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Edited Transcript of REC.OL earnings conference call or presentation 24-Oct-18 6:00am GMT

Q3 2018 REC Silicon ASA Earnings Call

Hovik Oct 29, 2018 (Thomson StreetEvents) -- Edited Transcript of REC Silicon ASA earnings conference call or presentation Wednesday, October 24, 2018 at 6:00:00am GMT

TEXT version of Transcript


Corporate Participants


* James A. May

REC Silicon ASA - CFO

* Tore Torvund

REC Silicon ASA - CEO & President


Conference Call Participants


* Oscar Semb-Fredricsson

Arctic Securities AS, Research Division - Former Equity Analyst




Tore Torvund, REC Silicon ASA - CEO & President [1]


We are on time, and welcome to this third quarter presentation from REC Silicon.

As you probably have already seen, it has not been a stellar quarter, but hopefully, we are through the worst. Hopefully, things are gradually improving going forward.

We will cover definitely the financials. James will take the details on our financials side. And then I will again give some updates on the market, short term, long term and also what we do within the company to adjust to the present situation.

The numbers. It's not, as I said, very encouraging. The revenue came in at $43.7 million during this quarter, and we then record a negative EBITDA of $6.1 million. Maybe the best part of the presentation or the situation is that we still have a decent amount of cash, we have $41 million, so we were only down $1.4 million during this quarter.

The FBR, let say, our Moses Lake operations, are running now at 25% and that definitely makes some consequences for the cash cost. But again, $15.1 is not bad given the situation we are into with only 25% utilization. We would definitely have been well below $10 if we were able to run at full capacity, which would have been the case if we had been able to get access to the Chinese market.

Silicon gas sales, 865 metric ton, a little bit lower and guided on 900 metric ton. But the -- on the positive side, we got 1.3% price increase compared to last quarter.

And the JV in Yulin is doing very well, and I will come back to the more details on our performance in China.

On the key metrics, there is not too much deviation compared to what we guided on. The -- maybe the most negative on this slide is the fact that we built inventory, some inventory, during the quarter, 500 metric ton even though we are running at 25% utilization. And this is definitely a reflection of the fact that the market and the demand for polysilicon has been very weak during the quarter.

The other, let's say, metrics is basically within what we guided 3 months ago.

So then, James, if you would like to give the details on the financials and I'll come back with more market update afterwards.


James A. May, REC Silicon ASA - CFO [2]


Good morning. As Tore indicated, our revenues for Q3 were $43.7 million. This represents a decrease of 25.8% compared to what we reported in the second quarter. EBITDA for the quarter was $6.1 million, which is a smaller loss compared to the second quarter loss of $9.6 million, which reflects the success of our efforts to control costs, maintain inventories and maintain the liquidity of the company.

The loss in the third quarter also includes some unusual items: first, we had $1.9 million of termination benefits associated with the workforce reduction that we announced on July 1; and then we received $1.3 million in sales tax refunds from prior quarters. Those items netted $600,000 expense and were reported in other items -- or other income and expense on the income statement.

In the third quarter, the Solar Materials segment realized an EBITDA contribution loss of $9.9 million. The loss continues to be a result of low polysilicon demand, and accordingly, the low production volumes in the FBR facility, which is operating only at 25% of its capacity. As Tore indicated, our markets for FBR polysilicon continue to be limited to those outside of China due to the trade war.

Semiconductor Materials segment contributed earnings of $9.3 million of EBITDA during the quarter. EBITDA in the Semiconductor Materials segment continues to reflect the profitability of the silicon gas business and the increasing sales of semiconductor grade polysilicon. The decrease in EBITDA compared to $14.4 million in the second quarter is due to lower sales volumes of silicon gases and a higher mix of solar grade polysilicon sales and the associated -- and then there was also an impact because we downgraded some semiconductor material and finished inventories to a lower-quality product, and accordingly, wrote off some of the value.

Within the Solar Materials segment, revenues decreased by $69.8 million (sic) [69.8%] to $6.2 million. The decrease was exclusively due to lower sales volumes. We sold 658 metric tons of FBR material compared to 1,742 metric tons in the second quarter, a decrease of 62.2%, and reflects the soft demand for solar grade polysilicon, which Tore alluded to and he'll explain further in a few moments. The average sales prices realized for prime grade solar grade polysilicon declined by 27.1% compared to Q2. However, recall that the price decrease that we realized in Q2 wasn't as large as the overall decrease in the market for that quarter and that's because our sales in the second quarter were isolated to the first half of the quarter. So a great deal of the price increase -- decrease that we're seeing now in the third quarter occurred due to the volatility in the second quarter where we just didn't have volumes that were sold for the final month of the quarter.

