REC Silicon ASA

OSE:RECSI

Earnings Call Transcript 2020-Q3

[Tore Torvund, CEO & President]

Good morning, and welcome to this Third Quarter Presentation for REC Silicon. I'm Tore Torvund, the CEO of REC Silicon.Today, we would like to do it somewhat different. We are, let's say, in Moses Lake. So we will use more people to present our numbers and our presentation today. James May will, as usual, take the financial review. Kurt Levens, who are now in -- let's say, Kurt Levens is responsible for our Butte operations, and he is calling in from Butte. Francine, Vice President of Commercial. She is in Houston, and she will then present her part from Houston. Chuck Sutton is our Vice President of Sales, and he will then present here from Moses Lake. And the same with Jeff Johnson, Vice President of Operations. And then we will invite you for Q&A when we have done our presentation.The third quarter highlights. Definitely, third quarter has been eventful for REC Silicon. When we look to the revenues, they came in at $30.3 million. And as you will see, the EBITDA is very high this time, $17.9 million. That is basically an accounting issue due to the fact that we were able to settle the property tax dispute here in Grant County in Moses Lake. The underlying EBITDA is at $1.9 million.The cash balance increased from the last quarter by some $4.3 million, and it came up to $35.9 million. Cash inflow from operating activities was $3.6 million. Silicon gas sales came down from 831 in Q2 to 746. It's mainly due to the fact that we are in a difficult situation in China, but Kurt Levens will elaborate on this. Silane price increased by 3.4% because, basically, China pay less than our customers outside of China.Semiconductor grade polysilicon sales at 174, and we also saw an increase in price of some 9% versus what we had in Q2. And then finally, the Norwegian Tax -- Central Tax Office dropped this tax issue we have had since -- or which has been around since 2013. So they dropped the case, which then resulted in the reversal of $22.5 million in tax liability and $4.7 million in interest liability. And it increased the shareholder equity by some $27.3 million.And at the same time or also in third quarter, we were able to find an agreement with Grant County here in Moses Lake, and so we have now settled all the disputes we had for the year 2012, 2013, 2014 and 2015. So there is no more dispute on the property tax. The settlement includes that we are going to pay $3 million in December of this year. And then every December for the next 6 years, there is a payment to be settled to be at $1.75 million. And that's the main reason why EBITDA went up to $17.9 million, there is a noncash contribution to the EBITDA due to this settlement of some $16 million.Also, it has been a very eventful October. As you probably know, we have entered into an agreement with Violet Power. Violet Power is a company, which are going to build sales and module capacity here in Moses Lake, just adjacent to our plant in Moses Lake. And we also have entered into an agreement with Group 14 Technologies concerning construction of a silicon anode battery pilot plant in Moses Lake.And at the end, let's say, the last one is that we were successful in a private placement of equity. It was completed on October 14. The settlement will occur in 2 tranches. One on October 27 where we received NOK 302 million. And on November -- in November, we then will receive another approximately NOK 700 million. In total, altogether, NOK 1 billion private placement.Then I will hand over to James May. But just give you a very short update on where we are compared to the previous quarter. Inventory of polysilicon went down by some 163 million metric tons. So we sold more than what we made. The production was approximately at the level where we had indicated. The semiconductor was, in fact, up 23.4%, and I already commented on the silicon gas sales, which went down some 10% compared to prior quarter.So then, James, maybe you can give an update on the financial review.

[James A. May, Chief Financial Officer]

