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REC Silicon ASA (OTCPK:RNWEF) Q2 2020 Antithesis Appointment Alarm July 23, 2020 2:00 AM ET

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Company Participants

Daniel Stenslet – Arctic Securities

Tore Torvund – CEO & President

James May – CFO

Conference Alarm Participants

Daniel Stenslet

Good morning, everyone, and adequate to the additional division alive webcast with REC Silicon hosted by Arctic Securities. My name is Daniel Stenslet. I assignment as an disinterestedness analyst actuality at Arctic, and I will abstinent this session.

With me today, I accept CEO, Tore Torvund; and CFO, James May, who anon will booty you through the highlights from the additional quarter. Afterwards their presentation is concluded, we will move into Q&A, and I appetite you all to use the babble action on the right-hand ancillary to accelerate the questions forth the way so that we can blanket up with a Q&A affair appear the end.

And with that, I anticipate we’re accessible to activate the presentation, and I will leave the chat to Tore and James.

Tore Torvund

Good morning, and adequate to the Q2 presentation for REC Silicon. It will be James May, our CFO and myself, who will booty you through the numbers today. And on the screen, you will now see the highlights. We added the revenues during this division to $31 actor compared to $24.7 actor in the aftermost quarter. And also, the EBITDA became afresh $2.9 actor against $1 actor in Q1 of this year. Also, the banknote antithesis went up by $1.3 million. So we accept $31.6 actor in banknote in the coffer for the moment. And the basic acumen for these absolute numbers is that we awash added silicon gas in the aftermost quarter, we came in at 831 metric ton. Also, we awash added polysilicon, semiconductor polysilicon, which came in at 203 metric ton during this quarter.

Due to the COVID-19, there is annihilation new apropos the denial of Butte. We accept still several absorbed parties, but they accept not been able to biking to Butte due to the coronavirus, and that’s why we are still awaiting on the denial of the Butte plant. Apropos the COVID-19, we accept had no cases aural our Moses Lake bulb nor on our Butte plant, and we accept austere restrictions to accumulate it that way. And hopefully, we will not accept any cases. But as you know, in the U.S., the cardinal of cases are still growing, and it is absolutely all-important with austere restrictions additionally in the advancing months.

You will see that we accept an crime of $23 actor and James will explain you the accommodation abaft this. But the acumen is that we accept afresh connected the charter for automated gas in Moses Lake. The basic acumen for this was that we accept afresh adjourned contract. And in case we are action to restart, we are action to extend the affairs of automated gas.

On the added hand, there is a bargain allegation from the automated gas during the aeon — in a abbreviate aeon of time. And that — this is done to abate the amount in — aback Moses Lake are at the present state.

Next. The key metrics: We awash 385 metric ton of polysilicon, and the account decreased by 151 metric ton. Assembly came in about according to what we had aftermost quarter. Semiconductor assembly came in a little bit less. The basic acumen for this is that we’ve prioritized authoritative Float Zone, which is the aerial end, but it takes somewhat added accommodation to aftermath this quality. And the actual absolute affair is that, in fact, we awash 13.8% added silicon gas than we did in the above-mentioned quarter.

Next. Aback we attending into the all-embracing bazaar for semiconductor, if you attending to the right-hand side, which is basically the anticipation for IC or the chips — microchips in the industry and we came, let’s say — and this is from a report, as you see appear there. In January, the industry anticipation it should be about $380 billion in acquirement or in about-face aural this area. If you appear aback to — if you go to April, you see that the anticipation was afresh lower. But in June, the optimism still are increasing, and it is basically now affected that 2019 will be somewhat like 20 — or 2020 will be somewhat like 2019. It is basically due to the actuality that the amount of chips has increased, while the aggregate comes down, which shows that there is somewhat lower supply, and the address is somewhat higher. But added or less, the bazaar is declared to be collapsed compared to ’19 and ’20, but still, there is a lot of ambiguity as said.

From our side, we have, as you saw, a about able Q2 and so far in Q3, it seems that the trend is about the same. We see that we don’t address the volume, but particularly, the gas silane is strong, but the arch allotment of it is what we alarm specialty gases, breadth we are in some of those qualities. We are not able to bear as abundant as the address out in the marketplace.

Next. Yes. As you see then, the silicon gas, we were at 831, which is in band with what we delivered, except for in Q1. So basically, let’s say, we are aback to the akin we commonly should be at. And as I said, we see abiding address additionally so far in Q3. It doesn’t beggarly that we couldn’t accept any surprises. But so far, Q3 seems to be agnate to what we accept accomplished in Q2.

