Oslo, March 21, 2007: Renewable Energy Corporation (REC) has entered into a long-term agreement for the supply of polysilicon to SUMCO TECHXIV Corporation (STC), a subsidiary of the world's second largest electronic wafer producer. Under the agreement, REC will deliver polysilicon to STC worth approximately NOK 4.8 billion over the next 7 years. REC has also started ordering long lead-time items to secure further expansion of its polysilicon production in 2009-2010.
STC is the new name of Komatsu Electronic Metals after its acquisition by SUMCO Corporation. The agreement replaces one of the agreements taken over when REC acquired Advanced Silicon Materials LLC in 2005, where REC commits supplying polysilicon to a small number of electronic customers.
The new contract, which combines re-negotiated terms of existing supply contracts and an extension of volumes and duration, has a total contract value of up to NOK 4.8 billion. Deliveries will start 2007 and continue until 2013. Additional volume to the existing contract is close to 6,000 MT, which will be supplied during the added years covered by the new contract. Two thirds of the contracted volume is on take-or-pay terms at predefined and increasing prices. Starting in the second half of 2010, volumes above the take-or-pay contract will be delivered at market terms and negotiated annually within a pre-determined price bracket.
Due to improved pricing terms, the average price for REC Silicon's total polysilicon sales is expected to increase slightly more than 15% from 2006 to 2007. Earlier guidance indicated an average price increase of up to 10%.
"This agreement strengthens the relationship between two global market leaders. REC is the world's largest PV-company, while SUMCO is the second largest manufacturer of silicon wafers for electronic applications. By executing this contract, REC Silicon will achieve more operational flexibility than the former agreement allowed, which will enable product mix changes and further optimization of production", says Gøran Bye, Executive Vice President Silicon of REC ASA.
"We are determined to pursue our strategy and commitment to grow solar. However, with our aggressive expansion ambition in polysilicon production, we also see an opportunity in continued supply of some polysilicon volumes to important customers in the electronic segment. This diversification will allow us to further pursue de-bottlenecking opportunities at our Butte plant and potentially reduce production cost further in existing production assets", says Erik Thorsen, President and CEO of REC ASA.
While existing polysilicon expansion projects are running according to plan, REC has also started preparations for the next polysilicon expansion. Decision has been made to invest nearly USD 50 million to procure long-lead items to ensure that additional capacity could come on-stream in 2009/2010.
"We continue to see a positive demand for our products and we have therefore decided to order certain items early to help us reduce project lead-time in a pressured global engineering, procurement and construction market. With our new proprietary and cost efficient granular polysilicon production technology, further expansions within polysilicon production will not only contribute to continued cost reductions, but also provide additional material to pursue expansion opportunities further downstream in our wafers, cells and modules activities", continued Erik Thorsen.
REC is uniquely positioned in the solar energy industry as the only company with a presence across the entire value chain. REC Silicon and REC Wafer are the world's largest producers of polysilicon and wafers for solar applications. REC Solar produces solar cells and solar modules. REC Group had revenues in 2006 of NOK 4,334 million and an operating profit of NOK 1,574 million. Please also see www.recgroup.com
For more information, please contact;
Erik Thorsen, President & CEO, +47 90 75 66 85
Jon Andre Løkke, SVP & Investor Relation Officer, +47 67 81 52 65