REC Cuts Polysilicon Output Estimates After Power Failure
Stock Chart for REC Silicon ASA (REC)
Silicon production for 2011 will drop to 18,500 metric tons from 19,000 after the halt of REC’s factory at Moses Lake, Washington, after a loss of power yesterday, the Sandvika-based company said today.
“This is related to the power supply that is the local utility’s responsibility,” spokesman Mikkel Toerud said by phone. As insurance covers only a prolonged production shutdown, compensation will depend on how long it takes to restart the plant, he said.
REC Silicon expects it will take two to three weeks before full output can be resumed, the company said. The yield of high- quality silicon and unit costs are expected to be affected in the fourth quarter as a result.
REC fell 3 percent to 4.35 kroner in Oslo trading, the worst performer on the benchmark OBX Index. The shares have fallen 76 percent this year.
“This is not related to REC’s plant and should not reduce client confidence considerably in our view,” Eirik Vegem Dahle, an analyst with Pareto Securities, said in an e-mail. The failure is expected to reduce earnings before interest, taxes, depreciation and amortization by as much as 150 million kroner ($25 million), Dahle said.
Given that the company has had similar problems at Moses Lake before, the loss of confidence among buyers and the potential risk of a future failure may have a larger impact on earnings than the loss of production, Tomas Skeivys, an analyst at Terra Markets AS said in a note.
The cause of the failure is likely different from a similar shutdown at Moses Lake last year, Toerud said. REC will provide an update on the incident at its third-quarter results presentation Oct. 26.
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