SECOND QUARTER
2016 PRESENTATION
REC Silicon Q2 2016 presentation cover v1.indd 1
20.07.2016 18.23
Disclaimer This presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for REC Silicon ASA’s (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as ”expects”, ”believes”, ”estimates” or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for REC Silicon ASA’s businesses, energy prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the presentation. Although REC Silicon ASA believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. REC Silicon ASA makes no representations or warranties, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither REC Silicon ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. This presentation was prepared for the second quarter 2016 results on July 21, 2016. Information contained herein will not be updated. The following slides should be read and considered in connection with the information given orally during the presentation. REC Silicon ASA shares have not been registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Act.
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Agenda
REC Silicon Q2 Financial Results
T. Torvund, CEO
Financial Review
J.A. May II, CFO
Market Outlook
T. Torvund
U.S. / China Trade Dispute Update
T. Torvund
Yulin JV Update
T. Torvund
Guidance
T. Torvund
Q&A
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
REC Silicon ASA Second Quarter 2016 Highlights Revenues: EBITDA:
$71.1M ($14.3M) Loss
June 30, 2016 Cash Balance of $91.3M - $16.3M Cash Flows from Operating Activities - $21.2M Bond (REC02) Retired in May 2016 - Indemnification Loan Not Called in Second Quarter 2016 FBR Production Restarted in Moses Lake - Silane III Restarted in May 2016 – Currently Producing Near Capacity - Silane IV Currently in Restart Substantial Increase in Solar Grade Polysilicon Prices - 9.7% Solar Grade Polysilicon Price Increases
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
REC Silicon ASA Q2 2016 Key Metrics Polysilicon Volumes **
Total Sales Volume
3,634MT
Inventory Reduction 1,963MT
FBR Production
FBR Cash Cost
Actual
1,026MT
Actual
$33.7/kg
Guidance*
1,370MT
Guidance*
$24.0/kg
Deviation
-25.1%
40.4%
Total Polysilicon Production
Semiconductor Production
Silicon Gases Sales Vol.
Actual
1,671MT
Actual
155MT
Actual
610MT
Guidance*
2,020MT
Guidance*
190MT
Guidance*
800MT
Deviation
-18.2%
Deviation
-23.8%
Deviation
-17.3%
* Guidance presented May 3, 2016 5
Deviation
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
** Excludes Fines and Powders
FINANCIAL REVIEW
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© REC Silicon ASA. All rights reserved. Confidential
Q2 2016 Key Financial Results Revenues
EBITDA
100
93.0
Revenues - $71.1M › 3.2% Increase from Q1 2016
87.5
80
› Decreased Polysilicon Sales Volumes
74.9 68.8
71.1
(13.4)
(14.3)
Q1
Q2
60
- (5.8%) Sales Volume Decrease from Q1 2016 - 9.7% Solar Grade Price Increase from Q1 2016
› Silicon Gas Sales Volumes 610MT - 14.8% Sales Volume Increase from Q1 2016 - Silane Price Decrease of (2.8%) From Q1 2016
EBITDA – Loss of ($14.3M)
› Inefficiency due to Capacity Curtailment in › 7
USD million
(Excluding Fines & Powders) 40
20
0
(14.1)
-20
(29.6)
-40
Moses Lake Electricity Refund of $5.9M in Other Income
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
5.8
Q2
Q3
Q4
2016 Margin:
6%
-16%
-40%
-20%
-20%
Q2 2016 Cash Flows Cash Flows From Operating Activities $16.3M
$130
› EBITDA - Loss of ($14.3M) › Working Capital Decrease $36.9M
$120
- Includes $5.0M Customer Prepayment - Decreased Accounts Payable ($4.0M)
› Interest payments ($7.4M)
Cash Outflows From Investing Activities – CapEx ($3.3M)
(3)
$110
› Repayment of NOK 179.5M Bond (REC02)
Currency Loss of ($1.7M) 8
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
(2)
$100
$90
(21) (14)
$80
$70
Cash Outflows From Financing Activities – ($21.2M)
1 (7)
USD million
- Decreased Inventories $28.0M - Decreased Accounts Receivable $12.8M
37
$102
$113
$91
Debt Coverage at June 30, 2016 USD million Indemnification Loan (NOK) 2018 NOK Bond (May 2018)
Nominal Debt - $188M
2018 USD Convertible Bond (Aug 2018)
› Decreased by $22.7M in Q2 2016 - $21.2M Maturity of NOK Bond (REC02) - Decreased by $1.5M due to Weaker US Dollar
$164M
54
Nominal Net Debt - $97M › Decreased by $12.6M in Q2 2016
$91M
- Decrease in Cash of $10.2M - Decrease in Nominal Debt of $22.7M
110 $24M
24 Cash Jun'16
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
2016
2017
2018
MARKET OUTLOOK
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Market Expectations for H2 2016 2016 Installation Forecast
2016 Quarterly Installations 25
80
67.9
70
67.5
65.1
19.7 20
18.5
60 14.8
15.9
50
GW Installed
GW Installed
24.9 39.81 10.2 40
8.1 18.4
30
13.9
15
10
18.7 20
18.5 5
14.5 10.2
10
2.71 7.2
6.9
5.6 0
0
I.H.S. Europe
U.S.
