Annual Report • Mar 28, 2022
Annual Report
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| Board of Directors | 3 |
|---|---|
| Letter from the CEO | 4 |
| Board of Directors' report | 6 |
| Sustainability report | 16 |
| Board of Directors' report on corporate governance | 22 |
| Financial statements index | 29 |
| Financial statements REC Silicon Group | 30 |
| Financial statements REC Silicon ASA | 82 |
| Auditor's report | 100 |
Chairman of the Board of Directors since December 2021. Mr. Røkke is currently Chief Executive Officer of Aker Horizons AS. Mr. Røkke has experience from investment management, offshore services and shipbuilding in several companies in the Aker group. Before his current position, he was Chief Investment Officer of Aker ASA, Chief Executive Officer of Akastor ASA, a publicly listed oil service investment company, and spent several years in various operational and executive roles at Philly Shipyard. Mr. Røkke is currently chairman of the board of Philly Shipyard, Inc., Akastor ASA and Plastic REVolution Foundation, and serves as a director on the boards of Aker Carbon Capture AS, Aker Offshore Wind AS, American Shipping CompanyASA, Abelee AS and TRG Holding AS. He has an MBA from The Wharton School of the University of Pennsylvania.
Member of the Board of Directors since May 2020. Mr. Stensvold is currently CEO of Vinestor AS. Prior to his current position he held various positions within the Aker group from 2006 to 2018, i.a. investment director at Aker ASA and CFO and Investment Director at Converto. Before joining Aker, Mr. Stensvold worked as a strategy and finance consultant for Selmer, and as a financial analyst for DnB NOR. He has served on several boards and is currently a board member i.a. of Havfonn AS. Mr. Stensvold has a master's degree in Business and Economics from the Norwegian School of Economics (NHH).
Member of the Board of Directors since March 2021. Ms. Landøy joined Aker ASA in 2021 and is currently Investment Director and head of Industrial Holdings. Before joining Aker, she was part of the Aker BP executive team heading Strategy and Business Development. Ms. Landøy joined Aker BP in 2017 and before that she led Statoil ASA's business development unit on the Norwegian continental shelf. She held various positions in Statoil from 2003 to 2017, in Technology and innovation, Finance, Natural gas and infrastructure and Global business development. Ms. Landøy holds a master's degree in finance from the Norwegian School of Economics (NHH) and the University of California Los Angeles (UCLA). She also holds a master's degree in international finance from the Skema Business School in France.
Member of the Board of Directors since May 2020, Ms. Justad is currently a partner at Recore, a Norwegian management consultant company, and her experience includes a substantial number of positions as nonexecutive director and chair for public and private companies. She has a master's degree in Chemical Engineering from the Norwegian University of Science and Technology (NTNU) and a master's degree in Technology Management from NTNU and MIT Sloan School of Management.
Member of the Board of Directors since January 2022. Seung Deok (Andy) Park joined Hanwha Group in 1994, has served as Chief Strategy Officer of Hanwha Solutions/Strategy Division since September 2021. Mr. Park held various senior managerial positions, including Chief Executive Officer of Hanwha General Chemical, Head of Corporate Strategy Office at Hanwha Chemical as well as Senior Vice President of Operation at Hanwha Q CELLS, gaining expertise in the solar and petrochemical business. Mr. Park graduated from POSTECH with Master of Science degree in Chemical Engineering.
The past year has been very eventful for REC Silicon and will set the foundation for an exciting and successful 2022. First, I would like to acknowledge our long-term CEO Tore Torvund for his numerous contributions to the Company. He became CEO during the construction and commissioning of the FBR facility in Moses Lake and was instrumental in proving the commercial capabilities of the FBR technology. He then guided the Company through uncertainty as we lost access to markets and were forced to shut down our operations in Moses Lake. Tore was also instrumental in setting up the circumstances which I believe will allow us to restart the Moses Lake facility. He leaves a large void and will be greatly missed. I appreciate the opportunity to serve as CEO and have high expectations for the Company's performance in 2022.
REC Silicon's Board of Directors also changed during 2021. We appreciate the leadership of our previous Chairman Kjell Inge Røkke and we all look forward to continuing to work with our new Board of Directors. Hanwha Solutions' equity investment in REC Silicon resulted in additional liquidity of approximately NOK 964 million, which was received in January 2022. REC Silicon was also able to resolve the last remaining legacy matter with the settlement of the indemnification loans in October of 2021. The Company can now turn its focus completely to the future, rather than the past.
