* REC to separately list solar and silicon firms
* To move solar to Singapore, silicon to United States
* Q2 underlying operating loss better than expected
* Japan, China seen driving growth
By Balazs Koranyi and Terje Solsvik
OSLO, July 18 Loss-making solar equipment maker
Renewable Energy Corporation will split in two, raise
cash and move out of Norway, hoping that its beefed up halves,
relocated into the centre of growth markets, can ride out the
REC said it would sell off its solar panel division to
existing shareholders, move it to Singapore with no debt and
ample cash, and recapitalise its silicon unit so it can manage
its debt before it moved to the United States.
The deal, pending approval by shareholders and bond owners,
would quickly make both new entities takeover targets as the
solar arm would have no debt while the silicon arm would have
the cash to service debt for several years to come.
The solar equipment industry has been in the doldrums for
years as Europe's economic woes, falling government subsidies
and Chinese overcapacity have dragged prices down, while a trade
dispute between China, the United States and the European Union
has made uncertainty almost permanent.
That dispute flared again just hours after REC announced its
split, with China issuing preliminary anti-dumping duties on
imports of U.S. and South Korean solar-grade polysilicon. The
move would sharply hit REC's sales from its U.S.
REC shares, once the darling of the Oslo bourse but down 98
percent since its 2008 peak, surged as much as 25 percent on the
split plan, but gave back the bulk of that gain when China
unveiled the new trade barrier.
"By separating these two companies into two very well
financed companies, we think we are positioning ... for organic
growth as well as the possible consolidation and restructuring
of the industry," Chief Executive Ole Enger said on Thursday.
"Overall, the solar industry is still very fragmented, it's
poorly financed and certainly ripe for consolidation."
REC has already closed its expensive Norwegian manufacturing
base, moving production to Singapore and the United States,
regions that will generate the vast majority of the market's
growth in the coming years.
The struggling firm, which made a net loss of 447 million
crowns in the second quarter versus expectations of a 297
million crown loss, last year had to raise cash and take out a
new bank loan when bondholders rejected a restructuring plan.
CLOSER TO CUSTOMERS
With the sale of the solar business, underwritten by its
biggest shareholders, REC will raise 800 million crowns,
retaining 500 million and providing the solar arm with 300
million crowns in net cash.
The deal would leave existing shareholders with a stake in
two separate entities that would be listed in Oslo but
The split would raise solar arm's cash to 2.1 billion
crowns, above the 1.9 billion needed to pay off its 2014 bond
and convertible bond next year, putting in the clear until 2016.
REC's silicon division produces a variety of ingredients for
solar panels, semi-conductors and optical devices.
"We see a continued positive demand development mainly
driven by Japan, China and the United States," Enger said. "Even
more importantly, we also see an increased demand in almost
every country in Asia, as well as Africa and South America."
HSBC expects global solar installations to rise by 18
percent this year as Japan and China more than offset 30 percent
fall in Europe. For 2014, it expects global growth at 7 percent,
accelerating to 11 percent in 2015.
"This is a very good solution," Eirik Dahle, an equity
analyst at Pareto Securities said. "The two units don't really
have much to do with each other and now they'll be able to
concentrate on their individual businesses."
"Most importantly, this will make Silicon a more attractive
takeover candidate, as a buyer would not need to later divest
Solar," he added in a note.