As I said a few moments ago, we continued to report strong earnings for the Semiconductor sales segment due to the silicon gas business and then the underlying growth in the semiconductor polysilicon sales that we've seen throughout the year.

Revenues for Semiconductor Materials segment decreased by only 2.5% compared to the second quarter. The decrease was driven by lower sales volumes of silicon gases, which declined from 918 metric tons in the second quarter to 865 metric tons in the third quarter. However, this was offset by increases in polysilicon sales volumes.

Overall, polysilicon sales volumes increased from 335 metric tons to 455 metric tons. Again, this was an increase in high-quality solar grade polysilicon that is sold into the monocrystalline PV market, while the underlying sales of semiconductor grade are relatively stable between the second and the third quarter.

Silicon gas sales volumes were 865 metric tons compared to 900 metric tons of guidance.

Silane gas prices increased by 1.3% as well. The lower volumes are a result of the volatility in demand for silane gases in the PV segment. Sales of silicon gases into the PV segment command lower prices. Therefore, the lower mix is, in part, responsible for the price increase as well. The underlying demand for silicon gases in flat-panel display and semiconductor application continue to be robust.

In the other and eliminations, we recognize net cost of $5.4 million for the quarter, and these include a reimbursement of some $700,000 from the JV for employee benefits expense on employees that have taken assignments in China and relate to prior periods. Recall that the second quarter expense was $8.1 million and it included bad debt of $2.2 million. So the run rate has been very near the current run rate of $5.4 million for the last 2 quarters. And again, this reflects our efforts to control costs compared to earlier quarters.

Summary. The consolidated EBITDA for the third quarter was a loss of $6.1 million and it was driven largely by lower silane prices as well as FBR sales and production volumes and prices.

During the third quarter, cash outflows from operating activities were $1.7 million. The EBITDA loss of $6.1 million was offset by a decrease in working capital investment of $4 million. The largest component of that was outflows of $5.6 million due to increases in inventory, the 500 metric tons that Tore talked about a few minutes ago, which was offset by customer collections in excess of sales of $5.5 million and then an increase in accounts payable of $4.2 million. The increase in accounts payables is due to the timing of ore shipments that arrived late in the quarter that were paid for in early October, and we expect the same phenomenon as we go forward.

The remaining items included in operating cash flows were $700,000 refund of alternative minimum tax in the United States, it's a component of normal income tax. And the remaining $200,000 outflow is due to changes in other assets and liabilities.

Cash flow from investing activities. The largest item there is a return -- a release of restricted cash that was a provision to repay the U.S. dollar convertible bond when we issued the new senior secured bond earlier this year. And then we also had CapEx of $400,000 for the quarter.

Cash outflows from financing activities were $1.7 million, that's the $1.5 million outflow to retire the remainder of the U.S. dollar convertible bond as well as $200,000 in fees associated with the new bond.

In terms of our liquidity, there are only minor changes to our liquidity. The largest item is the retirement of the U.S. dollar convertible bond. Nominal net -- excuse me, nominal debt decreased by $1.6 million, that's the $1.5 million for the U.S. dollar convertible bond as well as a change of $100,000 in the value of the indemnity loan, which is denominated in NOK due to effects of a stronger U.S. dollar.

Nominal net debt decreased by only $100,000, this is the change in nominal debt as well as the $1.4 million cash decrease that we've already discussed.

There are no significant changes with respect to our expectations on the indemnity loan or the tax examination by the CTO. As a reminder, the indemnity loan was callable in February of 2016, has not been called, and the timing of the repayment is uncertain. We do not expect the indemnity loan to be called before 2019.

With respect to the tax examination, we've not received an indication of the timing of any eventual notice. However, we don't expect a draft notice in 2018. And we continue to believe that we have a strong case to support our tax positions, and we believe that we will eventually prevail.