GTM China
Japan
I.H.S PV Demand Market Tracker Q2 2016 GTM Research: Global Solar Demand Monitor Q2 2016 Photon Consulting June 2016 11
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
RoW
Photon ME&A
Americas
Asia
Q1'16
Q2'16 Europe
ME&A
Q3'16 Americas
Asia
I.H.S PV Demand Market Tracker Q2 2016
Q4'16
Wafer Production Remains Stable Quarterly Wafer Production Forecast 25
› Polysilicon Demand Driven by Wafer Production
Driven by Increased PV Installations in Q4 2016 and 2017
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
19.1
Q2'16
Q3'16
15
10
5
0
Q1'16 Source: I.H.S Technology PV Integrated Tracker Q2 (June 2016)
18.7 17.3
GWp-DC
› Wafer Production
20
20.2
Q4'16
Polysilicon Spot Price Rebounds in H1 2016 FBR Prime vs. Solar Price Indices Index I
› REC Silicon Average Solar Grade
Index II
Index III
FBR PRIME
Sales Price Increased 9.7% vs. Q1 2016
› Average Solar Spot Market Price Increased 21.1% vs. Q1 2016
› Spot Price Increase Due to: - Continued Strong End Use
2015
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
2016
JUN
MAY
APR
MAR
FEB
JAN
DEC
NOV
OCT
SEP
AUG
JUL
JUN
MAY
APR
MAR
FEB
JAN
-
Demand High Wafer Capacity Utilization
Increased Crucible Share Drives Demand Outside China May 2015
› Leverage Low Cost to Increase Market Access
May 2016
Customer 1 Customer 2
› Successful Customer
Customer 3
Qualifications Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 0% Source: Internal data 14
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
5%
10%
15%
20%
25%
Reduced Reliance on Markets in China 6,000 MT
China 1,100
› Discounts to Maximize Sales Volumes
› Increased Crucible Share › Increased Wafer Capacity
Tolling 65
China 2,480
5,000 MT
China 175
4,000 MT
Tolling 2
Tolling 414
3,000 MT China 970
ROW 3,875 ROW 2,400
ROW 2,444
ROW 1,125 1,000 MT
Semi 300 Semi 312 Silicon Gases 736
Silicon Gases 989
Semi 270
0 MT Q1
Silicon Gases 709
Semi 317 Silicon Gases 531
Silicon Gases 610
Q3
Q4
Q1
Q2
Q2
Note: Includes Fines & Powders
Semi 123
Semi 380
Silicon Gases 642
2015
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
ROW 3,873
ROW 3,564
2,000 MT
Utilization
15
China 111
2016
Increased Sales Volume and Stable Inventory in H2 2016 Product Sales
Polysilicon Inventory
8,000 MT
8,000 MT
7,000 MT
7,000 MT
6,000 MT
6,000 MT
5,000 MT
5,000 MT
4,000 MT
4,000 MT
3,000 MT
3,000 MT
2,000 MT
2,000 MT
1,000 MT
1,000 MT
0 MT
0 MT
Q1
Q2
Q3
Q4
Q1
2015
Silicon Gases 16
Semi
Q2
Q3
2016
ROW
Tolling
China
Note: Includes Fines & Powders
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Q4
Q1
Q2
Q3
2015
Q4
Q1
Q2
Q3
2016
Q4
FBR Production Resumes Resulting in Industry Leading Cost Polysilicon Production FBR
Electronic Grade
FBR Cost
Siemens Solar
FBR Cash Cost
6,000
Depreciation
SG&A
$60 55.0
4.0
552 5,000
382
361
257
43.1
300 408
4,000
245 435
3,000
282
413 288
2,000
4,706
4,503 4,410
2,863 2,321
1,000
351
30.5
$30 24.3
$20
3,832
412 490 155
18.8
19.1
1.8
1.9
6.3
6.2
10.7
11.0
Q1
Q2
1.9
17.3
15.3
4.1
19.3
9.9
8.6
2.1
16.0
5.2
1.7 4.2
12.0
10.1
Q3
Q4
33.7 24.8
$10
1,175 1,026
13.8
16.5
$0
0 Q1
Q2
Q3
Q4
2015
17
3.0
$40
Cost ($/kg)
Silicon Production (MT)
324
$50
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Q1
Q2
Q3
2016
Q4
Q3
2015
Q4
Q1
Q2
2016
Low FBR Cash Cost Makes REC Competitive in Global Market
› Return to Full Production
32
Will Reduce Cash Cost to Industry Leading Levels
28
› Anticipate Production Near Maximum Rates for Next Two Years