Good morning. Total revenues for the quarter were $30.3 million, which is about $700,000 lower than revenues for the second quarter. All the revenues in this quarter were generated by the Semiconductor Materials segment. The lower -- the slight change in revenues can be attributed to lower silicon gas sales, almost offset by higher polysilicon sales from the Butte facility. I'll provide a little more color around the effects of this in a few moments.Total EBITDA for the quarter increased substantially to $17.9 million, as Tore pointed out. However, EBITDA includes a noncash adjustment for the settlement of the property tax dispute, which leaves about $1.9 million of clean EBITDA, which compares to $2.9 million of EBITDA for the prior quarter.This is the third straight quarter of positive EBITDA that the company has had since the second quarter of 2019. While we wish it was substantially higher, it does demonstrate how successful we have been in adapting to a very challenging business environment and it places us in an excellent position to capitalize on the business opportunities in our future. You've heard a little bit about that, and we'll talk about -- more about it in a few minutes.Within the Semiconductor Materials segment, revenues for the third quarter, again, were $30.3 million and broadly unchanged from the second quarter. But as I noted, lower volumes of silicon gas sales mostly offset by an increase in total sales volumes in polysilicon. The total sales volume for polysilicon within this segment were 401 metric tons compared to 323 in the prior quarter. Sales volumes of semiconductor grades, however, decreased by 14.5% to 174 metric tons. So this decline can be attributed to the impact of COVID-19 and as large customers delayed purchases to control inventories on hand.The increase in revenues for polysilicon sales is a result of REC taking advantage of spot market opportunities to sell lower-quality solar grades polysilicon, which resulted in sales of 227 metric tons or some 107 metric tons higher than the solar grade volumes in the second quarter. The high mix of solar grade sales had a dramatic impact on total average polysilicon prices realized, which decreased by 22.8% during the quarter.As Tore noted, however, semiconductor grade polysilicon sales prices increased by 9%, and this was in part due to the impact of tariffs imposed by China on sales prices for the highest quality Float Zone grades, which increased by 6.1%. And then in addition, average prices for semiconductor polysilicon increased due to a higher mix of FZ grade as a percentage of semiconductor polysilicon sold.Silicon gas sales volumes decreased by 10.2%, as Tore pointed out, mainly as a result of lower shipments in China -- into China, primarily for solar PV and older technology flat panel displays as China attempts to disengage from supply arrangements with United States where possible. Outside of China, primarily in semiconductor and high-end flat panel display applications, shipment volumes remained strong due to improvements in technology and the commissioning of new capacity. As a result, average prices for silane gas increased by 3.4%.EBITDA contributed by the Semiconductor Materials segment was $7.3 million, down from $9.4 million in the prior quarter, and this decrease can be attributed to the lower sales of silicon gases. There were no revenues within the Solar Materials segment compared to $300,000 in the prior quarter. EBITDA contributed by the Solar Materials segment was $14.6 million compared to $2.3 million in the prior quarter. Again, EBITDA in this segment includes $16 million noncash adjustment for property taxes, which leaves underlying EBITDA in the segment of $1.4 million. Net expense for the third quarter includes approximately an $800,000 year-to-date adjustment for lower accrued property tax expense in Moses Lake due to lower-than-expected property valuations, and this is not part of the settlement with Grant County. The clean EBITDA of approximately $2.2 million for the third quarter is comparable to EBITDA of $2.3 million for the prior quarter.Other and eliminations were a net cost of 400 -- or $4 million and were broadly unchanged from the prior quarter. Cash balances increased by $4.3 million during the quarter. Cash inflows from operations were $3.6 million and included the EBITDA of $17.9 million, offset by the $16 million noncash adjustment, a $3.3 million decrease in working capital invested. And the company paid interest of $1.4 million, which was all associated with long-term leases.In addition, we made contributions of $700,000 to the frozen defined benefit plan in the United States and experienced a $500,000 gain due to the impact of a weaker U.S. dollar on cash deposits in Norwegian krone. Cash inflows for investing activities were $1 million, which was a result of the receipt of $1.3 million on the maturity of municipal bonds held by the company, and this was offset by capital expenditures of $300,000. Cash inflows from financing activities were $300,000 and were a result of the repayment of long-term lease liabilities. In total, cash balances increased by $4.3 million to $35.9 million on September 30.Nominal debt increased by $11.1 million during the quarter to $221.5 million. This increase was due to the addition of a $9.9 million note associated with the settlement of the property tax dispute with Grant County. The note represents the present value of future cash payments from REC Silicon to Grant County to facilitate the settlement. That is $3 million in December of this year and 6 successive annual payments of $1.75 million beginning next December.We had a $700,000 increase in lease liabilities as well. The remaining $600,000 increase in nominal debt can be attributed to the impact of a weaker U.S. dollar on the indemnification loan. Nominal net debt increased by $6.8 to $185.6 million due to the increase of $11.1 million in nominal debt that I just discussed, which was offset by the increase, and $4.3 million in cash from the previous slide.As Tore indicated, we're pleased to report that the contingent liabilities faced by the company declined substantially during the quarter. First, we've already discussed the settlement of the property tax dispute. This settlement results in a net decrease in liabilities of $17.6 million. That's $27.5 million and the reversal of liabilities for taxes and interest, offset by $9.9 million in the note that I just discussed. I would point out that this settlement is for all tax years rather than the $8.1 million for 2012 that we've highlighted on the slide during previous releases.Second, I'm more than delighted to report that the Norwegian Tax Office has dropped their examination of tax years 2009 through 2011. We've consistently reported we had a strong case and that we expected to prevail eventually. However, it took a little longer for the CTO to come to the identical conclusion. This transaction has resulted in a decrease in current liabilities of 23 point -- excuse me, $27.3 million and a substantial increase in the company's unrecognized deferred tax asset.With respect to the indemnity loan, the impact of a weaker U.S. dollar increase -- changed the balance by $600,000, and there were no other changes with respect to the status of the loan. I'll now yield the presentation to Kurt to discuss silicon gas and semiconductor grade markets.