On the absolute side, the Chinese bazaar we accept been — it has been a accurate tax on silicon gas into China. China has afresh bargain this tax from 10% to 7.5%, which is also, let’s say, not a cogent reduction. And I additionally accept told you beforehand that China is not that important for silicon gases, but you can see that as a positive, let’s say, adumbration from the Chinese government.

If you go to the abutting one. We delivered 203 metric ton in Q2 compared to 85 in Q1. As you see that the amount came bottomward 8.6%, that’s mainly a mix issue. We awash added electronic-grade polysilicon compared to — and afresh beneath Float Zone and that’s why the amount came bottomward compared to Q1. It is not that the bazaar in itself beneath in Q2 and in Q1.

We apprehend that we are action to bear added in the additional bisected than what we accept done in the — or advertise added in the additional bisected than in the aboriginal half. And there, you can see that the Chinese, in fact, has bargain the accurate assignment on U.S.-produced polysilicon — semiconductor polysilicon from 25% to 0 during this quarter. It ability be looked at as a absolute development in the accord amid the 2 or added likely, it can be looked that the Chinese needs high-quality polysilicon, which is not accessible to accomplish in China as of today.

We absolutely focus on the high-end Float Zone. We are one out of 2 companies able to aftermath this quality, and that’s breadth we basically now focus our production. Decidedly additionally because the ability prices in accompaniment of Montana is about low during the summertime.

Then I duke over to James to go through the numbers.

James May

Good morning. As Tore indicated, I’ll analysis the banking achievement for the additional division of 2020. As Tore declared earlier, the revenues for the additional division of 2020 added by $6.3 actor to $31 actor during the additional quarter. This admission is abundantly a aftereffect of the college sales volumes at the Semiconductor segment, and I’ll altercate those in a few minutes.

Total EBITDA for the division was $2.9 million, which compares to EBITDA of $1.0 actor during the aboriginal quarter. This represents a additional beeline division of absolute EBITDA. While we’d like to see it at higher, clearly, it demonstrates our success in adjusting to a very, actual arduous business environment.

Within the Semiconductor Materials segment, revenues for the additional division were $30.7 actor compared to $24.5 actor for the aboriginal quarter. Absolute polysilicon sales aural the articulation were 323 metric bags compared to 88 metric bags in the above-mentioned quarter.

Solar-grade polysilicon sales added from alone 3 metric bags in the aboriginal division to 119 metric bags in this quarter. The college mix of solar-grade polysilicon sales had a affecting appulse on the all-embracing boilerplate prices, which decreased by some 139%. Semiconductor-grade polysilicon sales added from melancholia lows of 85 during the aftermost quarter, to 203 metric bags in the accepted quarter, which is added in band with the abiding averages that we’ve seen. Boilerplate prices for semiconductor sales decreased by 8.6%, but this is due to a mix of articles awash as Tore indicated. Recall from the aboriginal division that there was a aerial allotment of sales in the accomplished amount Float Zone grades of polysilicon. Overall, however, the basal prices for any specific brand of polysilicon abide abundantly banausic from the above-mentioned quarter.

Higher silicon gas sales volumes added by — or silicon gas sales volumes added by 101 metric bags to 831 metric bags for the quarter, while boilerplate prices for silane gas beneath by 7.6% compared to the above-mentioned quarter, due primarily to a college allotment of sales into the lower allowance PV and the basal collapsed console affectation bazaar segments, while the basal amount has remained about unchanged.

EBITDA contributed by the Semiconductor Materials articulation was $9.4 actor compared to $8 actor in the above-mentioned quarter. The admission in antithesis is primarily attributable to the college sales volumes of silicon gases.

Within the Solar Materials segment, revenues are due to baby — shipments of baby amounts of the actual account from the FBR ability and resulted in revenues of $300,000 for the quarter. The EBITDA accident contributed by the Solar Materials articulation was $2.3 actor for the quarter. As you can see, we abide to abate expenditures as we analyze opportunities to save costs. The Added and Elimination segments, it came in at a net amount of $4.1 actor for the quarter, which was banausic compared to the aboriginal quarter.

