UPDATE 2-Ailing solar firm REC to split, move out of Europe
* REC to separately list solar and silicon firms
* To move solar to Singapore, silicon to United States
* Q2 underlying operating loss better than expected
* Japan, China seen driving growth
OSLO, July 18 (Reuters) - Struggling solar equipment maker Renewable Energy Corporation will split in two, raise cash and move out of Norway, hoping that its beefed up halves, relocated into the centre of growth markets, can ride out the storm.
REC said it would sell off its solar panel division to existing shareholders, move it to Singapore with no debt and ample cash, and move its silicon unit to the United States.
The deal, pending approval by shareholders and bond owners, would make the new solar company an immediate takeover target given that it would have no debt while the silicon firm, which will retain REC's debt, would have the cash needed to refinance a bond expiring in 2014.
The firm has already moved its manufacturing bases to Singapore and the United States, regions that will generate the vast majority of the market's growth in the coming years. Moving headquarters to those countries will also put the divisions closer to customers and possibly future investors.
REC shares, once the darling of the Oslo bourse but down 98 percent since its 2008 peak, jumped as much as 25 percent on the plan, as investors hoped the deal would make the two new firms more attractive takeover targets.
"By separating these two companies into two very well financed companies, we think we are positioning ... for organic growth as well as the possible consolidation and restructuring of the industry," Chief Executive Ole Enger said on Thursday.
"Overall, the solar industry is still very fragmented, it's poorly financed and certainly ripe for consolidation."
The solar equipment industry has been in the doldrums for years as Europe's economic woes, falling government subsidies and Chinese overcapacity have dragged prices down, while a trade dispute between China, the United States and the European Union has made uncertainty almost permanent.
REC, struggling with high costs, closed its expensive loss-making production in Norway last year, focusing output in Singapore and the United States as European demand, fed in the past by lavish government subsidies, is not expected to resume.
"We see a continued positive demand development mainly driven by Japan, China and the United States," Enger said. "Even more importantly, we also see an increased demand in almost every country in Asia, as well as Africa and South America."
The move is only expected to affect jobs in Norway, a relatively minor development as only about 2 percent of REC's 2,300 workforce are employed at the firm's head office.
Analysts welcomed the split.
"This is a very good solution," Eirik Dahle, an equity analyst at Pareto Securities said. "The two units don't really have much to do with each other and now they'll be able to concentrate on their individual businesses."
"Most importantly, this will make Silicon a more attractive takeover candidate, as a buyer would not need to later divest Solar," he added in a note.
Although markets have improved in recent months, particularly from healthy Chinese and Japanese demand, REC remained loss making, reporting an underlying operating loss of 57 million crowns for the second quarter, ahead of expectations for a 139 million loss.
Solar prices appear to have bottomed out at the start of the year and may continue to benefit from higher-than-expected Japanese and Chinese demand, even as silicon prices remain near their recent lows.
HSBC expects global solar installations to rise by 18 percent this year as Japan and China more than offset 30 percent fall in Europe. For 2014, it expects global growth at 7 percent, accelerating to 11 percent in 2015.