Analyst Corner: Possible REC Solar buy could reduce RIL’s execution risk

Key takeaway: RIL could acquire REC Solar, reports media. REC is a fully integrated solar PV maker with similar ambitions to RIL. It is the only player globally to commercialise a tech that consumes 75% less power than Chinese comps. It has patented tech and has a long operating record of reliability. Challenge in stabilising yield has prevented wider adoption of REC’s tech. The possible acquisition could lower RIL’s execution risk but wouldn’t eliminate it.

REC fully backward integrated solar equipment maker: REC Group is a fully integrated solar PV module maker starting from Si. It uses a proprietary tech for polysilicon manufacturing that has a high monocrystalline yield. REC’s fully integrated model is in line with RIL’s aspiration of a similar integrated operation. REC also manufactures semiconductor-grade polysilicon of much higher purity Low power cost key competitive advantage for China’s polysilicon makers: Polysilicon is the basic building block of the solar PV module. Power cost is c40% of polysilicon production cost. Major polysilicon producers in China are located in Xinjiang, which has abundant supplies of sand and coal, among the lowest industrial power cost in China, and accounts for 45% of global polysilicon supply. REC only company globally to commercialise tech that consumes 75% less power than Chinese comps: REC has implemented the Fluidized Bed Reactor (FBR) tech for producing polysilicon on a commercial scale. The FBR process consumes 75-80% less energy than the traditional Siemens process that Chinese players use. REC’s plants have a long operating history of reliability and quality. REC owns patents across its tech: The FBR tech is very difficult to stabilise and is protected by many patents. REC owns patents over the entire FBR production process and mono-crystallisation technology. These patents along with the long commercial operating history are major competitive advantages.