* Norwegian producer takes $1.2 bln writedown after price
* Industry consolidation, flattening prices expected
By Gerard Wynn
LONDON, July 19 A $1.2 billion write-down by
solar equipment maker REC on Tuesday highlighted the
pain being inflicted by aggressive Chinese competition and may
herald wider consolidation in the sector and flattening of
REC produces equipment across the supply chain from slices
of raw, solar-grade silicon, called wafers, to finished solar
But prices for wafers have almost halved since April,
forcing REC to mothball its older Norwegian facilities and take
a 6.5 billion Norwegian crown ($1.2 billion) write-down, in a
possible foretaste of wider provisions and consolidation.
"You've got a shakeout starting now," said Gerard Reid,
clean energy analyst at Jefferies bank in london.
"You want to have an industry which has 10 manufacturers
maximum, not 400," referring to over-capacity.
China and Taiwan have emerged as dominant centres for
production of silicon solar equipment, with a market share of
about 60 percent in 2010, up from 50 percent in 2009, S&P said
in report earlier this month.
"This growth is responsible for the current substantial
over-capacity in the industry supply chain," the report said.
Prices for solar-grade silicon are down about 40 percent
over the year, and panels, called modules, about a fifth.
Top Chinese module makers are now selling at about $1.50 per
watt, compared with $2.25 on average in 2009.
Wafers have fallen fastest partly because of a developed
spot market meaning product is less tied up in long-term
"Certain companies are just going to go bankrupt, they just
can't compete," said Reid, who said significant write-downs were
possible at German producer Q-Cells , and saw further
falls in REC shares despite a 12 percent rally by midday.
On the positive side, REC had market-leading, U.S.
polysilicon facilities, said Barclays Capital analyst Rupesh
Madlani, which could become the main focus of the company.
REC has lost 60 percent of its value since February while
solar stocks have underformed wider clean energy and benchmarks
in a long-run slump reflecting the margin squeeze.
The United States and European countries support renewable
energy including solar power to confront the twin threats of
security of energy supply and climate change. But governments
have tinkered with policies, creating a stop-start market.
Italy, the world's number two market, curbed demand earlier
this year, leading to the latest slide in equipment prices.
Italy finally announced in May smaller subsidy cuts than feared.
"What happens next all depends on how much demand picks up
in Germany, Italy and the U.S.," said Matrix clean energy
analyst Michael McNamara.
REC chief executive Ole Enger saw wafer prices bottoming
out. Data gathering website energytrend.com
recorded a rally in spot silicon and wafer prices this week.
REC's Tuesday stock rally may show investors trying to find
the bottom of the dip, said one investment analyst who declined
to be named.
Solar power is still far more expensive than fossil fuels,
despite the price falls, while the discovery of cheap shale gas
has further dented the economics of renewable energy.
A nuclear backlash after Fukushima may boost coal and gas as
much as renewables, says the International Energy Agency.
($1 = 5.607 Norwegian Crowns)
(Editing by David Cowell)