[Tore Torvund, CEO & President]

Okay, Kurt. Kurt ins in Butte. So you have to give indication when we should then change the slides here.

[Kurt Levens]

Okay. Next one. For introduction, my name is Kurt Levens, and I'm going to cover several issues regarding the operations in our silicon gas and semiconductor polysilicon business.First, you're well aware that we have communicated that we had a process ongoing for the potential divestment of -- and the associated businesses. We have come to this decision that we will not be divesting Butte. And as a result of our successful equity raise, it is going to allow us to retain Butte, which was our preferred solution in the first place. In addition to that, we were going to be able to make some rather moderate, limited investment that will further create value and more opportunities at Butte to grow our top and bottom line.The Butte plant is important for REC Silicon for several reasons. First, their strong commercial, technology and operational synergies between both plants, both in shared services, obviously, shared technology, competence and, in some cases, shared markets. We do serve some of the same markets. Obviously, the focus is on semiconductor in Butte, but Butte silane also goes into the PV sector. Butte silane is also what is starting off the battery -- lithium-ion battery producers and the silicon anode producers for ramping up their silane volumes. So Butte gives us the ability to grow them from smaller volumes to larger volumes until such point that it makes sense for them to go to the penultimate solution being a fence defense arrangement.Together, there were the large producer and distributor of silane gas in the world. Our capacity, again combined, is more than enough to support market growth in all of the markets that silane currently addresses. We are, in fact, not only the largest silicon gas plants outside of China. But combined, we're the largest silicon gas operation even within any winner in the globe. Next. Concerning electronic grade polysilicon. James hit upon some of the highlights. Let's say that, primarily, our focus was on moving a higher mix of our high-end Float Zone product. We did have some orders that were pushed out, delayed, simply due to inventory management control of our customers. However, we did benefit from an overall mix effect of having a higher ASP within our semiconductor grade due to the fact that we sold more of our top-end product. We expect Q4 to be roughly in line with Q3. By that, I mean, it will be -- we expect it to be actually stronger than Q3. And traditionally, Q4 is our strongest month for these sort of segments. And that would, in fact, close out what we had before observed, which was a stronger second half that we had expected. Right now, our preliminary forecast from customers when we start looking forward is that there's an expectation that growth could accelerate back on a previous track prior to the inventory turndown of '19 and the COVID experience that, that wouldn't be happening until the second half of 2021. We'll continue to monitor that.We continue to focus on our high-end Float Zone polysilicon. This is where we do have a true differentiated edge. There's only 2 producers of Float Zone, and we run our entire operation to optimize for the highest value creation in terms of that. So we always will -- rather than serving for volume, we solve for highest value creation even if sometimes it means we have less volume throughput.Next. Concerning our silicon gases. When we say that we are the only large capacity silicon gas provider, we don't say that necessarily in a boastful manner. It's just the fact. Our module fleet -- in addition to our production capacity, our module fleet is 30x our closest competitor. And our infrastructure for distribution and services is unmatched. As I said, we are the largest producer and distributor of silane gas. We have an unmatched experience and safety record. This includes more than 50,000 movements of this material around the world without incident. We're a recognized leader in product quality and reliability, which is -- which means something when you're a large capital-intensive industry that spends a lot of money on a new production asset. You want to make sure that's something that is so critical to your process is going to remain as good day 1 -- I mean as good day 100 as it will be day 1. We're a supplier to all the global top 10 IC producers. Our channel partners are large, established, secured companies, well-known, and they bring their own value to our solution as well that our end users appreciate. We have plenty of capacity to support our market growth -- to support the entire markets growth actually.On dichlorosilane, this is mainly driven by technology adoption in 3D NAND and advanced logic. Currently, a 20% growth forecasted over the mid-term, and we currently need additional capacity in order to meet our customers' growth. We are limited and have been limited for the past couple of years by our capacity.In disilane, it's the same story. It's capacity constrained. It's also driven by increased performance at the customer at certain technology levels. Again, we need additional capacity to meet customer growth. We currently have backlog there that is -- exceeds more than several quarters into the future.As we said on silicon gases, we did ship less in this quarter, and that was primarily due to the fact that we sent less of our lower quality material into China. The issue there being, of course, that there is a strong tendency towards where they can towards wanting to source with local suppliers, given the tensions between the U.S. and China.Having said that, we're still the largest supplier in China. We have been and we will remain so for quite the near-term future. Next. So I guess in summing this up, we have a unique position concerning our products that come out of Butte. We have adequate capacity in 2 of our products, and we have a pathway towards increasing capacity in 2 others. We're dominant outside of China. We're still the largest supplier inside of China. We're known for high quality, consistency, reliability as a supplier. We're the only supplier with multiple redundancies in terms of how many production units, how many loading units we have, how many rolling assets we have in order to take care of the market demand. Our DCS and disilane opportunities that we are currently evaluating will increase our gross margin in both cases and sufficiently add to our bottom line at a fair percentage of what our run rate is today.In electronic grade polysilicon, we are only 1 of 2 companies that manufacture FZ. We have over 30 years of experience producing FZ. Our customers are the top 3 semiconductor wafer producers globally. And we do produce some products that are known as the highest purity polysilicon in the world. And there are no other producers that can produce them with those particular qualities.We will continue to focus on our Float Zone. This does sell at a premium to electronic grade polysilicon regular chunk polysilicon. The price is a multiple of chunk polysilicon. We are evaluating possible investment for larger rod diameters as well. Customers are going to larger mass, meaning either a longer and a slicker rod in order to drive cost down for their customers in order to continue to increase adoption of that Float Zone material in advanced electric vehicles and other applications.And that's it.

