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Renewable Energy Declines to Record Low on Forecast

Renewable Energy Corp. ASA, the Norwegian maker of solar-energy components, fell to a record low in Oslo trading after predicting lower earnings this quarter.

Renewable Energy, known as REC, fell 6.87 kroner, or 20 percent, to 27.61 kroner, the lowest since the initial public offering in May 2006.
Earnings before interest, taxes, depreciation and amortization will be “significantly lower” in the first quarter compared with a year earlier amid lower prices for solar modules and wafers, the Hoevik-based company said.

This is “really bad news for the case of earnings expansion in 2010,” Einar Kilde Evensen, an Oslo-based analyst at DnB NOR Markets, said in a note to clients. He recommends investors sell the shares.

REC had a fourth-quarter loss of 1.05 billion kroner ($178 million), compared with a profit of 1.11 billion kroner a year earlier. Analysts expected, on average, a profit of 110 million kroner, according to a survey.

Lower sales prices, impairments and plant expansion costs hurt earnings. REC took an impairment charge of 1.5 billion kroner in the fourth quarter, mainly from its so-called mono wafer and module businesses and its Sovello plant in Germany.

‘Difficult Year’

“2009 was a difficult year for REC,” Chief Executive Officer Ole Enger said at a presentation. “2010 will be demanding, especially in the first two quarters.”

Next year’s earnings should be “much better” because all the company’s plants are expected to be in full production, he said in an interview.
About 75 percent of REC’s assets were in ramp-up last year and about 50 percent will be in 2010 as the company expands production at all its business units, including wafers, cells and modules, to exploit demand for energy that doesn’t emit carbon dioxide, a gas blamed for global warming.

REC said today it sees a 20 percent decline in wafer prices in the first quarter compared with the fourth quarter.

“The prices have probably flattened out. Recently we’ve seen some small increases,” Enger said.

Negotiations on about 10 long-term contracts with REC’s wafer customers will be carried out on a quarterly basis, Enger said. The contracts, which last about five years, were signed in 2007 and 2008 at predetermined prices and volumes when prices were higher.

The world’s largest maker of polysilicon used in solar panels said it expects polysilicon production to reach 12,000 metric tons this year. Output was 7,023 tons last year, short of the company’s target of 9,000 tons.

–Editors: Jonas Bergman

To contact the reporter on this story: Vibeke Laroi in Oslo at +47-22996144 or vlaroi@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at +49-30-70010-6221 or htromm@bloomberg.net