Cash balances added by $1.3 actor during the additional quarter. Banknote outflows from operations were $5.1 actor included — and included the EBITDA of $2.9 million. $900,000 admission in alive basic invested, which consisted of a $2.4 actor admission in barter receivables due to the college sales volumes compared to the aboriginal quarter. $2.2 actor abatement in inventories accompanying to 151 metric bags of polysilicon and afresh a $700,000 abatement in payables and added accruals. In addition, the aggregation paid absorption of 800 — or $8 million, which consisted of $1.7 actor on abiding leases and $6.3 actor on the chief anchored bonds. In addition, we accustomed acquittance of another minimum taxes in the United States of $2.7 actor and acclimatized chump rebates of $1.9 million.

We additionally accomplished a $700,000 accretion due to the appulse of a weaker U.S. dollar on banknote deposits denominated in Norwegian kroner. Banknote outflows from advance activities were $400,000, which is a aftereffect of basic expenditures of $300,000, an admission in belted banknote balances of $300,000 and afresh these were account by the cancellation of $200,000 associated with accessories — the acquittance for accessories that was damaged to the chump side.

Cash inflows from advance activities were $6.8 million. This included the acquittal of abiding charter liabilities of $1.4 actor and afresh the gain of $8.3 actor for a accommodation accustomed beneath the Coronavirus Aid Relief and Economic Security Act or the CARES Act. The accommodation program, which is alleged the amount assembly affairs — or Amount Protection Program, provided condoning businesses with funds to pay up to 8 weeks of amount costs, can be acclimated for assertive added operating expenses. The affairs has aback been connected from 8 to 24 weeks. The funds beneath this affairs accept been provided, and we are advertisement them in the anatomy of loans. However, they may be absolutely or partially forgiven aback acclimated to pay for condoning expenses, and absolution is basically based aloft advancement agent headcount and bacon levels.

In total, banknote balances added by $1.3 actor to $31.6 actor on June 30. Nominal net debt added by $34.4 actor during the division to $210.3 million. The better admission in the nominal debt is due to the modification of the abiding charter that Tore mentioned earlier. Absolute leases added by $24.6 million, the majority of this was $25.8 million, which was associated with the accumulation of candy gases to the Moses Lake facility. A brace of things to point out about the charter is that the absolute charter asleep at altered dates, but the aboriginal one actuality in February of 2021. Next, that cessation included capabilities that we bare — that we charge in acclimation to advance the bulb in its accepted status. The new charter extends the charter aeon through December of 2028.

The admission in the charter accountability for these leases was $25.8 million, which is the disciplinarian abaft the admission in the net accustomed amount of the Solar segment, which resulted in the $23 actor of impairment. Also, this charter contains an advantage for aboriginal abortion if the FBR bulb is not in operation at December — in December of 2023. If the charter appellation concluded in December of 2023, the admission in the charter accountability would alone be about $5.5 actor and crime would accept been about $4 million.

Additionally, the charter payments are about $2 actor lower on an anniversary base than they were beneath the old lease. So in summary, this charter lowers the banknote breeze requirements to advance the Moses Lake ability in its accepted cachet and ensures that we accept the adequacy to advance the bulb over the connected run in a nonoperating status, and it maintains the all-important adequacy to restart the FBR ability over a about abbreviate aeon of time and to admission bulb gases at a favorable amount afterwards it’s restarted. The added ample admission in nominal debt was due to the CARES Act loans of $8.3 actor that I discussed on the antecedent slide, and afresh the actual $1.5 actor admission in nominal debt can be attributed to the appulse of a weaker U.S. dollar on the apology loan, which is denominated NOK.

Nominal net debt added by $33.1 actor to $178.8 actor due to the admission of $34.4 actor in nominal debt, that I aloof discussed, account by the admission in banknote of $1.3 actor from the antecedent slide. In acceding of the accidental liabilities, there’s been no abundant change in any of the — our expectations associated with payment. With account to the 2012 acreage tax appeal, an appeal’s audition was captivated on July 7, the Court adumbrated that it would aphorism in the accustomed course, which is accepted aboriginal in the fourth quarter. And this development is aural the time frames we’ve ahead presented. There are no added changes to the apology or the tax accountability from above-mentioned periods.

With that, I’ll about-face it aback to Tore to altercate U.S.-China barter relations.

Tore Torvund

Yes. Thank you, James. Okay. Apropos the U.S. trade, there is nothing, let’s say, in accurate to report. The China has not yet implemented the Phase I agreement. We accept been in affiliated discussions with USTR. USTR will accompany this up in the accustomed affairs they accept with the Chinese. But China, according to what has been appear to us, say basically that they are not yet in breach. This is a 2-year agreement. But there is no acumen for, let’s say, to apparatus it yet due to the COVID-19 issue.

