REC to double down on Moses Lake investment

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Charles H. Featherstone/Columbia Basin Herald | REC Silicon plans to sell its Montana facility and use the proceeds to retool the Moses Lake plant, which has been shuttered since summer.

FORNEBUVEIEN, Norway — REC Silicon is mulling the sale of its Butte, Montana plant in order to increase its investment in the company's currently shuttered Moses Lake facility.

“We have decided to divest and use the proceeds to develop Moses Lake,” said company President Tore Torvund during REC's third quarter earnings report early Wednesday.

REC ceased production of polysilicon for solar panels in Moses Lake in July after years of prohibitive Chinese tariffs beginning in 2013 effectively blocked the company from its major customers in China. China produces over 90 percent of the world's wafers used in making solar panels, and because of its patented technologies, REC's Moses Lake facility is one of the lowest cost producers of solar grade silicon in the world.

“Almost all polysilicon made ends up in China. They have complete dominance in making wafers,” Torvund said.

However, Torvund also said there is currently a global glut in solar grade polysilicon keeping prices down and forcing companies like his to struggle for a share of the market. “It was definitely right to shut down Moses Lake,” he said. “We should have done it sooner.”

The Butte facility, which makes higher quality, electronics grade polysilicon using an older process, has been generating the company's only real cash flow in the last few years. However, Torvund said semiconductor silicon is not part of REC's core business, the market for electronic grade polysilicon is “growing decently” but is mature and lacks opportunities, and the company doesn't have the resources to make needed investments and upgrades to Butte.

A sale would also “strengthen” REC's balance sheet and allow the company to pay off roughly $110 million in debt associated with Butte, Torvund said.

“REC seeks to be debt-free,” Torvund said.

However, Torvund refused to disclose what REC would consider “an acceptable price for Butte.”

“It is necessary to test the market. But we are not selling below a certain level, and we have already received a lot of interest,” Torvund said of the Butte facility. “We will not do this in a hurry, but in an orderly fashion.”

Until then, REC will continue to operate the Butte facility and keep Moses Lake “in a condition to restart,” Torvund said.

If Butte is sold, Torvund explained the proceeds from the sale would be used to finish work on a new production system in Moses Lake to create electronics grade polysilicon using the company's fluid bed reactors — a continuous process that uses roughly 10 percent of the electricity needed by older batch processes to make polysilicon.

“It's a complicated technology but it's really efficient. It's why we want to keep Moses Lake,” he said.

“(The new production system) needs another $30 million to $50 million to finish it,” said Francine Sullivan, REC's vice president for business development.

Electronics grade silicon is much higher quality than solar grade and is used in computer chips and flat panel displays.

REC still wants access to the Chinese market, Torvund said. While he has been in contact with the U.S. Trade Representative's office, Torvund said he doesn't know whether REC's concerns about Chinese tariffs are part of the Phase One agreement President Donald Trump was set to sign with Chinese President Xi Jinping at the Asian Pacific Economic Council summit in mid-November.

The Chilean government canceled the summit on Thursday following days of anti-government demonstrations.

Torvund said the company is still looking at alternate “value chains” for its products, including use as an anode in rechargeable batteries. Tesla has been using silicon oxide in some of its most efficient batteries, and Torvund said silane — a group of chemicals with silicon and hydrogen atoms at their base — is the future.

He also said REC has been in talks with three companies working on silicon battery technology seeking to relocate to Moses Lake to get ready access to REC's silane production.

“It will be a huge market if it materializes, but it will not happen overnight,” he said.

For the third quarter of 2019, REC Silicon reported a loss of $5.6 million on revenue of $36.4 million, which includes $2.2 million in severance payments made when most of the Moses Lake staff was laid off, Torvund said. The company currently has $46.2 million in cash on hand.

In Wednesday trading on the Oslo Børs, Norway's stock exchange, the value of REC's stock fell 5.7 percent to end trading at 3.23 Norwegian kroner, or 35 cents, per share.

Charles H. Featherstone can be reached at cfeatherstone@columbiabasinherald.com

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