[Tore Torvund, CEO & President]

Thank you, Kurt. And I hand over to Francine Sullivan, Vice President of Business Development, and she will call in or she calls in from Houston. Francine, are you there?

[Francine Sullivan, Vice President Business Development]

Yes. Hi, everyone. I'm just going to make a few comments about the trade and the other dynamics in the solar value chain right now. If you could go to my first slide, please, Tore.So there's an anomalous situation in the United States in as much as the U.S. is currently dependent on China for its solar panels for its installation industry. And that dependence really comprises -- dependence in the upstream part of the solar value chain. And you can see from the pies in our graph there how red they are. We've showed them before, and that's China's dominance in the solar value chain. And then there are also -- the U.S. is also dependent on imports from Chinese-owned companies for cells and modules, which those companies are mostly located in Southeast Asia. So the U.S. actually does have adequate polysilicon production to support demand. There's 18 to -- 18 to 20 gigawatts of polysilicon capacity available in the United States between REC Silicon, Hemlock and Wacker. But despite this, as I said, the U.S. is completely dependent on China for the downstream parts of the supply chain.In 2019, over 90% of solar panels installed in the United States were imported and most of these came from Chinese owned companies that are located in Southeast Asia and other countries in Asia. And the reason that they're located outside of China is in order to avoid U.S. AD/CVD and other tariffs on products from China. So we show there the graph, most of the panels are coming from Malaysia, and the next most important countries are Vietnam, South Korea and Thailand for imports of panels into the U.S.Next slide, please, Tore. However, I think things look like they're going to change. There's definitely some momentum to establish a non-Chinese solar supply chain, and we're seeing this in the U.S. And I think we're seeing this in Europe as well. In the U.S., re-shoring is a hot topic. There's a lot of support for things to be made in the U.S.A., particularly in high-technology industries. What we're seeing is, in a semiconductor industry, there's bipartisan moves in Congress to support the U.S. semiconductor industry, and we're seeing it in other critical industries.In relation to solar, at the end of the day, it's energy, and it's one of the most important growing sources of energy in the U.S. in terms of installations. And the U.S. likes energy independence. It doesn't like energy reliance, particularly not when that energy reliance is on China in this case. So I think these kind of dynamics are pushing this momentum to establish the non-Chinese supply chain forward.Of course, there's also the job creation imperative in light of COVID-19 and solar manufacturing industries, potentially a very large source of high-quality jobs, similar to the sort of jobs that the fossil fuel industry has previously created in the U.S. So it's important in that regard as well.We have the election next week. And after the election, there's likely to be some sort of stimulus package within the coming months from Congress. And we do expect that re-shoring of solar manufacturing will benefit from a stimulus package one way or another. And that -- and we believe that will occur regardless of who wins the election. If Trump remains, there will be a focus on re-shoring these critical industries and incentives for that. And certainly, if Vice President Biden is elected, he has a flagship policy in relation to developing the green energy industry, and we expect manufacturing to be part of it.There's another dynamic that's developing in the solar value chain now, and that's concerned in relation to potential disruption of the solar value chain because of the concentration of polysilicon production and some other solar supply chain in Xinjiang in China. Xinjiang is connected with human rights abuses, and there are some concerns that this -- that the large reliance on Xinjiang and the solar supply chain may result in disruption of the panel supplies into the U.S. And this dynamic really underlines the risk for the wider industry of relying -- being so heavily reliant on China. This is a real sort of political country risk item, and I think it will help the sort of broader industry support be much more keen to support local manufacturing than they may previously have been. And of course, this has impacts or potential impacts on those companies associated with this region and their ability to qualify on ESG principles, both in the market and for investment dollars. So we'll see this continue to play out, I think, in the solar value chain.The other comment on trade matters is that China's Phase 1 trade commitment -- trade deal commitments remain intact. It is committed to purchase significant quantities of U.S. polysilicon. It has not started those purchases, but those agreement is still in place and certainly, the inclusion and prioritization of the U.S. polysilicon industry in that agreement really underlines the fact that the U.S. government is starting to recognize or is now recognizing this industry as an -- as providing strategic materials in the U.S. economy.The EU also has a flagship Green Agenda, and that caused a lot of renewable investment, $340 billion in solar wind and the key tenet of that policy as well is reassuring the solar manufacturing chain to the EU. And I think Chuck is going to talk about some of the initiatives that, that has spurred in a couple of slides time. So that is it for me today.

[Tore Torvund, CEO & President]

Thank you, Francine. Then I hand over to Chuck Sutton, Vice President of Sales here in Moses Lake.

[Chuck Sutton, Vice President of FBR Polysilicon Sales]