So annihilation new on this. We all apperceive that the astriction amid the U.S. and China has or accept added afresh due to the coronavirus and the agent of the COVID-19. So it is actual ambiguous if we are action to accept a resolution or not. It’s added ambiguous today than it was in the aftermost quarter.

Trump administering has been actual articulate that if it’s not action to be implemented, polysilicon is of cardinal accent and there will be a advance to afresh reshore or onshore the amount alternation to either the U.S. or to countries alfresco of China.

We aloof saw the advertisement that aural the semiconductor, TSMC, which is the above supplier out of Taiwan, has already afresh absitively to body a huge hub in the U.S. And there is no agnosticism that, let’s say, the apple-pie energy, decidedly solar, it’s of accent in the U.S. Q1 was abundant stronger than advancing in the U.S., and it continues to be advancing about 15 gigawatt to be installed in the U.S. in 2020.

So the Trump administering has basically said that we are very, let’s say, absolute to reshore this industry if there is no acceding with China. And likewise, Biden, which ability be the — or which will be the another if Trump will not be reelected, he has additionally been actual bright that fabricated in the U.S. is actual important in his policy.

If you afresh go to the — abutting the PV bazaar outlook, it has been a lot of focus on the blooming hydrogen calendar in Europe if you apprehend the abstracts there. Aback it comes to hydrogen, there is 3 case or 3 sources of hydrogen. You accept the blooming hydrogen, which is based aloft sources, renewable sources. You accept the dejected hydrogen, which is accustomed gas, breadth you, let’s say, inject or you could booty out the carbon dioxide and actuate it somewhere. And you accept the amber hydrogen, breadth you basically — that’s breadth best of the hydrogen advancing from today, breadth you abstract it from accustomed gas and you aloof afford the carbon dioxide.

Green hydrogen is what is preferred. That agency that it has to be a amazing advance in solar and wind in Europe aloof to accomplish that hydrogen. And in their — let’s say, in the papers, it is about EUR 340 billion in solar and wind investments for the abutting decade, which should accomplish 120 gigawatts of renewable capacity.

So if the, let’s say, blooming hydrogen calendar will be implemented, that would beggarly that there is a amazing advance additionally action to appear in solar in Europe. At the aforementioned time, you see that the coronavirus, additionally in Europe, they are adorable into reshore or to basically body up afresh a accomplishment accommodation aural solar, added or beneath all its accommodation now confused to China, but absolutely the blooming calendar additionally calls for a lot of new employments in Europe.

So — and aloof recently, we saw one aggregation now action to advance for some 8 gigawatts of solar beef in Germany. At the aforementioned time, we see that carbon brand seems to be actual focused. We accept the French archetypal breadth solar panels with low carbon brand has a exceptional in the market. And South Korea has now implemented the aforementioned thing, breadth carbon brand will afresh command somewhat college prices of solar panels. And as you know, Chinese solar panels do not attempt on acceding of, I would say, carbon footprint, decidedly polysilicon, which is fabricated out of low-energy atramentous in the Xinjiang arena has a actual aerial carbon footprint.

The Biden attack has promised a apple-pie action revolution, arch to 100% apple-pie action by 2035. You ability say that seems to be unrealistic. But Trump, absolutely supports U.S. manufacturing. Biden will absolutely abutment a apple-pie action anarchy in the U.S. Altogether, definitely, there is no agnosticism that the solar will be a actual important action antecedent in the abutting decade.

Next. And you will afresh see that this is from the right-hand ancillary solar ability Europe. In 2020, the bazaar could be amid 76 gigawatts to 138. I anticipate the accord today is about 110 to 115, but afresh you ability see that aural the abutting 4 years, added or less, this ability about bifold and a actual able advance are accepted in 2021 and onwards.

It’s not alone the European Union. U.S. will absolutely increase. China seems to be stable, about 40 gigawatts, while additionally Asian Pacific and the Middle East has a able cull into PV. And the basic acumen is absolutely that the amount of PV now are aggressive with the alternatives. And in addition, the focus on the altitude change is overextension about the globe.

That agency that, if you go to the abutting one, that the polysilicon bazaar may already be in antithesis in 2021. In my aftermost presentation aftermost quarter, we accepted that to appear in 2022. But the present accommodation for polysilicon abutment about 150 gigawatt and it will either be a curtailment in the end of 2021 or in 2022, if there is not action to be new investments on this.

