Norwegian solar energy equipment group Renewable Energy Corporation on Tuesday announced plans to gain 7-9 billion Norwegian crowns ($1.08-1.38 billion) in long-term financing by issuing new shares and debt.
REC, which has invested heavily in past years to build capacity on the revved-up solar market, said it needed more capital because falling demand for solar energy equipment amid the global economic crisis had weakened its cash flow.
Shares in REC were up 8.1 percent to 69.70 crowns at 0716 GMT (3:16 a.m. EDT) in a relief rally that financing needs were not bigger.
Many analysts expected REC to raise capital after its core profit fell by 29 percent in the first quarter and after a botched expansion of its flagship plant in Moses Lake, Washington. REC said its 4 billion crown share issue was fully underwritten and that its 3-5 billion crowns in debt was a combination of restructured debt and new credit lines.
We wanted more 'head room' compared to the financing we had before, REC's Chief Executive Ole Enger told Reuters.
We had large ongoing investments. Those were financed in 2008 but then markets have deteriorated substantially more than we had expected in the mean time.
The solar industry has said in past weeks that a lack of project funding threatened to undermine its already fragile growth prospects amid a deep global crisis.
In the long-run the financial strengthening is positive, it blows away concerns over capex plans and bank covenants, said analyst Thomas Skeivys at Orion Securities, who said REC shares should end the day in positive territory.
UNDERWRITTEN SHARE ISSUE
Shares in REC have lost 64 percent of their value over the past year, giving the company a market cap of $4.8 billion. REC produces everything from polysilicon metal which absorbs the sun's energy to complete solar panels for consumers.
REC said the rights issue will, subject to certain conditions, be fully underwritten by REC's main shareholders jointly representing about 60 percent of outstanding shares.
The shareholders include conglomerate Orkla, utility Hafslund, Norwegian pension fund Folketrygdfondet and a bank syndicate including DnB NOR acting as Global Coordinator and Joint Bookrunner.
Nordea, ABN AMRO and BNP Paribas are the issue's Joint Lead Managers and Bookrunners, REC said.
Contact with our shareholders has indicated that our owners are highly supportive of the company taking action to ensure our long-term financial flexibility, Enger said in a statement.
Through new equity and significantly improved credit lines, we have taken the necessary steps to secure long-term financing of our ongoing capital expenditure program and provided a foundation for developing potential opportunities.
REC said it had engaged DnB NOR, Nordea and SEB as Joint Lead Arrangers for its bond issue. It said it has successfully restructured existing debt and received an offer to revise financial covenants under the existing debt facilities.
The terms of the issue, including its price and size, will be announced on or about June 5, REC said.
($1=6.501 Norwegian Crown)
(With reporting by Wojciech Moskwa and Ole Petter Skonnord; editing by Mike Nesbit and Jon Loades-Carter)