REC Silicon chiefs sound off on expansion

Moses Lake was always favored location

MOSES LAKE — Three years ago, the company known as Solar Grade Silicon (SGS) was nearly bankrupt.

Last year, after Renewable Energy Corporation purchased the majority of interest in the company's owner, Advanced Silicon Materials LLC, the company began doing business as REC Silicon.

On Tuesday, REC board members in Oslo, Norway, announced that Moses Lake would house a new facility for a $600 million expansion. REC's third and newest plant, including 85 to 90 new jobs, will commence construction later this year and be operational by 2008, more than doubling the company's polysilicon production.

"The turnaround has been fantastic," REC Silicon CEO Goran Bye said. "The market has been very good to us, but the people (working) here have also changed their ways of working and put in the extra effort. It must be very rewarding for them. I hope so."

Bye said the company decided to locate in Moses Lake, where it already has 250 people who are professionals in running the kind of plant the expansion will create and because of the presence of infrastructure. While the same number and quality of people and same type of infrastructure exists in REC Silicon's facilities in Butte, Mont., which was also considered, power prices made Moses Lake more desirable.

"This new plant will be only the third of its kind in the world," he said. "So if we were to build in America, there was no doubt that it would be either here in Moses Lake or Butte, and out of those two locations, Moses Lake was the most attractive."

Power prices drove that decision, Bye said, even without a long-term contract with Grant County Public Utility District. REC Silicon signed a letter of commitment with the PUD earlier this month. Bye said the letter was signed in faith and hope that the PUD will continue to be good stewards of their resources.

"I think it's quite clear that we will need to see that they really have a long-term view on their resources, and I think that might be one of the most important issues that the PUD has to look at now," Bye said. "When are they running out of local resource and how can they start acquiring more local resource before that happens?"

Bye said that there hasn't really been more to that discussion, as the focus has been on starting the expansion project. REC is accepting that PUD has good local resources, a good financial situation and has customer service policies and rate schedules, which is as good as it gets for the time being, he said, and was enough to convince the REC board to make its decision.

"The support we have got from (PUD) has been very, very good," he said, stressing that he does not want to be negative toward the utility district; it's just a topic of conversation that tends to come up in discussions about the expansion.

Members of the REC board visited both locations to get a better feel of each site while considering, but Bye said the decision was made more on his and REC Silicon senior vice president Tor Hartmann's recommendation, as the board was spending more time evaluating potential foreign locations.

Bye said the company is still considering other locations for further expansions.

"We need to look 30 years ahead now in this industry, and I very much doubt that the fourth plant will be built in North America," he said.

Butte was a possibility when the site evaluation process began, Bye said, but the company was wary of that location once they looked at the prices of electricity and development, and a situation in Butte where "you in reality have a monopoly on the power supply, but then a deregulated monopoly. That was simply not good enough to build a 30-year business plan on."

In April, Bye said it was probable that the expansion would locate in Moses Lake.

"We in REC Silicon have a bias for Moses Lake," he said Thursday morning. "That was not only power prices, but also we do feel welcome."

Many agencies and individuals expressed "warm" feelings toward the company, Bye added. Timing was also on the company's side, because a decision needed to be made to get the expansion going, and the "fruits of this labor" will not be seen until late 2008. If another half-year had been spent trying to find the best foreign location, he said, that would have delayed the expansion at least that long.

"The time to market is essential now," he said.

Hartmann said the response from the community following the announcement has been very good, with various representatives from the state and area offering their continued support.

Ground will break for the new facility in a ceremony in July or August, with some foundation work being done later this year. Hartmann added 2007 will be a year of heavy construction, with as many as 1,000 people working on the site.

"I think that's something that we need to sit down and discuss with the local officials, the impact on the community," he said, adding where the work force comes from will be a factor.

Bye added that REC began listing on the Oslo Stock Exchange for the first time May 10, which increases the company's visibility in the global financial community.

"America is as interested in following solar shares and the solar sector as Europe is," he said, stressing that no parts of the company are available for purchase in the U.S. "Because of that (initial public offering, or) IPO, which was, by the way, the largest IPO in Norway (in) four years or so, we have the financial muscle to actually invest in this plant. This is a significant investment for REC, and we'll put it to good use."

Hartmann said he feels very good about reaching this point, and noted that while a lot of work has gone in thus far, he also understands the amount of work required in the future.

Bye called the expansion a major construction effort and a major new plant. He said REC Silicon will try to minimize the disturbance to the rest of town as much as possible, but there will be lots of people and activity.

"I think Moses Lake should be a little bit proud that they're on the map," he said. "This will not be the largest polysilicon plant in the world, but it won't be far from, and it's going to be the most modern."