale facilities with an early 2012 ramp target. In the research note, Renewable Energy: Sell-off represents buying opportunity, Piper Jaffray & Co. Sr. Research Analyst Torben Sommer said:

This new facility will either be located in Iceland, Canada or USA – close to cheap electricity. We expect an announcement later in 2008.

In addition, REC said they are evaluating sites for silane gas production dedicated to (the) merchant market.

I have two closing notes for regular Blog readers.

• GUNTHER Portfolio has joined the featured blogs at Greentech Media.
• I have been getting a lot of emails so it may take a while to get a reply. I try, but I don’t always manage to reply to everyone.

One thing to remember about silane: It’s a gas.