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REC Closes Norway Plant as Cuts Fail to Ensure Profitability

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March 21 (Bloomberg) -- Renewable Energy Corp. ASA, the Norwegian solar-parts maker that halted factories last year, said it will permanently close its Glomfjord wafer plant in Norway after failing to cut costs enough to make it profitable.

REC, based in Sandvika near Oslo, will close the 300 megawatt monocrystalline wafer plant with the loss of 200 jobs, it said in a statement today. While the plant has managed to reduce costs, these cuts have “not been sufficient to ensure profitability in a very challenging market,” Chief Executive Officer Ole Enger said.

European solar-component makers are under pressure from Chinese rivals that expanded output capacity just as consumption slowed, causing wafer and cell prices to plummet. REC and its European peers Solarworld AG and Q-Cells SE have cut production as demand shrinks in the region, where Germany, France and Italy have reduced subsidies to cap booming solar installations.

REC, which had already written down the value of its fixed assets at Glomfjord to zero, will recognize all charges related to the closure in the first quarter, it said. The cost won’t be included in the company’s covenant calculation in its bank loan agreement, REC said.

The Norwegian company said it will also reduce the size of its credit line to 4 billion kroner ($697 million). That compares with about 7 billion kroner at the end of December, according to REC’s fourth quarter report.

The Glomfjord closure is in line with expectations, “as we have already assumed zero production for the Wafer Norway segment from 2013,” Pareto Securities said in an e-mailed note to clients. The reduction in credit line also “indicates that REC is working on a solution for debt maturities, which is positive,” the brokerage said.

Shares in REC rose as much as 5 percent, the most since March 15, and traded 3.2 percent higher at 3.78 kroner as of 11:05 a.m. in Oslo, curbing the decline during the last 12 months to 80 percent.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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