› Current Spot Prices Insufficient to Support Marginal Producers
Unit Cost ($/kg)
24
20
Average Spot Price $16.92 16
12
8
4
0 0
40,400
80,800
121,200
161,600
202,000
Capacity (MT/yr)
18 © REC Silicon ASA. All rights reserved. Confidential July 21, 2016
242,400
282,800
323,200
363,600
404,000
Increased Silicon Gas Sales in Q2 2016 Silicon Gases (MT) 1,200
› Silicon Gas Sales Volumes 610 MT 2016
› Increased Demand Expected in H2 2016 - Q3 2016 Sales Increase to 800MT - Q4 2016 Sales Increase to 900MT
Sales Volumes (MT)
- 14.8% Volume Increase vs. Q1 2016 - 2.8% Silane Gas Price Decrease vs. Q1
1,000
800
600 989
400 642
709
610 531
200
0 Q2
Q3
2015
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Q4
Q1
Q2
2016
U.S./ CHINA TRADE DISPUTE UPDATE 20
© REC Silicon ASA. All rights reserved. Confidential
U.S. / China Trade Dispute Update › SolarWorld Under Pressure - Hemlock Comprehensive Win -
Against Solarworld in Lawsuit on July 13, 2016 Trade Dispute Resolution has Value for Hemlock
› MOFCOM and USTR Continue to Focus on Trade Dispute Resolution - Administration Change Could -
21
Create Risk for all Stakeholders Renewed Momentum to Resolve Solar and Polysilicon Trade Disputes
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
YULIN JV UPDATE 22
© REC Silicon ASA. All rights reserved. Confidential
Yulin JV – On Track for H2 2017 Start-up Yulin Plant Production Capacity: › 19,000MT Granular Polysilicon
- FBR-B: Next Generation Technology
› 300MT Siemens Polysilicon - Semiconductor Grade
› 500MT Silane Gas Loading
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Yulin JV – Current Status › Zero Project Safety Incidents › Detailed Design Engineering: 85% Complete › Procurement: 85% Complete › Structural Steel Installation Underway › Equipment Installation Contracts Awarded - Mobilized in Q2 2016
› Training Underway at Moses Lake and Butte - 50 JV Employees from China Trained by REC Experienced Personnel
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
GUIDANCE
Updated 2016 Guidance
FBR Production
FBR Cash Cost
Total Polysilicon Production
Q3
3,830MT
Q3
$12.0/kg
Q3
4,490MT
Q4
4,710MT
Q4
$10.1/kg
Q4
5,520MT
2016
$14.6/kg
2016
2016
10,741MT
Semiconductor Production
13,618MT
CapEx *
Silicon Gas Sales
Q3
250MT
Q3
800MT
Maintenance
$ 9M
Q4
260MT
Q4
900MT
Expansion
$ 2M
2,840MT
2016 Total
$11M
2016
1,016MT
2016
* CapEx Excludes any potential impact due to the July 1, 2016 Incident at the Moses Lake facility.
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© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
REC Silicon Summary & Outlook ›
June 30, 2016 Cash Balance of $91.3M
-
›
Silane III Restarted, Q3 FBR Volume 3,830MT and Cash Cost Expected at $12.0/kg
-
›
Increased Sales Expected in Q3
Q3 Market for Polysilicon Expected to Remain Stable
-
27
Silane IV in Restart
Q2 Polysilicon Sales of 3,634MT in Line with Expectations
-
›
Retired NOK Bond (REC02) of $21.2M in May 2016 Improved Liquidity
Some Uncertainty in the Following Quarters Silicon Gas Market Expected to Improve during H2 2016
›
Positive Development in Trade Dispute, Uncertainty Remains
›
Yulin JV on Track for Start-up H2 2017
© REC Silicon ASA. All rights reserved. Confidential July 21, 2016
Q3 2016 Reporting November 2, 2016
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© REC Silicon ASA. All rights reserved. Confidential