REC Silicon Enters Biggest Solar Market With Chinese Venture

REC Silicon ASA will build a polysilicon and silane gas plant in China through a joint venture as the maker of materials used in solar panels seeks to take advantage of growing demand in the world’s biggest market.

REC Silicon, based in Moses Lake, Washington, will pay $244 million for 49 percent of a joint venture with Shaanxi Non-Ferrous Tian Hong New Energy Co., it said in a statement today. Together, the pair will build an 18,000 metric-ton granular polysilicon plant at Yulin, in Shaanxi province.

“This joint venture is a key step in the worldwide growth of REC Silicon and will strengthen its leadership position,” Chief Executive Officer Tore Torvund said in the statement. The plant will also produce 1,000 tons of Siemens-grade polysilicon and 500 tons of silane gas loading, the company said.

REC Silicon, which last year spun off its wafer, cell and panel units to focus on polysilicon output, is seeking to take advantage of thriving demand for renewable energy in China, the world’s largest energy consumer. State support for photovoltaic projects has seen installation costs tumble as China’s government speeds renewables development to curb pollution.

The Oslo-listed company will also avoid Chinese import fees as high as 57 percent levied in response to a U.S. decision in 2012 to impose tariffs on Chinese solar cells. Companies based in China buy more than half the polysilicon they need from abroad.

Shares Surge

REC Silicon, one of the industry’s lowest cost producers, will get upfront payments of $198 million in return for allowing the venture to use its technology. Shaanxi Non-Ferrous will pay $254 million for a 51 percent stake, the companies said in the statement.

REC Silicon doesn’t expect to raise additional debt or sell shares to fund its stake in the joint venture, it said.

Shares in REC Silicon gained as much as 16 percent to 4.196 kroner, the highest intraday level in two years, and where it traded at 4.17 kroner as of 12:30 p.m. in the Norwegian capital. About 83 million shares have been traded so far today, more than double the average daily volume during the past three months.

“As a consequence of the announced transaction and expected receipt of upfront payments, we are of the opinion that REC Silicon’s refinancing issues in 2014 are resolved,” Lars Kirkeby, a credit analyst at Nordea Bank AB, said in an e-mailed note. Nordea upgraded its rating on REC Silicon’s bonds to market perform from underperform.

Yields on REC Silicon’s 9.75 percent senior unsecured note maturing in 2018 declined to 9.4 percent today from 10.1 percent yesterday, according to DNB ASA pricing compiled by Bloomberg.

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