Good morning. This is Thor Torwin. I'm here together with my CFO, James May, in Moses Lake. It's 11 o'clock in the evening in the West Coast of the U. S.
And welcome to the discussion and presentation of the Q2 2021 for REC, Zurich. The agenda for today, we will Mr. James will give you an update on the financial for Q2. Then I'm going to give you a short update on our Butte operations, a short update on the development in Yulin. And then I will spend some time on the Solar Value Chain.
We are working on the non Chinese low carbon solar value chain. And I will end up a presentation with a short update concerning the silicon anode opportunities. And then we will open for Q and A. The results in the second quarter, The revenue came in relatively high at $35,600,000 and EBITDA at dollars 7,900,000 James will give you the details and the background for these numbers. The cash balance was USD 123,600,000 by the end of June.
That is a decrease of SEK 7.8. This is a quarter where we then pay interest on our bond, USD 310. As you know, we pay that twice a year in Q1 and in Chitry. As you know, we let's say the CARES Act, what we call the PPP, which was an opportunity to have a loan from the U. S.
Government in in relation with the pandemic, which has been not only in the U. S. But also in the U. S. We have now because the decision that both these loans will be forgiven and that improve the situation or the EBITDA in the company.
Due to Cellatane, we increased the sales of silicon gas to 8 19 metric tonne, and we sold 3 75 metric tonne of semiconductor grade polysilicon. Total sales was at 4.66 metric tonne. All of this came from our Butte operations. When we come to what we are working on concerning business development, we are pursuing the negotiations with battery companies, silicon anode battery companies. And we have been very Steve, in looking into the opportunity to create this U.
S.-based solar value chain and I will come back to this. I will then hand over to James May, which will take you through more details of the financial results. So James?
Good morning. As Tore indicated a moment ago, total revenues for the Q2 were $35,600,000 which represents an increase of approximately 27% compared to $28,100,000 reported for the Q1. This increase in revenues can primarily be attributed to higher polysilicon and silicon gas sales volume in the semiconductor material segment. So I'll talk about it in a little more detail in a few moments. Total EBITDA for the Q2 was $7,900,000 compared to $4,000,000 for the Q1.
EBITDA for the Q2 included other income of $8,300,000 related to the forgiveness of loans guaranteed by the United States government under the CARES Act that Tore just mentioned. We've counted for this forgiveness as grant income, which impacts the Q2 results for each of the company's operating segments. Excluding grant income, EBITDA decreased by $4,400,000 compared to the Q1. This decrease can primarily be attributed to EBITDA contributed by the Semiconductor Materials segment, which was impacted by higher electricity prices, lower production volumes to avoid the high electricity prices, Higher costs due to the acceleration of plant maintenance and lower quality because of a manufacturing interruption caused by a lightning strike. In the semiconductor materials segment, revenues for our Butte Facility increased due to higher sales volumes.
Semiconductor polysilicon sales volumes increased from 2 27 metric tons in the prior quarter to 4.66 metric tons, an increase of 2.39 metric tons. A portion of this increase, Approximately 165 metric tons can be attributed to this a sale of CZ grade polysilicon, which was afforded by spot market opportunities, which we do not expect to reoccur. Overall, this increase demonstrates the expected increases in demand for polysilicon because of conditions in the semiconductor market. In addition, silicon gas sales volumes increased from 781 metric tons in the prior quarter to 819 metric tons this quarter. EBITDA contributed by the Semiconductor Materials segment was $11,500,000 for the 2nd quarter.
Of this, dollars 4,500,000 was due to grant income as a result of the forgiveness of the CARES Act loan within this segment. Excluding this item, the underlying EBITDA for the quarter was $7,000,000 or a decrease of $3,800,000 compared to the prior quarter. As you can see on the slide In the lower left hand corner, this decrease is attributed to higher electric prices, higher costs due to the acceleration of plant maintenance activities, Lower manufacturing utilization due to accelerated maintenance and lower quality due to a production interruption the production interruption caused by a lightning strike. These were offset by higher sales volumes due in part to the nonrecurring sale of CZ. During the Q2, the Solar Materials segment contributed $1,200,000 of EBITDA.