To be added actuality in Xinjiang breadth best all — if you go to the abutting one, yes. Let’s say, these are the 5 better companies, and you see, I accept accustomed the names of the 5 better in China. They are all either amid in Xinjiang arena or in abutting Mongolia. Aloof recently, what, 2 of those companies had a above adventure and explosion. And 2 of these companies ability be out of operation amid 2 and 6 months. On top of that, the Xinjiang arena is additionally beneath political analysis due to the affected action affair affiliated with the vigors in that area.

But anyway, you will see that in, let’s say, if you amalgamate all the bearing accommodation now of the silicon, China will have, in 2022, about 450,000 metric ton. Alfresco of China, the alone accommodation now actual is in the U.S. It’s in Germany. South Korea has abeyance their capacity, but there is still some accommodation in Sarawak in Malaysia.

Put all calm after new expansions, there will be curtailment of polysilicon than already in 2022. Afresh to accord you a abbreviate amend on our advance in China. There is annihilation abundantly new on this slide, if you attending to the position to capitalize the growing PV industry. The FBR-B reactors now are active actual able-bodied in Yulin, and we are bearing actual high-quality polysilicon, which now has additionally been accustomed by the better mono-wafer aggregation in China. We are actual aflame about the affection we are able to do now on these reactors.

And as you know, we are authoritative afresh actual high-quality semiconductor-grade polysilicon at the amount which is bisected what is accessible by the Siemens’ reactors. If we were to accomplish some investments in Moses Lake, we would ambition the semiconductor bazaar with FBR in Moses Lake. We accept adjourned with our accomplice in China. We were due to pay $4.7 actor in the end of May. We accept now agreed that this $4.7 actor can be adjourned because of the banking issues we accept in our company. And we are accepting an acceding that we abide to accept the aforementioned befalling in ’20 — or in January 2021 to admission our affairs from 15% to afresh 49%. We additionally accept connected abutment out of Moses Lake to Yulin and we are aloof signing a new acceding with Yulin to accumulate that abutment for the blow of 2020. They still charge a lot of abutment to be able to accommodated the abstruse challenges and targets for the plant.

The assembly in Q2 was 29 metric ton of loaded silane, 1,063 metric ton of FBR and 19 metric ton of Siemens out of Yulin. And we are active the bulb at a low amount because there is basically, let’s say, some issues about what we alarm the FBR liner accumulation into China. The FBR liner, which is a actual appropriate liner acclimated in the FBR reactors, are bogus in the U.S., and there is a adjournment in accumulation of those liners to China. If you go to the abutting on the array side. If we attending to the right-hand side, let’s say, the bazaar accepting scorecard. As we know, there is a lot of rumors about new able batteries out there. If you attending to the silicon anode appear the bazaar accepting scorecard, there is no agnosticism that one or the most, let’s say, abstruse developed technology now is basically to add silicon to the anode side. It aloof came out yesterday, additionally in R&D cardboard in the Holland, breadth they accept now been able to use 100% silicon on the anode side. And by accomplishing that, they added the ability of the array by some 70%.

We are, for the moment, altercate — in discussions with 3 altered companies to do a pilot in our ability in Moses Lake. These 3 companies, they all use silane as the feedstock for their silicon into the anode, and they appetite to afresh analysis out in a ample calibration their material. They additionally affirmation that they are in acceding with some of the beyond car companies, but these car companies would like to apperceive if the artefact they are authoritative can be done in a ample calibration — on a ample automated scale, and to do that, you charge ample quantities of silane. We additionally accept mentioned afore that silane in these quantities, we’re talking about 10,000-plus metric tons, is not adequate to transport. So a ability like that needs to be afresh amid adjoining to breadth you are authoritative silane. Let’s say, silane is alone fabricated today in the U.S., all the added polysilane companies are appliance TCS, which is a altered gas, which could not be acclimated for a silicon anode, let’s say, development. So we are aflame on it.

On the added hand, it will booty time. And we all apperceive that car companies are not, let’s say, appliance new batteries after an all-encompassing testing. So first, it has to be a pilot. Thereafter, it has to be afresh activated out afore it can be acclimated for the appliance in the car industry. Okay. Next. So basically, the focus we accept — connected to accept in REC. Aboriginal of all, to abide to accomplish Butte in a safe, abiding way. I’m actual aflame to see that the EBITDA in Moses Lake went up from $8 actor to $9.4 actor amid Q1 and Q2. So it is a actual assisting plant. And let’s say, it is absolutely actual important that we abide to accomplish in a adequate address in Butte.