Now I'll address the question that I'm certain that's on everyone's mind: what about the future liquidity prospects for REC Silicon? At current, our FBR facility is operating at utilization levels of 25%. If we continue operating at those levels, we get prices near current levels and Butte earnings remain fairly stable like they have -- we've experienced in the last 2 quarters, we expect sufficient liquidity to last beyond the end of 2019. Basically, what this entails is a cash burn rate of somewhere between $3 million and $4 million per quarter across the next 5 quarters. Obviously, during the second and fourth quarter, and the fourth quarter coming up, when we pay interest, our cash -- the cash decreases will be more pronounced than they are during the first and the third quarters when we have no interest payments.

This cash runout will provide time for the solar markets to recover. And when they do recover, which Tore is going to explain here in a few minutes, our liquidity position will improve. I think we've taken a fairly conservative estimate of our cash flow to make these estimates.

However, these estimates did not take into account any payments for the indemnity loan or for the tax case should they become payable. But as I indicated, these are not expected before 2019 and we will continue to press our position with respect to the tax case and hopefully prevail. The indemnity loan includes provisions to pay interest when it is called, so we will delay payments as long as we possibly can.

Our efforts to reduce spending levels have been effective in extending the company's liquidity position, and we'll continue to scrutinize every expenditure and every activity to retain the maximum amount of cash possible as we go forward.

Tore will now take over and discuss the market position of the company.


Tore Torvund, REC Silicon ASA - CEO & President [3]


Okay. Thank you, James. Let me then talk a little bit about our different markets, and let's start then with the solar market. Definitely, due to the decision by the Chinese government to reduce the installation in China, China is then supposed to be 35 gigawatts compared to 50 last year, has reduced the market for solar panels from approximately 100 down to some 90 gigawatts or 5% to 10% reduction in installations of solar panels. According to these 3 different analysts, you will see that there is an anticipated increase in installations from 2018 towards 2020 between 10% to 20%. So the market will recover independent upon what is going to happen in China. As you see, China is supposed to be approximately at the level of 35 gigawatts in the coming years compared to, as I said, about 50 in 2017.

The main reason behind this is basically that, we'll see, now the prices of modules has been down to -- or is about $0.23 to $0.25 per watt, which means basically that we start to approach in many markets grid parity and that means that solar panels can be used without subsidies offered by the different governments. The main reason why basically that this happens is that the size of the industry, there is no doubt that, let's say, the industry is becoming very efficient. The modules become more and more, let's say, watt-per-module more efficient. And there is a strong competition along the value chain, that means both in polysilicon, wafer cells and modules. And the price of modules will continue to go down as things get even more and more efficient.

The second thing is that electricity generated by natural gas and by coal is becoming more expensive. So basically, you compete with, let's say, the energy sources which gradually becomes more expensive. For example, natural gas, you have seen has had steep increase over the last period of time. Coal is increasing. And on top of that, you have the CO2 tax, which is now implemented in most countries around the globe. So that means, basically, that PV becomes more and more competitive towards the alternatives and that is what is going to make the market continue to grow in the pace of 10% to 20%.

The problems we had in Q3, you will see here, is basically the -- what happened in China. We went from 15 gigawatts to be installed in Q2 down to 4 gigawatt in Q3. The good thing by this is basically that there is, let's say, an increased installation going on in this quarter. And gradually, you will see that we will be back to a normal level. Also, the fact that we have the trade war with China, which is slowing down the economic activity in China, has generated, let's say, a need for stimulus to keep the Chinese economy going. And definitely, solar or hopefully solar will be part of that stimulus since also a lot of companies in China now are struggling to make a decent profit in -- within the solar value chain.

And you see that polysilicon prices now both outside and inside China. First of all, they have become approximately at the same level. It is down to around $10 a kg. It has not changed too much outside of China, but it has definitely been reduced by 67% inside China and that means basically that most of the companies now in China making polysilicon do have a negative cash flow in today's prices. What has happened then is that there is a curtailment of production. We anticipate about 60% of the capacity is presently running in China and also all this new investment in new capacity seems to be postponed compared to what was the initial start-up date. So all together, this will definitely reduce the capacity. On top of this, there is also this winter a reduction in capacity because of restriction to use coal in electricity generation.

So overall, we expect that it has been approximately no buildup of inventory during this downturn and we see that things start to move on because the -- along the value chain there was a curtailment of production capacity immediately taking place from the beginning of June when the Chinese decided not to support more solar panels for 2018.