The necessary building blocks to support the restart of the Moses Lake facility are coming together. The proliferation of electric vehicles will drive large scale demand for highly efficient batteries and many companies are pursuing initiatives to develop silicon anode materials for use in Lithium-Ion batteries for the automotive industry. For most of these companies, Silane has become the raw material of choice to introduce silicon into battery anodes and substantially improves the efficiency and performance of batteries. While the exact timing continues to be uncertain, battery materials forecasts indicate that large scale manufacturing will be required by 2025 and that the current capacity of silane gas production will not be sufficient to meet projected demand. This will create an excellent opportunity for REC to capitalize on its current production capacity and expertise.
"The Company can now turn its focus completely to the future, rather than the past. "
Moreover, the solar market experienced a significant turnaround in 2021. REC Silicon's FBR technology combines low cost, high quality solar grade polysilicon with an ultra-low carbon footprint that is well positioned for expected market growth. In addition to the potential opportunity for a solar value chain to be located within the United States, solar wafer manufacturing capacity is currently under construction outside of China which may create opportunities for REC Silicon to restart the FBR facility in Moses Lake.
REC Silicon's semiconductor business continues to provide the Company with stable cashflows and serves markets that are expected to grow substantially in the future. We are working to position our product portfolio to ensure that the Company reaps the benefits of this growth through capital expansion projects.
Over the past several years, we have been able to mitigate the impact of trade sanctions and adverse market conditions because of our talented, capable, and resilient workforce. Our employees have continually demonstrated the ability to take the necessary actions to preserve the Company's liquidity and to ensure that we maintained the capability to succeed when we restart Moses Lake. Now that market conditions have turned and we may have the opportunity to restart and expand operations, these employees will ensure that we are successful in resuming and maintaining operations.
I am confident in a bright and profitable future for REC Silicon!
James A. May II President and CEO
Revenues of \$143.2M (\$122.1M in 2020) and EBITDA of \$7.7M (\$23.8M in 2020)
Cash balance of \$110.5M at December 31, 2021
Total polysilicon sales volumes of 1,636MT vs. 1,212MT in 2020
Polysilicon inventory decrease of 383MT
C.A.R.E.S. Act loans forgiven
Settlement of indemnification loans
Investment in REC Silicon by Hanwha Solutions
REC Silicon ASA was established in Norway on December 3, 1996. The Company is headquartered in Lysaker, Norway.
REC Silicon is a global leader in silane-based, high-purity silicon materials, delivering high-purity polysilicon and silicon gases to the solar and electronics industries.
REC Silicon operates manufacturing facilities in Moses Lake, Washington and Butte, Montana in the USA. REC Silicon's subsidiaries include: REC Silicon Inc., REC Solar Grade Silicon LLC, and REC Advanced Silicon Materials LLC in the United States. REC Silicon's sales and marketing activities for sales of solar grade polysilicon, semiconductor grade silicon and silicon gases are carried out in China, Japan, Korea, Taiwan, and in the United States. The Group's investment in the Yulin JV is held by REC Silicon Pte. Ltd. in Singapore.
REC Silicon's strategy is to maintain its position as a technological innovator in the silicon materials industry.
REC Silicon intends to improve its competitive position and:
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Revenues | 143.2 | 122.1 |
| EBITDA | 7.7 | 23.8 |
| EBITDA margin | 5.4% | 19.5% |
| EBIT excluding impairment charges | -20.5 | -15.9 |
| Impairment charges | -0.3 | -23.0 |
| EBIT | -20.8 | -38.9 |
| EBIT margin | -14.5% | -31.9% |
| Profit/loss from continuing operations before tax | -43.5 | -69.3 |
| Profit/loss from continuing operations | -43.5 | -46.7 |
| Profit/loss from discontinued operations, net of tax | 13.4 | 0.0 |
| Earnings per share, basic and diluted (USD) | -0.12 | -0.16 |
| Polysilicon production in MT (Siemens and granular) | 1,225 | 906 |
| Polysilicon sales in MT (Siemens and granular) | 1,636 | 1,212 |
| Silicon gas sales in MT | 3,078 | 3,189 |
Total revenues increased by 17.3 percent from USD 122.1 million in 2020 to USD 143.2 million during 2021. This increase is primarily due to increased sales volume of polysilicon and an increase in average silicon gas sales price. Nearly all revenues reported are in the Semiconductor Materials segment and increased by 17.7 percent from USD 121.4 million in 2020 to USD 142.8 million in 2021.
