REC secures 'milestone' contract

Moses Lake considered for future expansions

OSLO, Norway — A new long-term agreement has the parent company of an expanding Moses Lake facility looking ahead to future expansions.

Renewable Energy Corporation (REC) announced Wednesday it has entered into a long-term agreement for the supply of polysilicon to SUMCO TECHXIV Corporation (STC), a subsidiary of the world's second largest electronic wafer producer.

"This is an important milestone for us," said Kurt Levens, REC vice president of business development. "It is the largest contract we have ever signed, and it's a very strong affirmation on our business, business conditions and what our customers and major consumers think about our approach to our business. So, it's very positive."

Under the agreement, REC will deliver polysilicon to STC worth approximately 4.8 billion in Norwegian krone (NOK) over the next 7 years. To support further expansion in polysilicon production, REC has also started ordering long lead-time items for its next project.

The new contract combines re-negotiated terms of existing supply contract and an extension of volumes and duration. It has a total contract value of up to NOK 4.8 billion. Deliveries will start in 2007 and continue until 2013.

Levens said the contract does not directly impact any of the Moses Lake $600 million expansion announced last year, or future expansions.

"In fact, what it does is it complements it," he said. "Indirectly, what it signals is we have a very robust demand for our products and our offering and purity levels. The competitive nature of our product allows us to be able to enter into these sort of agreements. It's very long-term; we're looking at seven years."

Due to improved pricing terms, the average price for REC Silicon's total polysilicon sales is expected to increase slightly more than 15 percent from 2006 to 2007. Earlier guidance indicated an average price increase of up to 10 percent.

"This agreement strengthens the relationship between two global market leaders," REC Silicon CEO Goran Bye said in a release. "REC is the world's largest (photovoltaic) company, while SUMCO is the second largest manufacturer of silicon wafers for electronic applications. By executing this contract, REC Silicon will achieve more operational flexibility than the former agreement allowed, which will enable product mix changes and further optimization of production."

While existing polysilicon expansion projects are running according to plan, REC has also started preparations for the next polysilicon expansion. The decision has been made to invest nearly $50 million in U.S. dollars to procure long-lead items to ensure additional capacity could come on-stream in 2009/2010.

Levens said the company expects to be able to make a decision concerning further expansion activities sometime before the end of the second quarter of 2007.

"The purpose of buying the longer lead-time items was to shorten the time between us making the decision and our ability to deliver product into the contract," he said. "(Moses Lake) is a possibility, I can say that."