And no doubt some of you will get tired about this update on the trade war. On the other hand, let's say, this is the most important part to -- for REC to come back to a decent, let's say, cash flow due to the fact that we would be able to compete without any problem making money in today's market if it did have -- if it had, had access to the Chinese market, which now is about 90% of our customer base -- or the polysilicon customer base.

The situation in the U.S. is basically that there is now 90% duty on solar panels produced in China going to the U.S. It consists of 25% of what we call the Section 201, which became enforced in February. It is to be added 25% in what was then the Section 301. On top of this, you have basically the AD/CVD. So solar panels made in China has a duty of 90% when it is exported into the U.S. And as you know, polysilicon made in the U.S. has a duty of 57% if it were to be sent to China.

This is what's happening. There is definitely a positive development when it comes to trying to solve this trade war. First of all, there is no doubt that the U.S. government and the President in the U.S. has openly said that he wants to have a resolution to this trade war under certain conditions. And the certain conditions, I'm not going to get into. It's also, no doubt, that the Chinese would like to have a resolution to this trade war and there is some positive signs that these 2 parties are now preparing to start negotiations. What is important to us is that the solar value chain will be part of this resolution. And let's say, what we have argued, and I was in Washington, D.C. 2 weeks ago and met both with USTR and with Department of Commerce, and the good argument from our side is basically that if we can get access to the Chinese market, that will increase the export from the U.S. to China, which is one of the major issues from the U.S. side. So that will reduce the deficit towards China. On the other hand, if U.S. gets access to lower-priced solar panels in the U.S., that will increase the activity in the U.S. in terms of installation of solar panels. So there is a win-win situation between the 2 countries with respect to the resolution to the trade war.

So after the midterm now in the beginning of November, there is a strong belief that there will be started up some negotiation and we also are relatively confident that we are very high on the list on those areas, which will be part of a resolution between the 2 countries.

Coming to our Chinese JV. The Chinese start-up -- or the start-up of the Yulin JV has been, let's say, conducted in a very, let's say, decent manner. We have produced now 3,000 metric ton of granular in Yulin through 8 reactors, and that's approximately half of the number of reactors we do have. We are continuing to commissioning the reactors. The reactors are doing very well. We have met all the design criteria we set when we developed this facility. And we are now producing solar grade quality. And as you probably remember, we are going to then produce semiconductor grade quality when we change our liner of these reactors.

The silane units are both been up and running. Today, we are running the silane -- what we call the Silane 10 unit while the Silane 20 unit has already been commissioned and has been running, but we have taken it down because we don't have full capacity on the FBR reactors yet.

And on the Siemens side, we have now produced semiconductor grade polysilicon, and we are going to produce the first Float Zone ever made in China during this quarter.

So the relationship and the way we cooperate with our Chinese partner in China, we are doing very well. They are very pleased by what we have done. We are still having about 15 people from REC Silicon working in China. And we are very, let's say, confident that this will be a very good investment, both from Youser Group but also for REC Silicon.

Let me then talk a little bit about the longer-term market for REC and for our silicon. First of all, definitely the solar market, as I said, will continue to grow, this is Bloomberg's estimate. And from approximately 100 gigawatts today, they estimate that within a 10-years period, it will be up towards 200 to 250 gigawatt on an annual capacity. One of the reason why it is then increasing rapidly, as you also remember, that between '17 -- '16 and '17, the market grew 25%. It will be flat between '17 and '18 and then it will continue to grow between 10% and 20%. And one of the reason why is that also low cost, high prices on electricity by alternative sources but also the fact that storage now starts to become more and more, let's say, economically viable into the market.

So a strong focus on clean energy, local pollution. That's what we see in China. The climate change regulations is definitely very important. And if you remember some years ago, it was a wide discussion about could PV be done by something else than polysilicon? Today, more than 90% of all solar panels are made based upon polysilicon. And the thin film, which was the alternative, are losing ground in the market. So it is polysilicon, which is going to be used to make solar panels.

If we look to the silicon gas market, which is mainly our Butte operations. First of all, we see that there is a continuous demand increase for silicon gas. The total market today is about 6,000 metric ton. It will grow towards 9,000 metric ton within the next 5 years. And as you remember, we have about 70% of the global market in terms of silicon gas.

On the semiconductor polysilicon demand, it grow at about 6% year by year and that's driven by the Internet of Things, wearable technologies, mobile phones, tablets and definitely electric cars. Electric cars, that is not the battery part of it, but it is all the other parts of the electric car, which drive the semiconductor polysilicon.