We'll give a little update on where we see the PV market. Currently, we see strong demand, as expected, in the next several years. We see global demand is expected to rebound with solid growth in all regions. Some of those supporting factors being the EU Green deal, as Francine just mentioned some things happening there, now continue to gain support.Annually, the U.S. installations are to stay strong in the 18-gigawatt range. China installations remain steady. This year, they're about 40 gigawatts. Asia Pacific, along with the Middle East and Africa, will also increase PV installations.Levelized cost of electricity for installations is dropping faster than forecasted, and it continues to improve the competitiveness of solar power. Improvements across the supply chain will continue to drive this. Items like half cells, bifacials and improved racking systems, along with future improvements, like the large-format modules coming out now along with TOPCon, Hgt and IBC cells will continue to drive that.The focus on carbon footprint and reducing CO2 levels has also lead more growth, with countries and corporations putting more emphasis on that. Installations for 2022 forecasted in the 140 to 177 gigawatt range by Bloomberg. If you look at the chart on the right, you can see that Bloomberg is forecasting strong growth in the next few years along with the node up at the top that there's currently 188 gigawatts of module supply. So there shouldn't be any issues with supply to growing that.The solar market is divided up in 4 major market segments -- areas: the U.S., Europe, China and the rest of the world. China in 2020, as I mentioned, will be around 40 gigawatts with their 2060 carbon neutral pledge that could even go higher over the next few years. The U.S. in 2020 will be around 18 gigawatts. There's still a lot of support at both the state and the federal levels. Corporations are announcing carbon targets that they want to achieve over the next few years. The residential market continues to show strength, and there's a growing preference for the ESG stances.Europe in 2020 will be around 20 gigawatts. There, we see work around low carbon. Green hydrogen, as it comes on, will require new renewables. And then the proposed COVID-19 stimulus packages that have been talked over there have the potential to stimulate more investments. The rest of the world, in 2020, to be around 40 gigawatts. The key drivers there is that solar is the lowest cost alternative for new power. Power infrastructure is not available for traditional supply. Many countries also are setting renewable targets.Looking at the charts on the right, you can see the top chart, just PV installations for all the regions over the next several years. If you're looking at areas like the EU, which is in the green, you can see strength -- stronger growth depending on which stimulus packages that are passed. China, in the red in the middle there, you can see the 60 gigawatts going out annually in a few years as part of the 2060 carbon neutral pledge.In the lower chart, the U.S., you can see the installations over the next several years are around 20 gigawatts and staying stable. Residential will continue to grow and the utility scale installation could start to grow larger depending on the upcoming election results and what packages are passed with that.There are several initiatives to build out this non-Chinese PV value chain. NorSun is a major non-Chinese ingot and wafer producer. They currently have about 1 gigawatt of total capacity. Several non-Chinese solar initiatives have also emerged recently with a focus on local manufacturing and governmental support, and these are some opportunities that are coming around.Looking at new capacity coming online that will enable the U.S. and Europe to be self-reliant. We'll talk about that in a moment. And then also Ultra Low-Carbon Solar Alliance