REC Silicon ASA (RECSI) Earnings Call Transcript & Summary

Welcome to the REC Silicon Conference Call. [Operator Instructions] This conference call is being recorded. Speakers, please begin your meeting.

Hello, everyone. My name is Francine Sullivan. I'm the Vice President of Business Development at REC Silicon. Thanks for joining today. I understand everyone is interested to learn more about our 2 announcements. Today -- we announced today a collaboration with Group14 Technologies in order to build a 12,000-metric ton carbon silicon anode production facility colocated with our Moses Lake site, which will break ground in 2021 and be at full production by 2023. And we also announced another partnership with Violet Power, which is a U.S.-located solar module producer, which is also colocated with our Moses Lake site. And we will work together to create a wafer supply using our polysilicon once we have restarted our Moses Lake plant. So they are our 2 announcements. I believe everyone on the call has probably seen the 2 press releases. So I'm happy to answer any questions anyone has.

[Operator Instructions] We will now have our first question.

This is Johannes Bernreuter from Bernreuter Research. Am I online?

Yes, Johannes.

I would have 3 questions, if I may. The first one, when are you going to restart production in Moses Lake? The second is how much polysilicon production capacity will remain after you have reserved silane capacity for Group14? And the third question is can you share more details on the ingot/wafer link, the player that will connect the steps of polysilicon production and cell production? Those are my 3 questions.

Okay. So for your first one, I -- we were -- these announcements are definitely -- of course, these are our plans in order to backstop the restart. We are not -- we will not be making any announcements about the restart today, but we'll be giving some further indications about that further at our Q3 on October 29. But this -- the Group14 Technologies plant is to be in full production in 2023, so we need to be sort of restarted within good time to supply them. So definitely sometime in the next 18 to 24 months. Now on the second question on the capacities, we have 25,000 tons of silane capacity in Moses Lake, which equates to about 19,000 to 20,000 tons of polysilicon capacity. The Group14 plant is 12,000 metric tons. I'm not in a position to disclose sort of details about the technology and the silicon content, but this is a very advanced silicon anode carbon composite production facility and technology, and these kind of technologies use around 40% to 50% silicon. So we still will have substantial polysilicon capacity left over even after providing them silane.

Good. Can you repeat the last one?

Look, there will -- we will still have significant production capacity for polysilicon even after providing Group14 silane for their plant.

Yes. And did I understand correctly that 40% to 50% could go to Group14 from your silane capacity?

No. I said that these kind of advanced silicon anode composite technologies use a very high level of silicon, but I can't disclose how much Group14 are actually using. So based on the nameplate capacity, they will be adding 40% to 50%. You could assume something around those lines. And then in terms of the ingot/wafer facility with Violet Power, this is very much about kick starting the U.S. solar supply chain. So certainly, we will be looking to build out ingot/wafer in the United States with Violet Power. In the near term, we will be looking to support them through identifying non-China ingot and wafer solutions.

But you cannot be more concrete?

No. We will in time.

Our next question is from the line of [ Andrew Sprunk ].

Yes. Actually, I think you've covered some of the answer that I was looking for in -- with your previous caller. But just in terms of the ingot and wafer, that is something that you're going to be -- the REC is going to be involved in as well? Or is that for Violet Power to organize?

We'll be working very closely with Violet Power, and we will be involved with that, Andrew.

I see. Okay. And that would be to have wafer -- ingot and wafer facilities at the same -- at the site or thereabouts?

That would be the best solution given that's where we are and that's where Violet is adjacent to us as well. And we have access to hydropower in that location, so it was -- is the perfect location to build ingot and wafer. As you know, it's an energy-intensive process, and the solar market is demanding and I think will continue to demand low solar products with a lower carbon footprint. And those -- the prevalent ingot and wafer solutions available on the market right now because they are, predominantly in China, a very, very high carbon footprint product.

Yes. No, I totally get that, but there is also the issue of scale and cost. Can you give us any indication of -- in terms of gigawatt capacity you'd be looking at with Violet and what sort of manufacturing cost you'd be able to achieve, please?