And there is only 5 companies able to deliver the quality, which is needed in the semiconductor market, and REC is one out of those companies.

The new thing coming out is batteries. It has been approximately 20 companies now visiting REC in the U.S., talking about silicon into batteries. We don't know too much about, let's say, the technology in batteries. This is not our, let's say, competence. On the other hand, let's say, these companies they are talking about the batteries will become 4 times more efficient by using silicon instead of graphite in the anodes of the batteries.

The second thing is that already today 5,000 to 10,000 metric ton out of 400,000 metric ton is used in batteries by companies like Tesla, Samsung, Panasonic and LG, but the market could exceed within the next 5 years about 100,000 metric ton. And even here, in Norway, we see that there is a strong interest of using -- R&D using silicon into the anodes of the batteries. The new thing is basically that both in the U.S. and in Europe, there is a very strong focus now to build a battery, let's say, business.

As you can see from the slide, China seems to be running, let's say, ahead of all others also on the battery side. They have done tremendous investments. They continue to do a lot of investments in batteries. China has basically what they call the 2025 mission. It is about renewables, it's about storage and it's about electric cars. And they do all the investments within these areas.

European car manufacturers, U.S. car manufacturers are very worried about that, let's say, when electric cars come, they don't have necessary supply of batteries and that's why if you remember -- or you probably saw some days ago, EU put together a huge package to promote building battery competence in Europe and the same thing in the U.S.

And when we now met with the USTR talking about what is important in terms of the trade war, batteries was really what they were focused on because they really want to keep kind of these industries, polysilicon industry, in the U.S. to support also development on the battery side.

This is not an important business to us as of today. But hopefully, within the next 2 to 3 years, this will be a very important part of our business as well. And the battery companies are particularly looking for silane and for granular because one of the important thing is that you use polysilicon, a very, very small sized polysilicon granular. That's what they are looking for.

So it is important still to have -- you can have the long-term focus, but the important thing is that we are still a viable company with these opportunities arise. So basically, what we have done since the last time we met with you was basically that we have reduced the FBR production in Moses Lake to 25% to manage the inventory during this downturn. We have laid off approximately 80 people, and we are now less than 400 people all together in Butte, Moses Lake and our people in China. So we are a very lean organization. We don't intend to do any further reduction, and we don't intend to shut down our Moses Lake operations. We will continue to operate at 25%.

As James said, we have scrutinized all our costs in the company and we have also been able to renegotiate the supply contracts we have with our suppliers, so gradually that will reduce the cost of making our polysilicon. And we are very heavily involved with our customers outside of China to enter into long-term agreement and to increase their use of FBR because we then offer them prices, which is well below what is the market prices.

The next step is that we still are very active in Washington, D.C. and in Beijing to promote the resolution to the trade war. And as I said, I am definitely more hopeful that, in fact, also, the recent turn-down in the market is a good thing for finding a resolution to this because the U.S. government is definitely very dependent upon that the market still continue to be -- let's say, the stock market continue to perform very well. That's part of -- or that's probably the most important part for the U.S. government as of today. So if it start to turn downwards, to find a solution to the trade war will be given even higher priority.

We maintained our cash, as James said. We are doing everything we can to not be in breach of our covenant, which is $15 million in terms of our bond. And we feel that even with the market we have experienced in Q3, which could hardly be more difficult going forward, we will have sufficient cash to make things going until well beginning of 2020.

We are working on increasing the FBR sales to increase blend, to offer discount, as I said. And we also are discussing some opportunities with the U.S. government to help us out on this issue.

And definitely, we are then focusing to be a viable company, a lean company in terms of cost when the market rebound.

So we are pretty hopeful that, gradually, things will improve for REC Silicon.

Then, the guidance is not a big surprise basically. These numbers are more or less in line with what we have already communicated for REC Silicon.

That's basically what we intend to do today. So then we are open for -- James and I, for questions, if you could have some questions to ask us.


Questions and Answers


Tore Torvund, REC Silicon ASA - CEO & President [1]


Okay? Pretty clear.


Oscar Semb-Fredricsson, Arctic Securities AS, Research Division - Former Equity Analyst [2]


Yes, Oscar Fredricsson with Arctic Securities. Could you please comment on the product development for semiconductor grade polysilicon. It was down some 5% this quarter, I think. I think it's -- I mean, you've put out a long-term positive market trend, but how are these shorter-term prices developing?


