REC Climbs as Polysilicon Gains Boost Debt Prospects: Oslo Mover

Renewable Energy Corp ASA, the solar maker facing excess capacity and falling demand, climbed in Oslo as a faster-than-expected recovery in polysilicon prices improves the prospects for its debt restructuring.

The Sandvika, Norway-based company gained as much as 4.9 percent to 1.45 kroner and traded 1.6 percent higher as of 12:01 p.m. That extends the stock’s gain to 86 percent since falling to 0.7555 kroner on Feb. 11, the lowest level this year.

“Polysilicon prices have started to recover at a faster pace than we anticipated,” Pareto Securities ASA said in a report today. “The positive trend could continue as the market now looks more balanced, supported by strong demand growth coupled with supply curtailments.”

Prices for photovoltaic-grade polysilicon, used to make solar panels, climbed 3.2 percent to an average of $18.58 a kilogram last week, researcher PV Insights said on its website yesterday. That comes after jumping 7.1 percent a week earlier, it said.

“Although REC still has a challenging debt situation, it should be easier to solve with the positive market sentiment,” said Pareto, which has a hold recommendation on the stock.

REC has about 3.1 billion kroner ($534.4 million) of debt maturing in 2014 and refinancing will probably be announced within the next six months, SEB Enskilda AB credit analyst Henrik Blymke said in an e-mailed report today. REC will be about 400 million kroner short of cash to meet all its obligations according to the broker’s estimates, he said.

‘Quite Optimistic’

REC is in talks with banks about changes to covenants on a 2 billion-krone credit line maturing in April 2014, Chief Financial Officer Kjell Christian Bjoernsen said on Feb. 8. The solar maker must also refinance a 320 million-euro convertible bond and a 650 million-krone fixed-rate note due in 2014.

Chief Executive Officer Ole Enger is “quite optimistic” REC will be able to refinance its debt, he said on Feb. 8, without giving further detail. His company, like European peers Solarworld AG and Q-Cells SE, is under pressure from Chinese rivals that expanded capacity just as demand slowed, causing solar-wafer and cell prices to plunge. Cuts in renewable-energy subsidies in France, Italy and Germany also hit sales.

REC will probably report first-half earnings before interest, tax, depreciation and amortization that will miss the 300 million-kroner cut-off point set by its banks, according to analyst estimates compiled by Bloomberg.

The company will post Ebitda of 37.3 million kroner in the first quarter, according to the average of seven estimates, and 84.9 million kroner in the second quarter, according to the mean of six estimates.