Renewable Energy Corp. ASA (REC), a maker of solar-energy components in Norway, slumped the most on record in Oslo trading after it unveiled 4.25 billion kroner ($712 million) of charges and other costs for the second quarter.
REC collapsed by as much as 30 percent, the most since it began trading on May 9, 2006. The Sandvika-based company also said in a statement today it would seek to raise 1.3 billion kroner by selling new shares to help bolster its finances.
“They’re making a quite large provision,” said Haakon Levy, a DNB Markets analyst. “That’s surprisingly large to many and myself included. The question is how they handle that.”
REC’s fortunes, and those of the solar industry, contrast with the optimism when it listed six years ago. The company, now down 98 percent from the initial public offering price, leapt as much as 24 percent on its first day of trading after selling shares at the top of a range of 88-95 kroner. The offer was Norway’s biggest since Statoil ASA almost five years earlier.
REC fell 29 percent to 2.06 kroner by 10:12 a.m. in Oslo.
European solar-component makers are pressured from Chinese rivals that expanded capacity as demand slowed, causing wafer and cell prices to plummet. Demand shrank as France, Italy and Germany reduced subsidies to cap booming solar installations.
REC, reducing production to cut costs, will book a charge on the value of its wafer plant in Singapore of about 3.5 billion kroner before a further drop in module prices. The company will also recognize about 750 million kroner in expenses related to the closing of wafer production in Norway.
Remaining costs related to the closure are expected to be about 966 million kroner, with 403 million kroner booked in the second half and the remaining 563 million kroner later, it said.
Share sale proceeds will be used to redeem 100 million euros ($125 million) of convertible bonds, fund investments and strengthen the balance sheet, REC said. It will refinance bank debt into a new 2 billion kroner facility maturing May 2015.
“This will allow management to turn focus away from short- term cash management and shut down of Norwegian operations, to utilizing and creating further value with its industry leading position in polysilicon,” Pareto Securities ASA wrote in a note. It is “an attractive refinancing proposal for CB holders. The refinancing is also highly supportive for REC’s bonds.”
Chairman Jens Ulltveit-Moe’s Umoe AS company bought 266.7 million new shares in the offer. Canica AS, controlled by board member Peter Ruzicka, bought 106.7 million shares, REC said.
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