When we attending to Moses Lake, we are so far abased aloft the barter resolution with China. It is allotment of the Phase I deal. But China has not yet implemented alike admitting they active this acceding like in January in 2020.

On the best term, we absolutely are adorable into, let’s say, a amount alternation alfresco of China, but it will booty time to accomplish it. In the U.S., you accept abundant polysilicon. You accept the end market, but you are missing the dent and corpuscle accommodation in the U.S.

We abide to attending into the denial of the Butte ability in one way to accession capital. I accept consistently said that Butte will not be bald if we don’t accept an action which is adequate to REC and their shareholders. We accept several companies still adorable into it, and we are action to accompany to see if we can get a appropriate offer, and afresh the Board will afresh booty a final accommodation on what to do.

We abide to abutment the Yulin JV. I would say, if there is action to be 2 altered markets, one, out of China and one assembly accommodation alfresco of China, REC will be the alone aggregation accepting assembly accessories in both segments. So we advance our affairs of 15% in Yulin. And I anticipate it’s actual important for REC, and it’s additionally actual important in the way we advance afresh the technology to be absolutely added aggressive than the Siemens technology.

And we abide the chat with several of these silicon anode companies. And hopefully, we will afresh be able to assurance up with a pilot testing in Moses Lake not too far out in this year.

I anticipate that’s it, afresh we will duke aback to Daniel and — for abeyant questions to our absolution today.

Daniel Stenslet

Thank you, Tore. Moving to Q&A.

Question-and-Answer Session

A – Daniel Stenslet

[Operator Instructions]. So the aboriginal catechism here. Aback it comes to acceptance the Chinese accomplishing of the Phase 1 barter agreements, what are the abutting steps? Two abode aback in time, you talked about aircraft baby quantities and see whether a assessment was answerable or not, has this been done? And if so, what is the abutting step?

Tore Torvund

Yes, it has been done. We accept alien or basically what we have. We accept entered into affairs with Chinese barter for — let’s say, REC are not bearing a lot of solar-grade material. This goes appear solar brand material, but we had some fallouts at the Butte. We accept afresh agreed to advertise it to Chinese customers. Afresh the Chinese barter go to the bounded MOFCOM appointment and they acquaint that you accept to pay 57% assignment on this. So we accept activated it several times. We additionally apperceive that our two added U.S. companies, Hemlock and Wacker accept done the aforementioned thing.

And afresh what we do is we go aback to USTR, which is the U.S. barter representative. We accept had several affairs with USTR, and they accept — and they afresh accept taken that to the Chinese and said that why don’t you apparatus the agreement? We are not allotment of these meetings. These are affairs amid USTR and the MOFCOM and according to the address aback from USTR, they acquaint that the Chinese says that the acumen why they accept not been able to apparatus is due to the COVID-19.

And the additional affair is that we are not still not in aperture of the acceding because this is a two year agreement. Apparently, there is some volumes there. And they ability apparatus it after and still accommodated the acceding according to what was told by USTR. What is the next? We abide to accord affirmation to USTR. We accept affairs with USTR. And USTR says that this is a antecedence to USTR to get this implemented.

Daniel Stenslet

Okay. And abutting question, and you affectionate of alluded this on your arbitrary slide, but if we don’t see a Chinese accomplishing of the Phase I agreement, afresh it will be added bigger to bureaucracy a non-Chinese amount chain. What would be the time anatomy to auspiciously authorize such a amount chain?

Tore Torvund

Yes. Let’s say, polysilicon, we charge dent companies to, let’s say, booty off our polysilicon. If you attending to — let’s say, the end bazaar in the U.S. is about 15 gigawatts. To accomplish 15 gigawatt of solar panels, you charge about 60,000 metric ton of polysilicon. And that’s what we accept in absolute accommodation in the U.S. So there is an adequation amid how abundant polysilicon and what is the end bazaar in the U.S. That agency that we charge dent accommodation of some 15 gigawatt. And according to our ability today, there is alone 1 gigawatt of accommodation of wafers alfresco of China. And this accommodation is mainly in Norway. But you accept to afresh advance for authoritative 14 gigawatts of wafers to awning this. That will booty time and will booty investments.

We are talking to government agencies in the U.S. They are actual favorable. But the time band is absolutely added than a year out to be able to accomplish this happen. But the beeline aeon would be to get into China. The abstraction would be that if we get into China, we still accept to accomplish a amount alternation out of China because we charge — it is not adequate connected appellation that all the wafers on this apple is fabricated in China. And I anticipate that is not alone accomplished in the U.S., but additionally abroad about the world. But it will booty added than a year to authorize that affectionate of amount chain.

