Renewable Energy Corp.'s ASA (REC.OS) Friday said it will have to make adjustments to its 2010 wafer contracts, which will weigh on earnings, and reiterated that 2009 silicon output targets remain challenging.

In a trading update released in conjunction with the launch of a EUR300 million convertible bond to underpin REC's corporate spending, the company warned that 2010 earnings before interest, tax, depreciation and amortization will be affected adversely as its customers renegotiate wafer contracts due to the market downturn.

"It is likely that the present weak market will continue in 2010, and it is therefore in REC's best interest to make additional contractual adjustments related to 2010," it said. The company has already adjusted certain wafer contracts in 2009 to help ailing customers.

Meanwhile, REC said the ramp-up of its Silicon III project continues. There is no change in the schedule and it ceded that reaching its full 2009 production targets remains challenging, as announced at its second quarter results presentation.

But it added: "The experience with the fluidized bed reactor technology (at Silicon III) remains positive and the potential of the process and the quality of the product have been confirmed."

REC closed Thursday at NOK47.04, around half the peak of the previous 12 months, but off the trough of just below NOK40.

Web site: www.recgroup.com

-By Elizabeth Adams, Dow Jones Newswires; +44 (0) 20 7842 9386; elizabeth.adams@dowjones.com