recently formed to promote ultra-low carbon PV in the U.S.If you look at the box on the right, for these initiatives, as mentioned, NorSun is about 1 gigawatt. They're evaluating further expansion in ingot and wafer. Violet Power, which was mentioned earlier, they're vertically integrated solar manufacturer and they're going to build a -- announced building a site right next to REC Silicon.Meyer Burger, who has been a supplier in the industry for equipment, they've announced that they're going to go into cell and module production with 5 gigawatts of new facility in Germany. The Ultra-Low-Carbon Alliance is formed in the U.S. with stakeholders across the value chain, REC Silicon, Hemlock, Wacker, we have NorSun, QCells and First Solar. So we're expecting more to join in that to pick up.Looking at non-Chinese polysilicon capacity. There is sufficient capacity to support the demand in the U.S. and Europe. Not counting semi demand for polysilicon, there's around 140,000 metric tons of polysilicon available. That can roughly support about 40 gigawatts of installation. We expect market price of polysilicon to be around $15 a kilo in the U.S. and Europe, and the highlight on that is REC produced polysilicon has both low-cost and low-carbon footprint. And our FBR technology is energy-efficient, and we have hydroelectric local power supply.Looking at the graph, we see that roughly 140,000 metric tons of capacity located outside of China and where it is. We do have this at around 42 gigawatts in the graph. So if you look at the 2 different numbers, the 42, 40, our current numbers are around 3.3 to 3.5 grams per watt. As this improves, the current capacity can support more. We're seeing more corporations and government regulators that are pushing for low-carbon footprint. Looking at the graph on the left, we've modeled some scenarios using the French CRE standard for carbon footprint. The first stack is the China CRE standard, and that's the current base that's out there. The second one is the U.S.A. Siemens poly, cell and module with a mono ingot/wafer from Norway. It's -- you can see it shows 55% less than China. The third column is same as the second, but uses REC FBR polysilicon, which reduces the carbon footprint even further, down 80% compared to China. A key area that you'll notice is the dotted lines, which -- showing FBR polysilicon has a 75% less carbon footprint than the standard Chinese polysilicon. Looking at the notes on the right with regards to carbon emissions, France and South Korea already have established programs for incentives for low carbon. There's also significant advantages for non-Chinese collaboration in these markets, and that's one of the things that we're looking at and working on.Similar programs are expected to become more widespread in the mature markets over the next years. The EU is considering carbon border tax. Those are being discussed. Japan and Australia are also considering similar measures with regard to low carbon. Large companies are focusing more on the ESG and carbon reduction. You can see announcements by Microsoft, Facebook, Amazon, Google as examples. They're looking at their supply chains and considering what requirements for their producers.Solar ingots made in Norway provide a significant carbon footprint reduction due to the hydropower and the ones cooling that's available over there for water. The Siemens polysilicon combined with coal-fired power is the primary contributor to carbon emissions when making a solar panel at the beginning. After that, there's very limited opportunities to change that in the cells and the module process and the downstreams.

[Tore Torvund, CEO & President]

Thank you, Chuck. And we move into the battery opportunities. And Jeff Johnson, Vice President of Operations here in Moses Lake, will discuss the just recent announcement concerning the collaboration with G14.

