REC Slides as Output Cuts Signal Lower Prices Ahead: Oslo Mover

Renewable Energy Corp. (REC), the Norwegian solar maker grappling with excess capacity and falling demand, declined the most in almost a month in Oslo after announcing production cuts at its Moses Lake plant in the U.S.

Shares in the company fell as much as 13 percent to 1.186 kroner, the biggest intraday drop since Dec. 17. The stock traded 11.1 percent lower as of 12:20 p.m. in the Norwegian capital, making REC the biggest loser on the Oslo Stock Exchange’s (OBX) All-Share Index after Biotec Pharmacon ASA. About 57 million REC shares have been traded so far, 80 percent more than the daily average in the past three months.

The Norwegian solar manufacturer, based in Sandvika near Oslo, plans to temporarily cut Siemens-based solar grade silicon output at its Moses Lake factory by 2,400 metric tons, resulting in the loss of 46 positions, it said in a statement yesterday.

“Under these current economic conditions it is not viable to continue production when market prices for the Siemens solar chunk production have fallen well below the cost to produce it,” said Tore Torvund, head of REC’s Silicon unit.

REC and other makers of polysilicon, the main raw material used in solar panels, are struggling with low prices after Asian peers expanded, leading to supply outpacing demand growth.

The production cuts come as “no surprise,” Pareto Securities ASA said in a note to clients. REC’s average cash cost is about $22 per kilogram (2.2 pounds) compared with a current spot price of about $16 per kilogram, the broker said.

‘Price Indication’

“In the long term this is an indication of where they see demand in 2013 and also where they see prices,” Andreas Strand, an analyst at ABG Sundal Collier Holding ASA, said by phone from Oslo. The cuts “imply that they do not see a very steep price recovery, at least not up to $25 per kilo.” Strand has a sell rating on the stock and a target price of 1 kroner.

The market probably won’t return to balance before “at least” 2014, REC’s Chief Executive Officer Ole Enger said in October. The company, which had net debt of 1.9 billion kroner ($342.7 million) at the end of the third quarter, has sought to bolster its finances by curbing costs.

The group reported net income of 408 million kroner in the third quarter after the bankruptcy of its Norwegian wafer unit, with continuing operations yielding a loss of 452 million kroner. REC will present its fourth-quarter results on Feb. 8.

To contact the reporter on this story: Josiane Kremer at jkremer4@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman in Oslo at jbergman@bloomberg.net

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