M&A Activity • Feb 26, 2014
M&A Activity
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REC Silicon ASA: Extended announcement in connection with new Joint Venture in China
Sandvika, February 26, 2014: REC Silicon ASA announced today that its
subsidiaries, REC Silicon AS and REC Silicon Inc, have entered into agreements
with Shaanxi Non-Ferrous Tian Hong New Energy Co., Ltd. governing a joint
venture partnership that will expand operations into China.
REC Silicon AS and Shaanxi Non-Ferrous Tian Hong New Energy Co., Ltd. have
entered into joint venture agreements for the formation of a production joint
venture and a sales joint venture. REC Silicon Inc and Shaanxi Non-Ferrous Tian
Hong New Energy Co., Ltd. have entered into a technology transfer agreement,
governing the terms under which REC Silicon Inc will transfer the exclusive,
non-transferrable right to use its technology in China and Taiwan to the
production joint venture.
The production joint venture will construct and operate a new plant for the
production of silane gas, solar and electronic grade polysilicon, utilizing REC
Silicon's next generation fluidized bed reactor (FBR) technology.
The new plant will be located in Yulin, in the Shaanxi Province, and is expected
to have capacity of 18,000 metric tons of granular polysilicon, an additional
1,000 metric tons of Siemens polysilicon, and 500 metric tons of silane gas
loading.
As part of these agreements, REC Silicon expects to receive upfront payments
from Shaanxi Non-Ferrous Tian Hong New Energy Co., Ltd., totaling US$198 million
(net of taxes) in March and August of 2014, for the production joint venture's
rights to use its technology. As the production joint venture will have
ownership of the technology rights, Shaanxi Non-Ferrous Tian Hong New Energy Co.
Ltd. will be reimbursed by the production joint venture which will secure debt
financing for the reimbursement instead of being funded by additional
contributions from either party. Upon receipt of these payments and the issuance
of necessary licenses for the production joint venture to conduct business, REC
Silicon, Inc will begin to transfer necessary technology and operating
procedures to the production joint venture.
REC Silicon will contribute US$244 million to acquire a 49% equity interest in
the production joint venture. REC Silicon expects to make its capital
contribution in three installments on the following schedule: US $75 million in
September of 2014; US$15 million in August of 2016; and US$154 million in August
of 2017. To acquire a 51% interest in the production joint venture, Shaanxi
Non-Ferrous Tian Hong New Energy Co., Ltd. will contribute US$254 million in two
installments, on a similar schedule.
REC Silicon does not anticipate taking on any additional debt nor offering any
new equity rights in order to fulfill its investment obligations in the joint
venture. Receipt of the upfront payments will allow REC Silicon to meet its
2014 debt obligations and increase REC Silicon's financial stability.
The production joint venture will be governed by a board of four directors, with
REC Silicon and Shaanxi Non-Ferrous Tian Hong New Energy Co., Ltd. each
appointing two directors. For the first three-year term, REC Silicon will
appoint the Vice Chairman of the board and both the Chief Financial Officer and
Chief Technology Officer; Shaanxi Non-Ferrous Tian Hong New Energy Co., Ltd.
will appoint the Chairman of the board and the Chief Executive Officer. During
the second three-year term, REC Silicon will appoint the Vice Chairman of the
board and the Chief Executive Officer of the production joint venture; Shaanxi
Non-Ferrous Tian Hong New Energy Co., Ltd. will appoint the Chairman of the
board and the Chief Financial Officer of the production joint venture.
Thereafter, appointment of those four positions will rotate between Shaanxi Non-
Ferrous Tian Hong New Energy Co., Ltd. and REC Silicon every three years.
REC Silicon and Shaanxi Non-ferrous Tian Hong New Energy Co., Ltd. have also
entered into an agreement for a new sales joint venture that will be established
close to the start up of the production joint venture. The term of the sales
joint venture is six years, and each party will own a 50% equity interest.
Capital contributions of the respective parties will be determined closer to
incorporation. This sales joint venture will be responsible for the marketing
and sales of all products from the new production joint venture and all
equivalent products from REC facilities in the US.
The sales joint venture will be governed by a board of four directors, with REC
Silicon and Shaanxi Non-ferrous Tian Hong New Energy Co., Ltd. each appointing
two directors. For the initial three-year term, REC Silicon will appoint the
Chairman of the board and the Chief Executive Officer; Shaanxi Non-ferrous Tian
Hong New Energy Co., Ltd. will appoint the Vice Chairman of the board and the
Chief Financial Officer. In the second three-year term, REC Silicon will
appoint the Chairman of the board and the Chief Financial Officer; Shaanxi Non-
ferrous Tian Hong New Energy Co., Ltd. will appoint the Vice Chairman of the
board and the Chief Executive Officer.
Tore Torvund, CEO of REC Silicon ASA said, "I am excited to announce this
strategic alliance with an ideal partner. This joint venture is a key step in
the worldwide growth of REC Silicon and will strengthen its leadership position
in the industry. It demonstrates the value of our technology and allows us to
expand our capacity without requiring REC Silicon to use its current assets or
to raise other funds in order to make its capital contribution."
REC Silicon is recognized in the industry as a leader in technology and
efficient production, and it brings this proven technology along with production
experience to the new joint venture. Shaanxi Non-ferrous Tian Hong New Energy
Co., Ltd. is a wholly owned subsidiary of Shaanxi Non-Ferrous Metals Holding
Group Co., Ltd., a well established Chinese company with assets in excess of
US$17 billion.
Investor call:
Later today, REC Silicon ASA will host an investor conference call with the
possibility of questions and answers at 2:30 CET. Please make sure to dial in
at least 5-10 minutes ahead of time to finalize your registration.
International dial in: +44 (0)20 7136 2056
Norway Toll Free: 800 56054
UK Toll Free: 0800 279 5004
USA Toll Free: 1 877 280 2296
China Toll Free: 10800 712 2769
Please provide confirmation code 6136722 and state your name, company and
country of residence.
After the investor conference call, for subsequent media inquiries, please
contact:
In EU and China:
Tore Torvund
+1 509-793-8581
In the US:
Ryan Dunn
+1 (509) 793-9020
About REC Silicon ASA
REC Silicon ASA is a leading producer of advanced silicon materials, delivering
high-purity polysilicon and silicon gas to the solar and electronics industries
worldwide. We combine 25 years of experience and proprietary technology with the
needs of our customers and annual production capacity of more than 20,000 MT of
polysilicon from our two US-based manufacturing plants. Listed on the Oslo Stock
Exchange (ticker: REC), the company is headquartered in Moses Lake, Washington
and employs approximately 740 people.
For more information, go to: www.recsilicon.com
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
[HUG#1764369]
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