James A. May, REC Silicon ASA - CFO [3]


Yes, in terms of the semiconductor grade polysilicon, there's 2 classes of it: the Czochralski, I think I said that right, CZ; and FZ. There's a wide price difference between the 2. Within each of those categories, the price continues to inch up a little bit through time. We're seeing tight markets and a lot of traction in that respect. During this quarter, we sold more CZ than we did FZ and it's more a matter of timing than anything else.


Oscar Semb-Fredricsson, Arctic Securities AS, Research Division - Former Equity Analyst [4]


Okay. And furthermore, on the silane gas markets, is that -- how's that developing with the volumes coming on from the Yulin JV? Do you see any sort of...


Tore Torvund, REC Silicon ASA - CEO & President [5]


We are not selling any silane gas from the JV yet. The reason why we were a little bit below our guidance was basically due to the fact that some of the silane goes into the PV market. The PV market was weak and that's why we also have reduced our, let's say, export of silane gas out of Butte.

Okay, if there is no more...


Unidentified Company Representative, [6]


Well, maybe we can take some questions from the web.


Tore Torvund, REC Silicon ASA - CEO & President [7]




Unidentified Company Representative, [8]


The market is trending towards, well, increasing amount of monocrystalline. Could you elaborate a bit on the competitive position for FBR meeting this?


Tore Torvund, REC Silicon ASA - CEO & President [9]


Could you repeat? You have to speak up. Sorry.


Unidentified Company Representative, [10]


The market is trending towards an increasing share of monocrystalline. Could you elaborate on the FBR competitive position to meet this?


Tore Torvund, REC Silicon ASA - CEO & President [11]


Yes. The, let's say, what we are going to make in Yulin will meet the specifications we have on the mono side. In Moses Lake, we are not, for the moment, meeting these specifications. On the other hand, let's say, there is 60 gigawatt on multi-capacity on a global basis. There is about 40 mono. So it will take quite a while until everything will become mono. We can do investments in -- relatively limited investments compared to what we have done in Moses Lake to meet the mono quality, but we are not going to do that until we see that we don't have enough demand where we are delivering now, which is into the multi-market. You'll also see that the trend between mono grade polysilicon and multi-grade polysilicon is not huge. It trends $1 in difference more or less, so it is not a huge price difference between the 2 qualities.


Unidentified Company Representative, [12]


Another question from the web. You mentioned briefly that you are taking initiatives to build customer relations. A, could you elaborate a bit on actions made to attract new customers outside China other than Taiwan? Has there been any new customers coming on in recent quarters?


Tore Torvund, REC Silicon ASA - CEO & President [13]


Yes. Let's say, definitely, Taiwan is the most important market, but we also have customers outside of Taiwan. The main issue we are talking about is that the customers we have had for the last 4 years, which has been non-Chinese customers is that we try to work together with them to increase the quantity they are using. Let's say, normally, companies use to -- use about 20% FBR, 80% Siemens. Now we have customers, which are using 100% FBR. Because it creates some kind of different processes to use 100% FBR, but definitely to us, since we then sell it at a discounted rate, it is very important for these customers to increase their blend so that's the main focus we have towards our customers.


Unidentified Company Representative, [14]


And finally, some questions on the battery side. You mentioned it briefly and is still in early stages, but have you made any test deliveries of your products to battery producers yet? Or are you still only in negotiations or the specifications?


Tore Torvund, REC Silicon ASA - CEO & President [15]


We don't have any negotiations. We deliver quantities, small quantities, to a lot of different battery companies. I can also say that we have had several customers now visiting us both in Butte and Moses Lake because they are looking for the opportunity to buy land adjacent to our factory because they think that they have to locate the battery companies -- or the battery factories, let's say, close to ours so they can use directly our silane through pipelines from our factory into the battery factory. But as I said, I don't know too much about it, but everybody knows that the real hot thing on a global basis today is batteries. It is in the U.S., it is in China and it is in Europe. And it seems that all of them say that, okay, if we can replace graphite with silicone, that's, no doubt, you increase the capacity, you increase -- or you decrease the time for charging. The problem is to make it without breaking the structure and that's where the focus is now. If you can integrate silicon without breaking the structure, you have a battery which might be 4 times more efficient. And there is tremendous amounts of money getting -- going into the battery companies as of today.

Okay. If no more questions, I see you then back next February then. Thank you.