Of this, dollars 3,900,000 was due to grant income as a result of the forgiveness of the CARES Act loan. Excluding this item, underlying net expense was $2,700,000 and was in line with the results for prior periods. In other, the net cost was $4,800,000 and was comparable to net cost of $4,900,000 reported for the prior period. Cash balances decreased by $7,800,000 during the 2nd quarter. Cash outflows from operations were $6,100,000 and consisted of EBITDA of $7,900,000 which was offset by an adjustment of 8 $300,000 associated with the CARES Act loan forgiveness.
Other outflows included Interest payments of $8,500,000 of which $6,300,000 is associated with the company's senior secured bonds And $2,200,000 of the interest was due to the repayment of long term lease liabilities. In addition, There was $700,000 contribution to the frozen defined benefit pension plan in the United States. These were offset by a $3,200,000 decrease in working capital investment, which consisted of $3,500,000 decrease in inventories, A $1,800,000 decrease in trade receivables and a decrease which were offset by a decrease of $2,100,000 in payables and accruals. The remaining $400,000 in cash inflows can be attributed to changes in other assets and liabilities. Cash outflows from investing activities were $1,200,000 and were only were the result of capital expenditures only.
Cash outflows from financing activities were $500,000 and were a result of the repayment of long term lease liabilities only. In total, cash balances were $123,600,000 on June 30, 2021. In terms of debt, nominal debt decreased by $8,900,000
to
211,400,000 at the end of Q2. This was a result of the Forgiveness of $8,300,000 in CARES Act loans. In addition, lease liabilities decreased by approximately $500,000 and The indemnification loan decreased by about $100,000 due to changes in exchange rates. Nominal net debt decreased by $1,000,000 to $87,800,000 nominal net debt decreased by $1,000,000 to $87,800,000 due to the decrease in cash of $7,800,000 which was more than offset by the decrease in debt of $8,900,000 that I just Discussed. Now I'll return the presentation back over to Tor.
Thank you, James. Let me then give you Short background, what has been the results from our Butte operations. It has been a difficult operational, let's say, quarter due to the extreme heat here on the West Coast of U. S. The power prices has increased.
As you probably know, we are exposed to the spot market, when it comes to power, due to the fact that, let's say, we have had fires, but also the fact that, The consumption or the power consumption has been extremely high due to the heat and the use of air conditions. Power prices has been way higher than what was in our expected. In Addition, we had a lightning strike here in Butte, which then took down our operations and we lost some reactors. That means volumes and also quality had to be downgraded. So from an operational point of view, it has been relatively difficult quarter.
When we see the shipments, 375 metric ton. You can see on the right hand side that we sold and 165 metric ton of what we call T DROP, which is has been in inventory for many years. The fact that there is a very strong market out there, it was now possible to find buyers for this product in a relatively decent price. When it comes to semiconductor grade polysilicon, Definitely, we see there is a very strong demand for this. On the other hand, let's say, we entered into contracts by the end of 2020.
So the price will not be reflected of this increased demand until we renegotiate for 2022, the price of polysilicon. We assume that, let's say, there will be an increase towards 2 15 metric tonne of semiconductor grade polysilicon shipment by the end of this year. When it comes to our silicon gas, we delivered 819 metric tonne, somewhat higher than what we did in the last quarter, which was SEK 781,000,000 and we expect that it will gradually increase throughout the second half of this year. We still experience a lot of logistic issues. As you know, most of our silane goes towards customers in the other side of the Pacific.
And it has been Difficult to get modules back from Taiwan, Korea, Japan and China because of the issues with binding ships to transport these modules back to the U. S. So we can fill them up again and vice versa. That means that we have some backlog. What we have focused on is to be able to deliver to our main customers, which is basically the semiconductor customers.
