REC ASA Invests NOK 13 billion in Singapore

June 19, 2008 by Jeff Shepard

Renewable Energy Corp. ASA (REC) has decided to invest close to NOK 13 billion in the first phase of an integrated manufacturing complex for production of wafers, cells and modules in Singapore. The investment is funded through debt financing and own cash flow. Production is expected to commence in the first quarter 2010, and reach full capacity of 740 MW of wafers, 550 MW of cells and 590 MW of modules before 2012. The annual consolidated revenues from these volumes are expected to be NOK 10-11 billion in 2012. The investment decision covers the first (Phase I) of several planned development phases.

"This investment supports REC’s position as a leading provider of highly competitive solar energy solutions, and in achieving our main corporate goals of reducing costs and securing profitable growth. The project cost levels should enable us to compete profitably at grid-parity prices in several markets, which is essential in building a robust business case", said Erik Thorsen, President & CEO of REC ASA.

The company states that it has carried out extensive value engineering over the past nine months, which has significantly reduced the capital expenditure for Phase I as well as secured the interdependency towards subsequent development. The investment decision for the next phase is expected in 2009.

"Our entry into Singapore ensures continued revenue growth beyond the significant growth to come from all the ongoing capacity expansions across all REC’s business activities. Based on this expansion, REC should be producing ~2,400 MW of wafers, ~780 MW of cells and ~740 MW of modules in 2012, and this will secure a significant presence for REC in key solar markets," said Thorsen.

The solar plant will be based on multicrystalline technology, and the integrated business model secures volume off-take and margins as well as an in-house base for product development across the value chain. REC has already secured supply of polysilicon through its ongoing expansion in Moses Lake and Butte, and other necessary raw materials to facilitate the expected production levels. The estimated capital expenditure of close to NOK 13 billion allows for contingencies and cost escalation due to inflation, and also includes a yet unallocated project reserve.

The investment will be funded through operating cash flow and existing and new credit facilities. REC has signed a mandate for a fully underwritten facility from ABN AMRO, BNP Paribas, DnBNOR, Nordea and SEB covering new loans and guarantees of NOK 10 billion at market terms. Over the past year, REC has allocated 75 man-years to pre-engineering activities, which has resulted in significant improvements both in terms of flexibility and costs. A more compressed site optimizes land utilization and reduces pipe racks and distances between the factories, and this has in turn reduced the capital expenditure and the interdependency of the development phases. Agreements have already been reached for all construction permits.

REC has now assigned approximately 40 employees to work with the Singapore-project in Norway and on-site in Singapore, and expects that this number will increase significantly during the next few months. An on-site office was established in April. REC has also signed Letters of Intent with all EPCM-partners, including costs and schedules as well as incentive structures. The investment decision also triggers agreements securing procurement for the bulk of (90%) equipment supplies where cost and delivery schedules are determined. REC will immediately commence detailed engineering and early construction and piling, with the target of commencing ramp-up of production early 2010.