Make REC Great Again!

Below are some immediate thoughts and questions after today’s presentation of Q1. Excerpts from the Q&A session is from Quartr’s autogenerated transcript.

In general, today’s quarterly presentation was, as feared, disappointing. The CEO seemed to be under oversight, with messages needing prior approval.

Lack of communication with the initiative

We sent questions ourselves, and we know others did as well, on why the company has chosen to disregard communication attempts from the initiative. These questions were ignored.

Again, this goes to show that the company simply chooses to ignore a significant part of their shareholders, informally representing something between 15% and 20% of all shares.

Silicon Anodes, nothing new

The fact that management has still not secured anode contracts that could provide prepayments and strengthen the basis for refinancing is disappointing.

The presentation only contained the following statement related to this market:

The accompanying report had a more positive statement

In the Q&A, Levens had the following to say:

Question:

Can you get into more detail on silane sales to the silicon anode market? In the presentation, it stated that there have been delays, but it also makes it sound like that, second half of the year, there will be some increased sales.

Answer:

Yes. I mean right now, from silicon anode manufacturers, it’s across the board. It goes from those that are projecting delays, those that now we know are being delayed because we should have been supplying them by now, to those that have also — recently a smaller one who closed down their facility here in Moses Lake. So it’s kind of a mixture. And we are hopeful, based upon discussions, that we will start supplying in the second half of the year.

Question:

Great. To kind of go on: With that, can you go into more detail on what discussions or offtake agreements REC may have with anode customers such as G14 or Sila nano technology?

Answer:

Well, Yes. I mean, Sila, we had disclosed before that we have a contract with them. And we are again hoping to begin shipments to them in this year, in the second half. G14, again, we would like to supply beyond. We do supply their facility. They’re a smaller facility now. We would like to be able to supply them more here when their facility starts up. So obviously any discussions we have that are ongoing, I don’t want to comment on, other than to say, from our perspective, we would like to be able to supply as many silicon anode producers as we can.

So, again non-committal and relatively vague, but it seems clear, also based on statements from Sila themselves, that volumes will start ramping up from Q3.

As for G14, it seems incredulous to use that they are getting closer to a ramp-up without an agreement for supply of their most important raw material, but what do we know…..

Anyway, while the volumes are unclear and it will take a while to reach significance, some effect on EBITDA seems reasonable to expect starting from Q3.

Polysilicon production and equipment

In the notice to the market of December 30^th, 2024, the following was written:

Production of polysilicon will be discontinued at the Moses Lake facility, while equipment involved in production of silicon gases will be maintained in a safe and recoverable mode that incurs minimal interim costs, allowing the unit to restart with reasonable notice.

In the Q&A, the following was said:

Question

Okay, what is the plan for all the nonsilane-related equipment in Moses Lake?

Answer

Right now all of that equipment has been treated as discontinued operations. It is sitting idle.

That reply says very little about what any plans might be. Has there been any effort to sell the equipment? Do the patents have any value?

Suspicious minds might interpret the answer as an indication that the equipment is idled for a future buyer that might have other ideas….?

No valuation of assets, no pursuit of alternative offers

As noted in the transcript, neither management nor the board has obtained an external valuation of the assets or attempted any form of realization — despite acknowledging that the long-term value of the assets could represent a significantly higher per-share value than the lowball offer.

Arctic, which has provided a so-called fairness opinion in connection with the bid, has previously presented entirely different figures. A quick look through this article – REC kan få monsterkunde i USA –  is illustrative.

According to the Norwegian Public Limited Liability Companies Act, the board is responsible for supervising the CEO, staying informed about the company’s financial condition, and ensuring sound internal controls. Whether they have fulfilled this responsibility and properly assessed the bid with all shareholders’ interests in mind is up to each investor to judge. Hopefully, the financial supervisory authority (Finanstilsynet) and the media will help shed light on the matter.