And we have then defaulted on the more, let's say, common customers in, for example, in the solar market. We hopefully think that these logistic, let's say, issues will be gradually resolved, but also we think that it will still the logistics issues in the next two quarters. Let me then turn to our investment in China. The operational in China has been very encouraging this quarter. We have been able to deliver 3,840 metric tonne of FBR granular.
That means basically that we are towards 16,000 metric tonne on an annual basis compared to the design basis of 19,000 metric ton. So the operation has improved Sidurbolie, over the last months or over this year. And we now see also that due to the market and the relatively for a very good market in China for our polysilicon. We are now cash positive in our operations in Yulin. The numbers will be affected in Q3 by partial turnaround of 1 of the Simon units.
So we have to expect somewhat lower numbers in Q3. When it comes to the sales, currently, oil production is sold out mainly to the high end and mono producers of ingotum wafers for the solar industry. So There is no doubt that the quality from Jullin is now reaching the specification, which is necessary among those high end producer of ingot and wafers. And our product is used in both what we call in issues of charge and on recharge application. So, this is very encouraging.
And this is, let's say, something which we, let's say, now use as background and has experience when we're now looking into restart Moses Lake. But just to repeat a little bit what is the technology advantages from SBR compared to what is our competitive technology, which is called the Siemens technology. First of all, as I have told many times, we are what we call a silane based company. That means that FBR is then seeded by Xylem. FBR is only possible on a commercial basis if you have Xylem as a feedstock.
So, all the TCS based Siemens, they can't get into the FBR of Technology, so they are have to use the Siemens technology. As I said, the Urine FBR B, which was developed here in Moses Lake but installed in Yulin as demonstrated excellent operational achievement. And we have, as you already have disclosed to the market, we are now looking to integrate half of the FBR A we access here in Molsek to achieve the quality we have achieved on the FBRB and that upgrade is estimated to cost about dollars 40,000,000 Why is FBR so efficient in making the polysilicon? First of all, let's say, the energy consumption by using FBR is about 10% compared to Siemens. The reason why Siemens is not very energy efficient is that most of the energy is used to cool the best charge of the Siemens reactor, while in an FBR, all the energy is used to transform silicon gas into polysilicon.
The second thing is that FBR It's a continuous process when you start in Reactturb. And as you will see on the graph there in now in Yulin. Some of the reactors are approaching 400 days. They are still running. That means that when you start a reactor, you can basically leave it there for more than a year.
While when you have Siemens, you basically have to harvest, that means you have to grow the polysilicon and you have to stop, have to take out the polysilicon from the reactor. You have to reload the reactor and then you have to start up again. That definitely makes it way more labor intensive. And our estimate is that we can make the same volume in Moses Lake by some 200 employees compared to Siemens for the same volume of some 3 times more employees due to the fact that it is a batch process. Out in the market, it has always been a question about the quality on the FBR side.
And it is now nice to see what kind of quality we are making in Yulin. Top line there, you can see that the black line is the specification for mono application in China. And all the reactors running in June of this year in Jullin. We're well below the specification. And that's what I said.
Paul said he came from UNHIN. He's now in large demand due to the fact that it is very high quality and it has also other attributes compared to Siemens where you have to crush while our project can be directly into the process. We are also tested by so called etching. This and etching means that we expose the granular to some Asif Bat, to take out the surface contamination. And you can see then that we, in fact, meet the semiconductor rate and specialization.
That means that what's kept out of the reactors are at very high quality, so it can in fact be used in semiconductor. So this is very good news because it just showed that what has been a lot of the discussion about FBR, It's the quality. Now we can demonstrate, now we can prove that the quality at least is at the same level than what we make in a Siemens Zielinski. So, this is definitely important because I'd say there is now a very strong focus to create what we call low carbon U. S.-based solar value chain.
And the reason why I'm going to come back to it. The U. S. Is the 2nd largest market for PV installations in the world. I'd say approximately 20 might increase towards 30 gigawatts of solar panels are, let's say, installed here in the U.