[Jeff Johnson, Vice President of Moses Lake Operations]

Good morning. Yes, I'll cover the batteries here a bit. We'll start with talking about the next-generation for the silicon anode portion of the battery. And the materials that use silane are now achieving 20% to 30% increased performance. In fact, many of these developers say, given time, the performance of the anode in the battery will reach 50% improvement.These next-generation silicon anode technologies require a very high-purity silicon, and they get that from silane. It improves the energy density of the battery, reduces the weight and the costs, unlocks the potential for the existing cathode to be fully utilized and increases the power acceptance, allowing for faster charging to go with the longer range. We know that Tesla is currently using silicon batteries in the form of silicon oxide. And from their Battery Day back in September, Tesla's put up some information stating their next-generation battery will use a powdered silicon that they expect to have in place in the next 2 to 3 years. Now it appears to be a bit lower performance than the silane-based silicon materials that are using silane.Next slide, please. So Tore mentioned Group 14 Technologies. They have a pilot plant here in Moses Lake already doing some development work and development production. And Group 14 has partnered with REC to build a 12,000 metric ton nameplate capacity anode manufacturing plant co-located here in Moses Lake. They expect to break ground in 2021, and we will supply silane to their new facility through a pipeline-type arrangement and collaborate with them on this activity.G14 is backed by some leading -- industry-leading folks, BASF, ATL, Showa Denko, Cabot and OVP partners. A lot of confidence in the work that they're doing. We -- in addition to G14 here, and we also supply, and Kurt mentioned this a bit, silane to several other anode industry leaders and continue to support this activity out of -- with Butte silane right now.Next slide, please. So here in Moses Lake, we have 25,000 tons per year production available of the silane to support this industry. In order to supply the quantities projected for the silicon anode market, the manufacturing plants should be co-located here in Moses Lake to be the most efficient. If you take a look at the current silane distribution network throughout the world, it's plus or minus 7,000 metric tons. And to expand that distribution capacity, it's roughly 30 million per 1,000 metric tons. And so it's a fairly significant effort there and investment there. And it makes sense to co-locate a plant with the projected silane usages this battery is looking to do.Kurt mentioned already the Butte silane business, so I won't cover that part of the slide here. But I will say that if you took a look at the combined silane capacities of Butte and Moses Lake together, depending on the amount of silicon that the battery is using and what point of technology is in, the 2 plants could cover between 1 million and 2.5 million EV vehicles down the road.

[Tore Torvund, CEO & President]

Okay. Thank you, Jeff. And I hand over to James again just to give an update on the key assumptions and financials in case of independent value chains, all the value chain outside of China and on the silicon anode battery side.

[James A. May, Chief Financial Officer]

The next 2 slides were presented with the investor presentation that was published as part of the private equity placement that we completed on October 14. During the private placement, we indicated that we were targeting to make the decision to restart Moses Lake by year-end 2021 and expect to begin producing by the beginning of 2023. If conditions develop to start -- restart the plan earlier, we will begin the sequence to restart the plant. Tore will discuss in a few minutes a little more about this decision. However, in general, the decision to restart will depend on progress to develop a non-Chinese solar PV value chain, which was covered by Chuck a few minutes ago, and progress related to the development and commercialization of silicon anode battery material, which was covered -- just covered by Jeff. Given the proven low-cost capability, the FBR facility has demonstrated in our history, we believe that when the plant reaches the capacity utilization of approximately 75%, Moses Lake will contribute more than $100 million EBITDA per year. Next slide. The equity raise that we just completed is expected to result in approximately $104 million in proceeds net of the brokerage fee and will provide the company with the liquidity to invest in the expansion of specialty gas production at the Butte facility, which Kurt mentioned, and to support ongoing operations. We will also provide the financial flexibility to prepare for the restart of the FBR facility and to restart the facility when conditions lead to a restart decision.I'll now turn the presentation back to Tore.

