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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
RECWafer
REC decided in the fourth quarter of 2011 to permanently close
down the three oldest multi production lines, Herøya 1&2 and
GlomfjordMulti. Furthermore, approximately 60 percent of the
remaining multi production capacity has been temporarily closed.
In 2011, the spot sales prices for multicrystallinewafers declined by
approximately 70 percent from the peak at the end ofMarch 2011.
Themonocrystalline price development has seen a similar trend. The
spot prices at the end of 2011 are believed to be below the cash
cost of themarginal producer, mainly due to the need to reduce high
inventories throughout the value chain. During 2011 and in the
beginning of 2012most of RECWafer’s long-termsales contracts
have been terminated against settlement fees. Consequently, future
sales will be based on the prevailingmarket prices for wafers either
through spot sales or market based contracts.
REC expects that after the significant price reductions in 2011 and
expected reduction of production capacity for wafers, the wafer
prices will improve somewhat in the nearest years, followed by
reductions in subsequent years.
The cost improvements for both RECWafer Mono andMulti have
been slower than planned for. However, positive results have been
realized at the end of the year by extensive improvement work, and
quality has improved. Still, RECWafer Mono andMulti plants have a
weak cost position compared to the industry and need to make
significant further improvements to become competitive.
Estimated conversion cost improvements included in the impairment
test are built on the performance improvements observed, expected
scale advantages and detailed action plans for the first years. The
significant sales price decreases are also expected to decrease costs
of input, includingmaintenance capital expenditure.
Volume in 2012 is negatively affected for RECWaferMulti Norway by
the temporary close down of production capacity. In the impairment
test it is expected that production starts up in full fromthemiddle of
2012. Production volumes in subsequent years are expected to
increase somewhat year-on-year due to process improvements. For
RECWaferMono one of the key issues is to increase the productivity
of the ovens through operational improvements and further
implementation of the recharge process. This is expected to
substantially improve the production output and correspondingly
reduce the cost per unit. For RECWaferMono, the utilization of the
newproduction equipment is still in an implementation phase, and
volumes are expected to increase year-on-year.
For RECWaferMulti andMono, the capital expenditure in the terminal
year is estimatedbasedon the initial investment, useful life and an
expectation of significant reducedprices onmachinery andequipment
(50percent). Technical infrastructure is expected tobe reinvested at
100percent and thebuildings are not expected tobe reinvested.
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 at year-end 2011.
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.
REC decided on March 20, 2012 to permanently close down
RECWafer Mono (see note 33).
REC ScanCell and the closed down parts of the
RECWafer Multi Norway operations
The fixed assets in the closed down operations in Norway are
recognized at its estimated sales values, if determinable, otherwise
zero. A building under finance lease is recognized at its estimated
sublease value.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
INVESTMENTS IN ASSOCIATES
(NOK INMILLION)
2011
2010
At January 1
174
146
Share of profit/loss in associates
-4
1
Impairment
-93
0
Share of profit/loss of associates
-97
1
Investment in associates
0
0
Exchange differences
-4
27
At December 31
74
174
08