S. Every year. China is by far the biggest one. They are at 15. But the U.
S. Is the largest or the 2nd largest market by country. The overall installation in this 2021 is expected to be between 150 and 160 gigawatt on a global basis. In the U. S, we have idle capacity.
That means that we have polysilicon, which is presently not being produced of approximately 10 gigawatt. So, we have enough polysilicon capacity in the U. S. To cover half of the demand for solar panels. The reason why this capacity is not used is that we do not have access to an ingot and wafer companies because they are all now located or almost all located in China.
And that means that we don't have any customer for our polysilicon. That's why REC and other companies have idle capacity. Also, when it comes to sales, there is very limited capacity in the U. S, less than 1 gigawatt. While there is more capacity available outside of China And when we come to modules, it is definitely a capacity approximately 25% of all modules are made outside of China, but that means still 75% of the modules are produced in China.
So China has overtaken this industry. And for President Biden. This is a dilemma. He wants to focus on renewable energy. On the other hand, with this situation, all the manufacturing jobs will be overseas.
There is no jobs created by manufacturing of solar panels by due to this trade war between China and the U. S. And that is probably not an acceptable solution that we have very focused installed panels, but they all will come from more or less from China. So we have been working on, let's say, how can we put together not only a U. S.-based, but non Chinese low CO2 carbon footprint value chain.
And again, back to, let's say, we have here in the U. S. 10 gigawatt of polysilicon, which is just waiting to be started up again. When it comes to ingotined wafers, there is hardly any capacity available outside of China. And as I said, due to the trade war, We don't have access to the Chinese, which then dominate that part of it.
When it comes to cell, There is 33 gigawatt available outside of China and you can see on the top line where that is mainly located. The biggest cell capacity outside China is in Korea and in Taiwan. And when it comes to module capacity, the U. S. Has 4 gigawatt, India and Korea has 11 and 8.
So either you can invest in this value chain here in the U. S. Or you can combine, say, the value chain with non Chinese countries to avoid using the or using Thomas May, in China. There is a lot of political initiatives to support this. And as I said, It makes sense because the Biden administration, one thing is to focus on renewables.
That means to reduce extraction of oil and gas and coal. That means again that there is a loss of employment and you have to replace that with manufacturing jobs into renewable industry. So that's there's a very strong focus not only from the Biden administration, but overall to try to unlock this opportunity. So For example, the tax credit has been already extended by 3 years and it is a new the Education. They are now discussing if it should be added another 10 years with tax credit on this.
I will come back to the battery side, but there is the same push on the battery side. Basically, the argument is that if we don't do anything now in the U. S. That will be also made in China and we will have exactly the same situation as we have experienced in solar. Basically, it needs to be a strong push to create a battery industry in the U.
S. And the politicians are very focused and very aware of the situation that it needs to be done something not only on a company level but also on a political level. We had the other week or last week the visit from, let's say, Governor Inslee from State of Washington. As you know, State of Washington is focusing on green industries. They have what is headquartered in the state of Washington, for example, Microsoft, Amazon, other big companies, Boeing as well.
And there is 6,000,000 people living in the State of Washington and Governor Inslee He's very focused on to create more what we call green industries, and he came to talk to us and to discuss with us what could be done not only on the federal level, but also on state level to get something done on the solar side. And finally, as you all know, there is a discussion about the Uyghurs or the Muslims in the Xinjiang province. It has been in Europe. It has been very strong here in the U. S.
And the Senate just passed a bill a couple of weeks ago where they banned products coming from Xinjiang to get into the U. S. Market. It was 5 companies mentioned in Tata, among those 3 polysilicon companies. And 3, As you know, Xinjiang is the by far the biggest region for making polysilicon.
Who makes about 60% of total production of polysilicon based upon coal fired power, which definitely admit a lot of CO2 and there is also some allegation about using forced labor. I don't know if that's going to be very important, but at least there is a ban now if, for example, It can be proven that the solar panel coming to the U. S. Has used polysilicon or wafers from the Xinjiang. It should not have the opportunity to get into the U.