Impacts of Chinese tariffs on polysilicon manufactured in the United States, uncertain market conditions, and reduced demand for the Company's solar grade polysilicon resulted in the shutdown of the FBR polysilicon plant in Moses Lake, Washington on May 15, 2019. After this date, all polysilicon produced by REC Silicon was manufactured in the Semiconductor Materials segment from its plant in Butte, Montana.
Total polysilicon production increased by 319MT (35.2 percent) to 1,225MT in 2021 compared to 906MT in 2020. All production in 2021 and 2020 was from the semiconductor materials segment.
Total polysilicon inventories declined by 383MT in 2021.
Earnings Before Financial Items and Income taxes (EBIT) for 2021 was a loss of USD 20.8 million. This represents a decreased loss compared to an EBIT loss of USD 38.9 million in 2020 which included impairment charges of USD 23.0 million.
EBITDA for 2021 was USD 7.7 million compared to an EBITDA of USD 23.8 million in 2020. EBITDA in 2021 included other income of USD 8.3 million associated with the forgiveness of the C.A.R.E.S. Act loan. EBITDA in 2020 included a non-cash adjustment of USD 16.0 million due to the property tax settlement with Grant County, Washington which resulted in EBITDA of USD 6.9 million excluding items in other income. The decrease in EBITDA compared to 2020 is the result of the abovementioned tax settlement in 2020 along with higher operating costs related to polysilicon in 2021. EBITDA contributed by the Semiconductor Materials segment declined by USD 2.9 million to USD 33.4 million in 2021 due primarily to increased operating costs. In Other and Eliminations, net operating costs increased by USD 0.7 million due to inflation.
REC Silicon's long-term competitive position is based on cost efficiency and industry leading product performance. REC Silicon's research and technology development activities are designed to enhance quality, improve efficiency, and reduce production costs of our products to add value to our customers and further enhance our competitive position.
However, research and development efforts have been limited due to the shutdown of the FBR facility in Moses Lake. During 2021, research and development efforts were focused on maintaining minimum research lab operations to support the silicon gas and semiconductor grade polysilicon businesses.
Cash expenditures for research and development were USD 1.3 million in 2021 compared to USD 0.9 million in 2020. Total expenditures including depreciation were USD 1.7 million in 2021 and USD 1.3 million in 2020.
REC Silicon manufactures polysilicon and silicon gases for semiconductor markets from its manufacturing facility in Butte, Montana. This facility is the world's largest supplier of silicon gases for semiconductor, flat panel display, and solar applications. The facility uses a silane-based Siemens polysilicon processing technology to produce the highest quality (FZ) polysilicon for use in the semiconductor industry. The Butte plant has a capacity of approximately 4,500MT of silicon gas loading and 2,000MT polysilicon production.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Revenues | 142.8 | 121.4 |
| EBITDA contribution | 33.4 | 36.3 |
| Contribution margin | 23.4% | 29.9% |
| Polysilicon production in MT (Siemens) | 1,225 | 906 |
| Polysilicon sales in MT (Siemens) | 1,570 | 1,149 |
| Silicon gas sales in MT | 3,078 | 3,189 |
Markets for semiconductor grade polysilicon are dominated by longterm sales contracts. During the fourth quarter of 2021, REC Silicon's total shipments were consistent with anticipated shipment patterns. REC Silicon received an increase in requests for expedited shipments. However, some opportunities for additional shipments were adversely impacted by the ongoing global logistics logjam. Demand for silicon wafers continues to grow; particularly for large diameter wafers intended for use in memory and advanced logic applications. Although capacity expansions have been announced, demand for large diameter wafers is limited by wafer manufacturing capacity. Demand for smaller diameter wafers has recovered but continues to be limited by bottlenecks in the value chain as fabrication capacity is currently the potential limiter. Polysilicon inventories held by customers have reached levels that are more consistent with normal supply chain replenishment and flow.
Overall demand for silicon gases remained high due to demand in semiconductor applications as production is at full capacity utilization. Demand for silicon gases in high-end flat panel display applications was muted relative to previous quarters. REC Silicon's sales of silicon gases continued to be adversely affected during the fourth quarter by delays in returning containers due to global shipping delays, port congestion, and availability of container booking. Demand for silicon gases in solar PV and older technology flat panel display applications in China continues to decline as manufacturers disengage from supply arrangements with the United States where feasible. In addition, logistics bottlenecks are preventing the timely and cost-effective supply of materials required by customers in China. However, REC Silicon continued to increase shipments to locations outside of China. These shipments represent existing and recently expanded manufacturing capacity which is expected to result in increases in market share. However, these were also subject to previously mentioned logistics challenges depending on location.