Yes. Well, look, we're still working -- we'll be working through a sort of feasibility study with them on this, but ideally they need to be balanced, and they do not want to be reliant on outside suppliers long term and they want to build out the U.S. supply chain. So -- and I think the sweet -- that's sort of known in the industry that the sweet spot for ingot and wafer to get to the kind of optimal cost is around 5 gigawatts. So I think that would be a good place to get to. Now in terms of cost, we're still working out the numbers but the 2 major imports to make competitive ingot and wafers are low-cost polysilicon and low-cost energy. And at REC in Moses Lake, we have both those factors checked given that at full capacity, we are one of the lowest-cost producers in the world and certainly the lowest true cost producer in the world, and we have the access to the hydropower. So we think we could create a very competitive wafer solution.

[Operator Instructions] Our next question is from the line of Aarvik.

This is Gard Aarvik from Pareto calling. I think you've pretty much answered all my questions. One question still remains from my part, and that's with Group14, is that going to be a pure supply agreement? Or will you also be in post -- or will you have any CapEx or cost of ownership in terms of a plant? Or will it be sort of a JV structure there? Or is it a pure supply agreement with the silane gas?

Yes. Look, we will -- there certainly will be a silane supply agreement there, and there'll be a lease and tie-in agreement that we'll work on as well. We won't share the plant CapEx. That's not in our -- in the plan at this stage but we will certainly work with them to develop the pipeline infrastructure because we will be supplying them the silane drill pipeline with the kind of quantities that they need. That just is the most cost effective and of course, the safest way to do it. Now I think one important point to note is that this is a nonexclusive agreement with Group14, so we do have the ability to supply other battery companies who may be interested in doing the same thing. And as you know, and I think as we disclosed several times, there are several companies that are proposing to scale up and use large amounts of silane in their production.

Our next question is from the line of Paul Strigler.

A question on the ingot/wafer side there. I presume that's going to be monosilicon. And what size of wafers are they targeting?

I think we're still working through those kind of details with them. And yes, it will definitely be mono wafers, Paul. If you look at Violet Power, when they made their announcement about the plant, they gave a few details about their technology, but not that many. But they're looking to do some sort of cool things on the mono side with their cell technology, but you should have a look at their announcement. And I can't -- otherwise, I can't really get too much into the details on that side.

[Operator Instructions] Our next question is from the line of Johannes.

This is Johannes Bernreuter again from Bernreuter Research. I would have a follow-up question regarding the restart of the Moses Lake polysilicon facility. You said in 18 to -- within the next 18 to 24 months, Violet Power is going to start production in the second quarter of 2021. That's roughly 6 months from now. Would Violet Power then source polysilicon in the meantime from a different supplier?

Yes. And we'll work with them on that. They're starting up at 500 megawatts, in accordance with their announcement, and I believe that's what we said in our release as well last night. And so there will be an interim solution. And then the 18 to 24 months, I don't want that to sort of be an estimate that's fixed, that's why I said that we'd give more guidance on October 29 on that. But that's -- of course, we would like to start it up sooner, and we're working hard to get it restarted as soon as possible. But we will work with Violet on an interim solution while we get restarted.

So your plant will then be up and running at the end of 2021 at the earliest?

Yes. I mean until we -- as I said, we're working hard to get it restarted as soon as possible. But these things, they're behemoths, as you know, Johannes. And there's a few things to get organized before you restart them.

Yes. Because I remember earlier data from REC Silicon that the time for restart would be shorter than 18 to 24 months.

Yes. As I said, we will be giving more indication on October 29, and we're working hard to get it restarted as soon as we can.

[Operator Instructions] There does not seem to be any further questions, so I will give the word back to the speaker.

Okay. Well, thanks, everyone, for your interest in our announcements today. And we will provide more information about these at our Q3 on October 29. So thanks for calling in today, and let me know if you've got any additional questions. I believe you all have my details on the notice. Thank you.

This does now conclude our conference call. You may now disconnect your lines.