S. Market. There is also some initiatives along the same lines in Europe. So we are pursuing these opportunities towards the government, but definitely also We are looking into how could we as a business give solutions to what is now very Tractiv, from a political point of view. And that means basically how can we be able to, let's say, support the creation of a PV value chain, which is not then based upon products coming from China.
Very short on the battery updates, we are continuing to have discussions with several silicon anode Material Companies, for supply of silane to these companies. There is no more let's say, we have been talking about the framework for this kind of agreement, but we have not yet been able to get a commercial agreement, but we will definitely keep you updated if that will happen and when it will be happening. So that's the update from REC Silicon for this quarter. Then we will be happy to answer some of the questions which has been sent to us online.
Currently, we've done a very good job of answering questions. We have 2 questions. If you have a question, please log them in. First question is, could you Comment on the restart of the Moses Lake facility and when that might occur?
We are still working towards We start almost like in 2023. But it's definitely hard dependent upon that we do have customers which then sign up to take our product, either if it is polysilicon for the solar industry or it is Silicon Anode Companies, which might take silane from our platform.
Okay. The next question is, do you have any thoughts About the Group 14 and SK Materials JV that was announced?
Yes. As you know, we have an MoU with 14. We have been let's say, we know that SK Materials is an owner in Group 14. They came in as a 10% owner back in October last year, And we know that that agreement also was an option to create a JV making silken anode material in Korea. SK is our as a main competitor in the silent market.
They have relatively, according to our knowledge, relatively limited capacity. And so what they are going to do in Korea is relatively small quantities of silicon anode material. What we talk what we have been discussing with Group 14 is much larger facility here in Moses Lake. But again, we have not reached an agreement. But according to G14, it's also a need for having multiple supplies towards the auto industry.
The auto industry will not rely on just one company, just one plan. So in their strategy, they are going to make some quantities in Korea while they foresee that way more quantities should be made in the U. S. And definitely we have the silicon capacity available for doing that if they decide to build here in Molsek.
You considered a listing on the NASDAQ exchange in the United States?
We have not considered that. You have not considered that.
When do you expect to make a decision on the possible Size of the option to increase the ownership interest in the Ulan JV?
We are presently looking into That option is available for another couple of months. Most likely, we will decide not to increase the ownership, but the final decision has not yet been made.
Are you more or less optimistic now than after Q1 regarding the Moses Lake startup?
Let's say there is no doubt that, let's say, the PV market is very exciting. There is a demand for solar around the globe, but also particularly in Europe and in the U. S. That's why we now focus very much on the solar market, which is an existing market. When it comes to silicon anode, that's a market which needs to be developed, but we are pursuing both Options.
In one way, we are working with, let's say, companies when it comes to silicate anodes, companies which do have, let's say, very strong Yilim, that the silicon nanometer market will be, let's say, huge, but it is not yet there. When it comes to the PV market, definitely the market is here in the U. S. As I said, we have for the U. S.
House 10 Gigawatt of Polysilicon. We have 5 Gigawatt of Polysilicon available in most states. We are pursuing both strategies. If I'm more optimistic or less optimistic, I'm pretty optimistic that we will find a commercial reason to start up Moses Lake within the time line we have already given to the market.
Okay. It's kind of an accounting question. You may want me to answer this one. Do the sales in the Ulan JV contribute to REC's revenues and if it does what's the percentage of sales revenues. The UN JV is accounted for as an investment.
We're currently carrying it on our books at the fair market value of 0. We wrote that down during the Q3 of last year. We don't consolidate, so the revenues are not included. It will be shown only on the balance sheet. I think that's it.
Okay. Thank you so much for attending this conference. I would like to I'll say that our next reporting is in October 20 and we will come back with what happens in Q3 and have a very nice summer holiday, both in Europe and also those listening in from the U. S. Thank you.