Sales Volumes (MT)
In 2021, revenues for the Semiconductor Materials segment were USD 142.8 million compared to USD 121.4 million in 2020; an increase of 17.7 percent.
Revenues from polysilicon sales increased by 50.8 percent in 2021 compared to 2020. Total polysilicon sales volumes increased by 36.7 percent from 1,149MT in 2020 to 1,570MT in 2021. The underlying sales volumes of semiconductor grade polysilicon were 988MT during 2021 compared to 711MT during 2020. Average prices realized for semiconductor grade polysilicon decreased by 10.7 percent primarily due to a one-time sale of a specific lower value grade of semiconductor polysilicon in 2021.
Revenues from silicon gas sales increased by 4.4% in 2021 compared to 2020. Silicon gas sales volumes were 3,078MT, a 3.5 percent decrease compared to 3,189MT in 2020. Average annual prices for silicon gas increased by 8.2 percent.
Total polysilicon production in the Semiconductor Materials segment increased by 319MT to 1,225MT in 2021 compared to 906MT in 2020. The underlying production volumes of semiconductor grade polysilicon increased by 181MT to 781MT for 2021. Inventories of polysilicon in the Semiconductor Materials decreased by 383MT in 2021 as the company took advantage of additional sales.
The Semiconductor Materials segment contributed USD 33.4 million of income to EBITDA during 2021 which included USD 4.5 million of other revenue associated with the forgiveness of the C.A.R.E.S. Act loan. This compares to an EBITDA of USD 36.3 million in 2020.
Income contributed by the Semiconductor Materials segment represents revenues less production costs for products sold during the period and excludes depreciation, amortization, impairment, and selling, general, and administrative expenses.
Sales Volumes (MT)
REC Silicon has the capability to manufacture polysilicon for the solar energy markets from its manufacturing facility in Moses Lake, Washington.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Revenues | 0.1 | 0.5 |
| EBITDA contribution | -5.7 | 6.7 |
| Contribution margin | NA | NA |
| Polysilicon production in MT (Siemens and granular) | 0 | 0 |
| Polysilicon sales in MT (Siemens and granular) | 65 | 63 |
Impacts of Chinese tariffs on polysilicon manufactured in the United States, uncertain market conditions, and reduced demand for the Company's solar grade polysilicon resulted in the shutdown of the FBR polysilicon plant in Moses Lake, Washington during 2019.
The Company expects to make a decision before year end 2022 to restart production at the Moses Lake facility and will depend on when Chinese markets for solar grade polysilicon re-open, a non-Chinese Solar PV value chain is developed, silicon anode battery technology based on silane gas is commercialized, and/or other significant positive developments occur in solar grade polysilicon markets. (see Risk Factors below).
During 2021, demand for PV installations picked up and finished the year strong despite feelings that high prices and supply limitations would restrain the market. Several projects were delayed and moved into 2022 due to concerns over pricing and project returns, along with supply chain disruptions. Polysilicon prices increased throughout the year and ended the year near USD 31.0/kg. Polysilicon supply in China was stable as most producers focused on inventory control, with approaching seasonal declines in demand, near year end. Polysilicon
* PV Insights – Mono-crystalline polysilicon prices
prices remained significantly higher at the end of 2021 compared to prices near USD 11.1/kg at the beginning of the 2021.
Revenues for the Solar Materials segment were USD 0.1 million during 2021 compared to USD 0.5 million in 2020. Sales during 2021 represented the sales of 65MT of the remaining granular polysilicon inventories.
Due to the shutdown of the FBR facility on May 15, 2019, there was no FBR production in 2021 or 2020. The FBR plant is being maintained in a non-operating status with maintenance expenditures to ensure safety and to preserve the ability to restart the plant when market conditions improve. REC is working towards having the ability to restart production in 2023. Capital projects for FBR upgrades were initiated in 2021 and include the ability to produce ultrahigh purity granular.
The Solar Materials segment contributed a loss of USD 5.7 million to the Company's EBITDA during 2021 and included income of USD 3.9 million from the forgiveness of the C.A.R.E.S. Act loan. This compares to an income of USD 6.7 million in 2020 which included a non-cash adjustment of USD 16.0 million due to the settlement of the property tax dispute with Grant County, Washington. Excluding items of other income, the Solar Materials segment incurred a net expense of USD 9.8 million during 2021 compared to net expense of USD 9.6 million in 2020. The Company anticipates that net expenditures will remain near these levels until activities are undertaken to restart the facility.
