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Solar Market Slump Makes Swift REC Exit Unlikely, Orkla Says

Orkla ASA’s plan to sell its stake in Norwegian solar-equipment maker Renewable Energy Corp. is being stalled by a slump in the solar energy market that’s cut the value of its shares, Chief Executive Officer Aage Korsvold said.

“The chances of getting this type of transaction in the short term aren’t that high, considering the situation both in the financial markets and in the solar market,” he said in an interview in Oslo today. “At this point, it shouldn’t be something that preoccupies Orkla’s management.”

Orkla, based in the Norwegian capital, is seeking to sell its 40 percent stake in REC as it focuses on becoming a dedicated consumer goods company, cutting its range of products from aluminum door frames and industrial chemicals to frozen pizzas and boxer shorts.

Those plans have been thwarted by a plunge in the price of polysilicon, used to make solar panels, and which is currently at its lowest level in at least a decade, according to Bloomberg New Energy Finance. Prices have fallen 13 percent this year after tumbling almost two-thirds in 2011 amid rising competition from Chinese rivals that expanded capacity just as consumption slowed, causing wafer and cell prices to plummet.

“We’re right in the worst part of the solar market decline,” Henrik Schultz, an analyst at Sparebank 1 Markets, said by phone from Oslo today. “They’re now paying the price for the fact that little has happened in terms of asset sales and restructuring.”

Worst Performer

Shares in REC have declined 99 percent since climbing to a record 220 kroner in November 2007. The stock traded 1.2 percent lower at 3.35 kroner as of 1:45 p.m. in the Norwegian capital, making it the worst performer on the OBX benchmark index during the last year and giving it a market value of 3.3 billion kroner ($574 million).

Korsvold, who was named CEO on April 30, declined to comment on an April 26 newspaper report in Norwegian daily Dagens Naeringsliv which said Orkla had been close to selling its REC stake twice during the last six months. He also declined to say how much Orkla is seeking for the shares.

“My impression is that Orkla has been too stingy and not flexible enough,” said Schultz, who has a sell rating on REC.

Korsvold, who took over as CEO after Bjoern Wiggen resigned after a disagreement with chairman and major shareholder Stein Erik Hagen, said his focus will be on selling Borregaard, its chemicals unit, and Sapa, its industrial metals business.

‘Small Engagement’

“REC is a company with many qualities, but in terms of value, unfortunately, it has become a small engagement for Orkla,” Korsvold said. Sapa is now “much bigger and more important” for the company, he said.

Sapa’s sales amounted to 7.7 billion kroner in the first quarter, more than half of Orkla’s total 14.8 billion kroner in revenue, the Oslo-based company said today, as it reported a 56 percent decline in net income.

Shares in Orkla fell 0.7 percent to 40.96 kroner as of 2:10 p.m. in Oslo, extending their decline during the last 12 months to 20 percent.

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