Shares in integrated solar company REC Group (REC.OS) plunged Friday after it said its markets continue to weaken, so the group's solar production will remain below capacity into the third quarter of 2009.

The Oslo-listed company also said it will book a NOK300 million charge in the second quarter on costs associated with repair work for malfunctioning junction boxes in its solar modules.

Combined, the news prompted REC to raise its planned equity issue to NOK4.5 billion ($713.1 million), NOK500 million more than previously stated. The subscription period has been postponed by around three weeks to between June 29 to July 13.

At 1013 GMT, REC shares traded down NOK5.10 or 7.8% to NOK60.70 as analysts bemoaned the lack of market improvement and surprising extent of the repairs-related write-down.

REC said the weak demand for solar products "has reduced the demand and prices for solar modules, which in turn has started to affect the supply and demand balances and prices further up the value chain". It has already reduced production and made short-term layoffs in its wafer and solar units.

One Oslo-based analyst, who asked not to be named, said the junction box problem was known, but he was surprised at the size. He added that the company's statements on markets "are not particularly rosy".

REC said its new integrated solar project in Singapore continues to trend toward a lower capital expenditure compared with initial investment projections due to a less heated construction market.

The Oslo analyst welcomed that news, saying of NOK13 billion planned capital expenditure on the huge project, 15% was already set aside for contingencies. "They're on track to spend less than 85% of that original capex, so it will end up at NOK10-11 billion, which is very good."

He noted the saving will, in time, help offset the negative impact of REC's NOK500 million increase in equity.

REC said longer-term fundamentals in the poly-voltaic industry remain "intact, with return on investments in solar systems reaching record high levels."

Economic stimulus packages, especially in the U.S., are expected to positively impact the PV market, REC said, adding that "it will take some time before the policies implemented materialize as increased demand."

Company Web site: www.recgroup.com

-By Elizabeth Adams, Dow Jones Newswires; +44 (0) 207 842 9386; elizabeth.adams@dowjones.com