[Tore Torvund, CEO & President]

Yes. So just let me then end this presentation for Q3 by some, let's say, a small, short update on this new partnership we have then entered into in October, and we are very excited on this, too. First, we definitely see a tremendous opportunity when it comes to silicon anode batteries. The Group 14, with this very strong industrial companies behind them, have been working together with us here in Moses Lake for the last 18 months, and they are now starting a pilot. So that means it has been so far done on a -- in our, let's say, laboratory, and they are now starting to do a pilot in our facility here in Moses Lake. And they, as already said, they then intend to make a final investment decision in 2021 for a 12,000 metric ton plant for the silicon and carbon anode material.We don't intend to invest in this, but definitely, we have necessary capacity. So we will supply G14. We are, let's say, with silane, and they will then build their plant adjacent to our plant in Moses Lake. There is also other companies. There is a couple of companies using silane and working on the same concept, which has shown a lot of interest to work together with us. And the agreement we have with Group 14 is not exclusive, and we will have silane capacity to supply other companies than just G14.The other thing -- the other, let's say, route for Moses Lake is definitely this non-Chinese solar value chain and Violet, which has been an initiative here in the U.S. They decided to also locate their facility adjacent to REC in Moses Lake. Their ambition is to have cell and module capacity of some 500-megawatt in 2021, and it will then increase to 5 gigawatt down the road.There is no doubt that the main, let's say, idea behind Violet is, in fact, twofold. It is to supply the market with a low-carbon footprint solar panels. And the second thing, which is very important, it is to increase the number of manufacturing capacity in the U.S., which was covered previously or earlier in this presentation. We have a huge end market in the U.S. We have sufficient polysilicon. We are -- we have to then create the capacity to combine these 2 markets. So that means ingot cells, ingot/wafer cells and modules. We have then entered into an agreement with Violet, and we are working very closely together with Violet, put in place necessary, let's say, necessary opportunities to create this non-Chinese value chain within solar. So for the next quarter, definitely, let's say, we are also very excited by the fact that we were able to raise NOK 1 billion in new equity. That gave us the opportunity to keep Butte. So we have now decided not to divest Butte because we do have the financial capacity to retain Butte into REC. And as Kurt said, this has always been our preferred solution. There is a lot of synergies between Butte operations and Moses Lake. And we also see that we have a lot of opportunity -- business opportunities, which has been not, let's say, possible to move into to the fact that we didn't have enough capital to do it. Now we will definitely do make investments both in DCS and in disilane.When it comes to Moses Lake, let's say, focus now is to create a market for Moses Lake's silane and polysilicon, development of a non-Chinese value chain, making the agreement and hopefully, that the decision to build this 12,000 metric ton silicon anode plant, let's say, announced by G14 that will create the opportunity for restart on Moses Lake. And we are still hopeful that the phase 1 trade agreement with China will be implemented. So there is a lot of opportunities now in Moses Lake, and we are working very hard to come to a situation where we have firm commitment in one or several of these possibilities. I think that is our presentation as of today. And then we can open up for some questions. I don't know who is going to make the questions here.

[James A. May, Chief Financial Officer]

Okay. I can ask questions. The first question. Could you please comment on REC's ambitions towards the Yulin JV? Specifically, do you plan to exercise the option for the ownership share increase and why?

[Tore Torvund, CEO & President]

We have not made any decision on that. As you know, we have the option to increase from 15% to 49%, just -- let's say, just on the other side of the new year. But there has not been taking any new or decision concerning Yulin. Definitely, there is a lot of political issues, particularly between the U.S. and China. On the other hand, the performance of the Yulin, particularly towards quality, has been very impressive, and we are now approaching the very high-end quality out of the FBR reactors in Yulin.So I think we have proven that FBR will be a very high-end polysilicon quality, which can be used to all, let's say, all qualities for PV and also some of the EG quality can be -- or it can be used for EG quality. But the decision has not been made. It will be done on the other side of this new year.

[James A. May, Chief Financial Officer]

We have time for one more question. Do you expect to indirectly serve the initial 500-megawatt cell line of Violet Power with Moses Lake polysilicon?

[Tore Torvund, CEO & President]

Definitely. That's the ambition. There is a missing link between polysilicon and what Violet will invest in initially because they will invest in sales and modules and not in wafers. So we are definitely working together with Violet and others to be able to supply Violet, but there is not any final commitment from Violet and from our side to do that. I think then we, let's say, do not have more time. So I would just thank you all for participating in today's call. And I think we have also Q&A at 3:00 this afternoon, Norwegian time or European time, which is way late here in Moses Lake. But still, we will be able to answer more questions at that time. Thank you very much for your calling in today, and have a good day.