REC to Split Silicon and Solar Business into Independent Companies
Renewable Energy Corporation ASA (REC) announced that it will divide the company into two entities, launching the Silicon and Solar divisions as independent, listed companies. Both companies are expected to be industry leaders in their fields and through the planned financial transaction REC will ensure a strong financial base which will provide a competitive advantage and a solid fundament for both companies going forward. According to Ole Enger, CEO & President of REC, dividing the company along the segment lines will place the two new entities in favorable positions to capture future growth.
"Solar has become a highly competitive source of energy and we strongly believe the solar industry will experience significant growth over the coming years. We recognize that it will be increasingly demanding to grow and maintain a leading position with a vertically integrated business model. By launching a pure play solar company and a pure play silicon company, both companies will be in a favorable position for attracting capital, and well equipped to streamline the market approach and stay in the forefront in terms of technology development," says Ole Enger.
Launching the separate entities will be done through a financial transaction where REC offers 100 percent of the shares in REC Solar to the existing REC shareholders. In the transaction, REC Solar is valued at NOK 800 million (EUR 102 million) and the offering is fully underwritten by the largest shareholders of REC.
REC Solar will be provided with a net cash position of NOK 300 million (EUR 38 million) and apply for a listing at the Oslo Stock Exchange. With an equity ratio of 67 percent, REC Solar will be uniquely positioned as one of the few debt free solar panel suppliers in the industry. REC ASA, will further strengthen its balance sheet through receiving proceeds of NOK 500 million (EUR 63 million) from the transaction. After the transaction, REC ASA will hold net debt of about NOK 1.7 billion (EUR 216 million) and with have an equity ratio of about 53 percent. The transaction is pending approval by the REC shareholders through an Extraordinary General Meeting and by the REC bondholders.
The announcement to launch the new solar and silicon companies coincides with REC releasing its second quarter results marked by increased demand, higher selling prices and overall improved earnings for the company. Revenues from the quarter ended at NOK 1,544 million (EUR 203 million), up 21 percent from the previous quarter. EBITDA was NOK 152 million (EUR 20 million) in the second quarter, up from NOK 46 million (EUR 6 million) in the previous quarter. EBITDA for REC Solar was NOK 75 million (EUR 10 million) and for REC Silicon NOK 106 million (EUR 14 million).
Further price increase on polysilicon is expected over the next quarter, and strong solar panel demand growth from Asia means the outlook for the industry is positive. For REC's large network of close, long-term partners and wide range of stakeholders, the move to separate the Silicon and the Solar businesses will not impact the interaction with REC, as the two business segments both have complete separate organizational set-ups, including operations, R&D, sales & marketing. The REC brand and trademark will in the continuation be owned by the new REC Solar company, headquartered in Singapore under CEO, Ã˜yvind Hasaas, while the parent company and the associated silicon business will be rebranded in due time.
"With these new entities, we are able to launch two independent and strong companies in an industry which is rapidly maturing. The current senior management of the solar and silicon segments will head up the new companies after a transition period. There are no other plans to change locations or alter the number of staff in the two new organizations, as maintaining the high competence level and strong global market position is of utmost importance to us, underlines Ole Enger.
The current corporate headquarters in Sandvika - Norway, will after a transition period will be downsized significantly, with corporate functions and roles transferred to the new head offices in Singapore for the solar business and the US for the silicon business.