Daniel Stenslet

Okay. And abutting catechism here. How are you abutting the opportunities in Europe’s Accomplishment Accelerator action aural the PV industry? For example, Norwegian NorSun accretion to 5 gigawatts of dent and cell. Today, 1 gigawatt on a applicant of Wacker. So I guess, how are you abutting the, yes, opportunities in Europe’s Accomplishment Accelerator initiative?

Tore Torvund

Let’s say, REC today is a U.S. company. We — let’s say, I’m the alone Norwegian now alive in this company. We are advised as a U.S. company, and our basic focus today has been in the U.S. We try to chase what’s action on in Europe, and definitely, it’s actual interesting.

But so far, we accept not spent a lot of time in EU. We are added afterward what’s happening. But definitely, let’s say, aback you attending to polysilicon, there is a accommodation of some 60,000 metric ton of polysilicon in Germany, and it is about 80,000 metric ton in the U.S. So the blooming action in Europe, calm with what’s action on in the U.S., is absolutely actual adorable to the approaching of this aggregation as well. But we accept not yet spent a lot of time in Europe.

Daniel Stenslet

Next question. Accustomed the appearing cardinal amount in REC, why are shareholders and administration not advancing a recapitalization at accepted low levels to pay bottomward all the debt?

Tore Torvund

I think, let’s say, we accept basically — okay, if you go aback to our banknote position today, it’s about $31 million. There is no agnosticism that, let’s say, the basic altercation for divesting Butte will be that that’s one antecedent of capital. The additional advance — let’s say, antecedent of basic is absolutely to ask the shareholders to recapitalize the company. Aboriginal of all, what we are alive on is to attending into the business opportunities for this company.

China — admission to China is absolutely the basic source, the basic opportunities. But we’re additionally adorable into a non-Chinese amount chain. And the third is afresh these array opportunities. I anticipate we accept to accept put that in abode afore we adjudge what to do if we’re action to bankrupt Butte and afresh use the gain for, one, abate our debt; two, to advance for 1 of these opportunities or if we are action to ask for added basic from the shareholders.

But we are not in a actual — let’s say, we still accept abundant banknote for the accountable future. So we are not in a very, let’s say — as time-wise, we accept time to attending into the business befalling and see how things develops in the market.

Daniel Stenslet

Next question. In one of your aftermost slides, you acicular out that you will abide the chat with the silicon anode array companies for pilot testing. And you additionally alluded to conceivably seeing some advance already appear the additional bisected of this year. Can you add some added blush to this? Are we talking about abate adventure companies or added accustomed array makers? And would these types of pilot tests crave any basic from your side?

Tore Torvund

The abstraction so far has been that we are not action to invest. We accept offered these companies to advance our facility. As you understand, let’s say, silane is a about alarming and difficult gas to handle. We accept all the permits in our Moses Lake facility. So to do pilot analysis alfresco of such a ability is about cher and big-ticket and will booty time because a lot of permits has to be granted.

On the added hand, we accept an absorption that these pilots are successful. Because if silicon anode will be the approaching of an added array efficiency, that will absolutely be to the account for our action as well, which will mainly be a ambassador of silane.

So we action them to be there. They absolutely accept to awning all costs with some affectionate of a allowance on top of that. But there is no plan from our ancillary to advance in these companies. It is added to do to advice them to be successful, which has been our business case.

Daniel Stenslet

And are we talking about abate adventure companies or added accustomed array makers?

Tore Torvund

I would say both. I would say both.

Daniel Stenslet

Okay. So abutting question, what is the appulse of the banknote bang from CARES Act in the additional division financials?

Tore Torvund

We accustomed an, let’s say, money from the U.S. government through this CARES Act. We treated, as James said, today, it is advised as a accommodation in our financials. But we are hopeful that at atomic some of these will be a grant. The CARES Act was basically to be assertive that we abide to apply all our bodies through this coronavirus communicable and not — did not lay them off. We accept met all this. We accept not laid off bodies during this period. So we should qualify, that allotment of it is action to be a grant, but apparently some of it needs to be paid back, but it is actual favorable terms. So it was a actual absolute accession to our financials during a actual difficult aeon of time.

Daniel Stenslet

Okay. Abutting question. The achievement for — or the Butte facility’s achievement this quarter, has it been impacted by any acclimation to the China tariffs?

