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REC Annual Report 2011
11
Report from the Board of Directors
REPORT FROM
THE BOARD OF DIRECTORS
2011 HIGHLIGHTS
Continued solar market growth, but overcapacity across the
value chain led to steep price decline throughout the year
Strong operational performance with cost reductions
and improved market position
2011 EBITDA decreased to NOK 2,867million - sharp
price decline for all products were partly offset by sales
growth and cost reductions
Net debt reduced by NOK 3.2 billion to NOK 4.7 billion
through the year
Due to the weak market conditions, cell production and
half of the wafer production in Norway was permanently
shut down in 2011
Continued cost reductions enables growth in newmarkets
and solar is fast becoming competitive with conventional
sources of electricity
2011 SUMMARY
Regulatory changes and macroeconomic uncertainty led to reduced
global demand in the second and third quarter of 2011, and overcapacity
in this period led to steep market price declines. In the fourth quarter
demand improved, and according to solar industry analysts, overall
demand for 2011 was in the range of 25 to 27 GW. This represented a
growth of approximately 40 percent from2010 to 2011.
REChas over the last fewyears been through a phaseof construction
and ramp upof significant newproduction capacity, mainly in theUS
and inSingapore. REChas in2011 focusedon cost reductions, further
optimization of assets, and improvedproduct quality across the value chain.
REC Silicon has in 2011 significantly increased production of granular
solar grade polysilicon based on the low cost FBR process. Due to the
challenging market conditions, RECWafer has permanently closed about
half of the production capacity in Norway, and currently operates about
50 percent of the remaining capacity. RECWafer continues to reduce
cost and improve product performance of the wafers produced at the
most modern facilities in Norway. REC Solar has significantly improved
cell efficiency and cost position in Singapore and built market presence
in newmarkets. The RECmodule is recognized as a top performer in the
field, and this is verified through independent tests.
Production of Siemens andgranular polysilicon increased39percent in
2011 to about 19,000MT.Wafer production inNorway decreasedby
11percent to about 1,100MWas productionwas reduced in the second
half year 2011. Moduleproduction increased39percent to about 700MW
in2011, as theSingapore facility continued to increase throughput.
REC’s average selling prices for modules declined 25 percent in 2011
compared to the average price in 2010, wafer selling prices declined
27 percent, and the polysilicon selling prices were down 12 percent. In the
first half of 2011RECWafer continued to deliver wafers under long-term
contracts, but most sales contracts were terminated against cash
compensation in the second half of the year and in January 2012.
RECSilicon significantly increased sales to third party customers through
the year as wafer production capacity in Norway were shut down.
REC’s revenues decreased three percent to NOK 13,366million in 2011.
The revenues were affected by reduced selling prices partly offset by
increased sales volumes in REC Silicon and REC Solar.
2011 EBITDA decreased to NOK 2,867million fromNOK 3,532million
in 2010. Sharp price declines for all products was partly offset by
increased sales of polysilicon and modules and cost reductions across
all business units. In addition, inventory write downs and cost related to
temporary and permanent shutdown of production capacity in Norway
weakened REC’s results.
2011EBITdecreased to negativeNOK9,508million frompositive
NOK1,018million in2010. REC recognizedNOK10,097million of
impairment charges on property, plant, equipment and intangible assets
in2011, primarily inNorway andSingapore, compared toNOK38million
in2010. Depreciation and amortization decreased toNOK2,278million
from2,476million in2010.
Financial items decreased toNOK205million in2011 from
NOK801million in2010. Interest expenseswere significantly reduced and
reduction of the fair valueof the convertiblebond contributedpositively to
the result, offset by reducedfinancial gains due to currencyfluctuations.
REC has estimated an income tax expense of NOK 726million for the
year 2011. The tax expense was incurred despite a loss before taxes
from continuing operations primarily due to impairment charges without
tax effect and non-recognition of deferred tax assets.
REC reports a pre-tax loss from continuing and total operations of
NOK 9,303million and a loss after tax from continuing and total
operations of NOK 10,030million for 2011.
Capital expenditure amounted to NOK 0.7 billion in 2011. Net debt
decreased fromNOK 7.9 billion in 2010 to NOK 4.7 billion by the end
of 2011. Equity decreased by NOK 10 billion to NOK 12.2 billion during
the year, reflecting primarily the loss for the year.
ACTIVITIES
Group Presentation
REC was established in Norway on December 3, 1996, and has grown to
become one of the world’s leading suppliers of solar and electronic grade
polysilicon, and a major supplier of wafers, cells and modules to the
PV solar industry. The Group is also involved in developing PV systems.
The Group headquarters are located in Sandvika, outside Oslo, Norway.