Moses Lake, WA 98837, USA

REC posts loss, but CEO still optimistic

MOSES LAKE — Norway-based REC Silicon posted a loss of $9.6 million on revenue of $58.9 million for the second quarter of 2018 (April-June).

And if the international market for polysilicon doesn't improve in the next year, REC Silicon will have to consider suspending operations at its Moses Lake facility, according to company President and CEO Tore Torvund.

“We will evaluate suspension in Moses Lake,” Torvund said during a conference call late Wednesday night (Thursday morning in Oslo). “A shut down is a possibility, and it might happen if there is no improvement in (the third and fourth quarters).”

“I don't think it is very likely,” Torvund continued. “We have sufficient liquidity, strong Butte operations. This can keep the company going until PV (photovoltaics) comes back.”

“Butte is doing very well, silane is strong. It's the most important part of the business now,” Torvund said.

REC Silicon recently laid off roughly 100 employees and reduced production of polysilicon at its Moses Lake facility to 25 percent of capacity after China slapped tariffs on polysilicon — used to make silicon wafers for solar panels — preventing U.S. polysilicon makers from selling to the Chinese market.

China produces roughly 90 percent of the world's silicon wafers.

Torvund and REC Chief Financial Officer James May said the company is being kept afloat by strong sales from its silicon gas unit in Butte, Mont. Silicon gas, or silane, is used to make semiconductors, display panels, and other electronic devices, and is not affected by the 2011 Chinese tariffs or the ongoing trade war.

“We have sufficient liquidity to maintain operations for 12 months at 25 percent capacity,” May said.

In addition to the Moses Lake and Butte facilities, REC also has a 15 percent stake in polysilicon facility in Yulin, China.

Torvund also said REC is not in discussions with anyone about selling the Moses Lake facility.

“That would not be advantageous to our shareholders,” Torvund said of a sale.

Torvund is somewhat optimistic about future demand for polysilicon. He said the Chinese government stopped subsidizing its solar industry and around 30-40 percent of Chinese polysilicon production has shut down.

“China's government has taken away subsidies to force consolidation in the solar industry,” Torvund said.

In fact, across the world, as production and installation costs for solar power products have fallen, governments have stopped subsidizing solar production and have begun taxing it, Torvund said.

“It's a strange development, and a lot of change,” he said.

Average world prices for polysilicon have fallen to around $11.13 per metric ton in July from over $15 per metric ton at the beginning of 2018, according to REC. The company expects prices to remain at this level for the rest of the year, though as the Chinese industry consolidates and as some of the tariffs fall, Torvund expects prices to eventually begin to rise.

In fact, Torvund said he's already beginning to see signs.

In the short term, Torvund said the company is talking with its customers in Taiwan to “find a competitive price” and “undercut the market to get customers as long as the trade war continues.”

If REC can hold on long enough, Torvund believes the company is well positioned as one of the world's lowest cost producers of polysilicon to take advantage of the market when it recovers.

“Our job is to survive as a company,” he said. “Focus on the short term to still be viable in the long term.”


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