Tore Torvund

Yes. So, let’s say, one of the advantage we accept in Butte is that we are beneath abased aloft China in the semiconductors. The avant-garde semiconductor business is still not in China. China has not yet been able to get into the best avant-garde allotment of it. So our basic bazaar for silicon gas, which is the basic contributor to the basal line, is in — is archetypal in South Korea, Japan and Taiwan, in accession to the U.S.

On the polysilicon side, breadth we are a about baby player, we aftermath not beneath than 1,000 metric ton out of a bazaar of some 30,000 metric ton, it is positive. You ability — but it will not actualize a lot of new aggregate aback we are added or beneath affairs all we are able to make. But it is absorbing to see that China bargain the assessment on polysilicon from 25% to 0.

As I said, it ability be because they basic to accord some absolute signals to the U.S. or it ability be that they are abbreviate of these qualities, and they charge to get these qualities from one of the 3 U.S. producers of semiconductor polysilicon. I don’t apprehend that to be a above change in Q3. So it’s added what’s happening, but it doesn’t change absolutely our business as such.

Daniel Stenslet

I assumption a aftereffect catechism to that, what’s your apprehension to REC semiconductor business in China, while China is blurred assessment to 0% and the accepted able development trend in dent industry in China is absolutely there?

Tore Torvund

Let’s say, as I said, we — let’s say, added than 70% of our business is alfresco of China aural the semiconductor business. So I don’t anticipate this will absolutely change our business. I anticipate what we now see for Q3 and avant-garde is that hopefully, the bazaar will be stable. But what’s action on in China or not on the semiconductor is, at atomic for REC, not that important. But the all-around market, let’s say, how bodies are affairs their new collapsed panels or added semiconductor or added cyberbanking apparatus is absolutely actual important. I additionally said that we address silane, but let’s say, actual important is additionally the new developments of new silicon gases. We accept 4 altered new silicon gases we put into the market, and the address is actual able on these gases. Because first, the antagonism is limited; and second, these avant-garde new gases is article the dent makers are appliance added and added as the chips get added and added complicated. So the silicon gas business seems to be a very, actual adorable business additionally on the abiding for REC.

Daniel Stenslet

Yes. So I accumulate accepting questions, but I anticipate we’ll stick to 2 added afore we blanket up the session. So Float Zone silicon is one of REC’s high-end articles and FZ bazaar is apprenticed by, for instance, high-power applications like electric cars. What is your apprehension to this market? Do you apprehend your Siemens reactor artefact mix to change?

Tore Torvund

Let’s say, we are added or beneath active now abounding all our reactors on Float Zone. On the added hand, Float Zone is actual difficult to make. That’s why alone 2 companies are able to accomplish it. The acumen why we address Float Zone and EG is that aback you accomplish Float Zone some of the actual you are authoritative accept to be downgraded because we — what we alarm fallouts. So there is not too abundant new capacity. If we were to admission the capacity, we will charge to do new investments in Butte.

We accept not prioritized that for the moment. If we accept basic for investments, it will be mainly appear the silicon gas side, breadth we accept a actual different position. So we are added or beneath active abounding accommodation in Butte, accumulated amid silicon gas, silane and Float Zone. And so we don’t accept a lot of additional accommodation alike if the bazaar is growing.

Daniel Stenslet

Okay. So final catechism here. Aback will you be able to run the Yulin bulb that’s abutting to abounding utilization, you think?

Tore Torvund

There you are into — let’s say, due to this coronavirus, let’s say, aftermost time I was in China was in mid-January. Aback then, I accept not been able to go to China. It seems that, as I said, some of the acumen why we are not active abounding accommodation is that we accept not been able to access abundant accommodation on new liners, which is fabricated in the U.S. into China, and we do not appetite to run the ability after these liners because these liners accomplish a actual high-quality polysilicon. It is difficult for me to accept all the ability of what’s action on in China. I get accustomed updates. But aback I accept not been there, I accept not abundant ability about what is the plan. But if I attending to the commitment agenda for new liners, it will at atomic booty a year until we accept abundant liners for all the reactors over there.

Daniel Stenslet

Okay. Actual good. I anticipate we accept now accomplished the time absolute for this location. If you appetite added aftereffect on your questions, amuse ability out to REC’s IR contact, Nils O. Kjerstad. Or if you appetite to altercate the advance case with me, I’m accessible for discussions. So I achievement you all begin the Q2 presentation absorbing and insightful, and I ambition you all a adequate day. And that concludes our session.

Operator

Ladies and gentlemen, this now concludes this appointment call, and you may now all abstract your lines. Accept a nice day.

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