For a business with strategic products for the US solar industry and the lithium-ion battery markets, and the know-how and experience to consider avenues for deeper expansion into these rapidly growing industries, we believe REC could have potential to command much higher EBITDA multiples. Alternatively, if Butte could be sold for $300-400 million, and the Moses Lake plant could sell 100% of its volume at a price that is 40% below current spot prices, the current valuation of REC would imply that Moses Lake would be valued at around 3x EV/EBITDA. Even in a scenario where polysilicon prices were to drop as much as 40%, to around $22 per kg, by our estimates, REC could still generate more than $200 million in annual EBITDA, which would imply around 4x EV/EBITDA on the current market valuation (incl. When factoring in the required reactivation capex, we estimate this would imply a <2x EV/EBITDA on the current market value of REC. With polysilicon spot prices close to $40 per kg, we estimate that Moses Lake, with its 18,000MT capacity, alone could generate close to half a billion dollars in annual EBITDA if it could sell 100% of its capacity in the open market. $1.7 billion invested in the plant – all the while REC is negotiating offtake contracts with Hanwha Corporation and Hanwha Solutions (“Hanwha”) for 100% of the plant’s capacity, with potential for additional demand from battery anode producers going forward. On current share prices, we estimate this would imply a $320-420 million valuation of Moses Lake, which corresponds to 19-25% of the reported c. The Butte plant is the world’s largest supplier of silane gas, with a very substantial market share, meaningful barriers to entry, and a fairly stable level of profitability, which we believe could easily attract strategic interest in a valuation range of $300-400 million. In our opinion, REC has an exceptional platform from which to capitalise on the accelerated push towards sustainable energy and the electrification of the auto industry. We have been believers in the potential of REC for more than half a decade, and we are highly encouraged by recent developments in both the political and the industrial landscape. In the absence of appropriate responses to the recommended actions set out above, Lodbrok will vote to reject all proposals on the EGM scheduled for 21 October 2022. The board of directors observes the Norwegian statutory rules prescribed for transactions with related parties, including the approval of any off-take agreement with Hanwha at a validly constituted shareholder meeting. Hanwha either accepts having a minority of the directors and appropriate oversight for any contract negotiations or increases its equity stake in REC Ībsent an ownership increase by Hanwha, an independent board hires advisors to explore and evaluate strategic and commercial interests in REC, in light of recent positive market developments, to ensure any large contracts signed with Hanwha are balanced against alternative opportunities from the perspective of all stakeholders and REC immediately postpones its EGM scheduled for 21 October 2022 and seeks to identify and consider additional board candidates, with the aim of having a board with a majority of directors being unrelated to Hanwha Lodbrok believes REC is significantly undervalued considering its two highly strategic assets in rapidly expanding industries, which benefit from political tailwinds and potentially strong profitability outlook, and we would recommend that: Lodbrok has been invested in REC continuously since our inception in 2017, and we have supported the company through difficult times, including by anchoring the bond refinancing in 2018 and by supporting the equity raise in 2019. GOVERNANCE CONCERNS RELATED TO REC SILICONĬertain funds and accounts managed or advised by Lodbrok Capital LLP (“Lodbrok”) own 5.2 million shares in REC (OSE:RECSI), making Lodbrok one of the largest shareholders in the company, and hold close to 20% of the 2023 senior secured bond. LONDON-( BUSINESS WIRE)-Lodbrok Capital LLP, in its capacity as one of the largest shareholders in REC Silicon ASA, recently sent the letter below to the company’s Board:
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