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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
values in use. This risk is mainly related to market developments,
cost and reinvestment levels. On the cost side it include risks
related to achievement of improvements without investments that
according to IAS 36 Impairment of assets cannot be included in the
impairment tests, as well as the ability to reduce rawmaterial cost
significantly without reducing quality and reliability. The exclusion
of investments that improve or enhance the assets’ performance
had a negative effect on some of the estimated values in use,
especially for REC Singapore.
In the second quarter 2011 the solar market experienced sudden
and significant reductions in prices and demand. This market
development led market participants, analysts and REC to change
their longer term views and assumptions at that time. This
especially related to a downward shift in expected future sales
prices. The cost improvements had not been realized according
to plan in RECWafer Multi Norway and RECWafer Mono. Some
initiatives to further increase quality have decreased expected
future volume and increased cost for RECWafer Multi Norway. In
the second quarter, REC also decided temporarily shut downs of
parts of the multi wafer production capacity and solar cell
production in REC ScanCell. Consequently, REC recognized
impairment charges of NOK 6.5 billion in the second quarter.
Of this, NOK 3.8 billion was RECWafer Multi Norway, NOK 1 billion
was RECWafer Mono, NOK 1.4 billion was REC Singapore and
NOK 0.4 billion was REC ScanCell.
In the third quarter 2011, further impairments of NOK 1.2 billion
were recognized, primarily in RECWafer Multi Norway due to the
permanent close down of parts of the production capacity, the
further depressed wafer market and the uncertainties related to
the continuing wafer operations in Norway. The wafer market
(multi and mono) has remained depressed with further price
declines, and there are considerable uncertainties related to the
ongoing operations of RECWafer. Consequently, the value in use
for the fixed assets of the ongoing operations in RECWafer Multi
Norway and RECWafer Mono have been estimated to zero. For
the ongoing operations, no provisions for losses on contractual
commitments have been recognized. If a decision is taken in a
subsequent period to close down further production capacity,
further losses on contractual commitments should be expected,
and the value of working capital may also be negatively affected.
At the end of the fourth quarter 2011 there was continued
significant uncertainty of the future market developments. The
fourth quarter showed improved demand, but prices continued
to decline. REC and external sources have estimated a further
downward shift in future sales prices compared to the impairment
tests for previous periods. This is the main reason for recognition of
further impairment charges in the fourth quarter of NOK 2.5 billion,
primarily in the REC Singapore operations.
The estimated value in use of the cash-generating unit REC Silicon
is still estimated to be well above its carrying value and the
impairments relates to assets taken out of use.
The impairment charges in “other operations” for 2011 are
primarily related to a technology development agreement with
SiGen for mono wafer cutting.
The fixed assets in the closed down operations in Norway are
recognized at its estimated sales values, or zero if not
determinable, and for a building under finance lease at its estimated
sublease value.
Specification of impairments (continuing operations) for 2010
(NOK INMILLION)
PROPERTY, PLANT,
EQUIPMENT
INTANGIBLE
ASSETS
TOTAL
REC Silicon
6
0
6
RECWafer
11
0
11
REC Solar - ScanModule
-42
13
-29
REC Solar - Other
49
0
49
Total impairments
25
13
38
In 2010, REC recognized minor impairment charges. During 2010
the main part of the expansions projects were finalized. The
development in most operations and market was in line with or
improved during 2010 compared to expectations used in the
2009 impairment tests.
KEYASSUMPTIONS AND SENSITIVITIES
Key assumptions are defined as those to which the units’
recoverable amounts are most sensitive. Key assumptions include
future revenues (sales prices and volume), cost of the major inputs,
conversion costs and efficiency and maintenance capital
expenditures. In addition, future cash flows are sensitive to
successful achievement of design capacity of the equipment,
successful implementation of technological innovations embedded
in these assets and realization of expected future cost reductions
and efficiency and quality improvements of the operations. Through
tuning of equipment and processes, continuous process
improvements, use of improved materials etc, efficiency and
volume is expected to improve and unit costs decrease. The sales
price decreases is also expected to decrease costs of input,
including the cost for maintenance capital expenditure.
Optimization of sourcing of input materials is also expected to
contribute to cost reductions. Changes in key assumptions going
forward will change the estimated recoverable amounts, and may
change the conclusions reached at year-end 2011.