The loss contributed by the Solar Materials segment represents revenues less production costs for products sold and idle facility costs during the period and excludes depreciation, amortization, impairment, and selling, general, and administrative expenses.
Other includes general administrative and sales activities in support of the manufacturing facilities in the United States and the Company's headquarters in Norway. It also includes costs associated with the Company's representative offices in Taiwan, Korea, China, and the United States.
Key financials - Other and Eliminations
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Revenues | 0.2 | 0.1 |
| EBITDA contribution | -20.0 | -19.3 |
| Silicon gas sales in MT | 0 | 0 |
Net operating costs in Other and Eliminations increased to USD 20.0 million during 2021 compared to USD 19.3 million in 2020.
The Group has an investment in China; Shaanxi Non-Ferrous Tian Hong REC Silicon Materials Co., Ltd. (Yulin JV). REC Silicon's ownership is 15 percent of the Yulin JV. The Company has designated the investment in the Yulin JV as an equity security at fair value through profit/loss (FVTPL).
Due to the continuing impact of operating losses and delays in realizing designed production capacities the Yulin JV has accumulated long term debt to maintain the operations. As a result, estimated enterprise value less long-term debt results in a deficit equity value. Accordingly, REC Silicon's investment in the Yulin JV has been reported in the statement of financial position at a value of zero which is unchanged from the prior period.
During the Group's review of impairment indicators, no impairment indicators were identified that might give rise to a change in the valuation of the Company's investment in the Yulin JV.
REC Silicon has not made the final equity settlement payment of USD 4.7 million which was payable during December 2020 due to delinquent invoices for services provided to the Yulin JV by REC Silicon and the completion of performance testing specified in the Technology Transfer Agreement (TTA). REC Silicon and the Yulin JV continue to seek a resolution to these issues.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Financial income | 0.1 | 0.3 |
| Interest expenses on borrowings | -13.6 | -13.2 |
| Interest expense on leases | -8.8 | -7.6 |
| Capitalized borrowing cost | 0.4 | 0.3 |
| Net change in fair value of financial equity investment through profit and loss |
0.0 | -18.0 |
| Expensing of up-front fees and costs | -0.4 | -0.4 |
| Other financial expenses | -1.3 | 3.6 |
| Net financial expenses | -23.6 | -35.2 |
| Net currency gains/losses | 0.8 | 4.5 |
| Net financial items | -22.7 | -30.4 |
Net financial items were an expense of USD 22.7 million in 2021 compared to an expense of USD 30.4 million in 2020.
During the fourth quarter of 2020, the Company recognized a USD 18.0 million loss due to changes in the fair value of financial equity investment through profit and loss. This loss is associated with the Company's investment in the Yulin JV and has been described under investments (Yulin JV) above and note 9 to the consolidated financial statements.
Net currency gains/losses are primarily related to the impact of exchange rate fluctuations on liabilities and cash deposits denominated in NOK. In addition, net currency gains/losses include fluctuations between transaction currencies and the USD which is the primary currency for the group.
Interest expenses on borrowings were USD 13.6 million in 2021 compared to USD 13.2 million in 2020. Interest expense on borrowings includes interest on the Company's senior secured bonds for both years presented. In addition, it includes interest expense on a note payable associated with the settlement of the property tax dispute with Grant County, Washington. (See note 17 to the consolidated financial statements).
Interest expense on leases was USD 8.8 million in 2021 compared to USD 7.6 million in 2020. This increase can be attributed to the modification of existing leases related to contractual increases in lease payments tied to economic indices (See Note 7 to the consolidated financial statements).
Other financial expenses during 2020 includes the reversal of USD 4.7 million of interest on unpaid taxes reported for prior periods associated with the tax examination by the Norwegian Central Tax Office which was dropped during the third quarter of 2020. The remaining expense can be attributed to interest on prepayments from customers and interest on the pension obligation.
The losses before tax from continuing operations of USD 43.5 million in 2021 and USD 69.3 million in 2020 resulted in no effective tax impact since it is offset by changes in unrecognized deferred tax assets. These losses represent an increase in the Company's unrecognized deferred tax asset. The losses will continue to be available to offset taxable income during future periods.
The income tax benefit of USD 22.6 million for 2020 was a result of the Norwegian Tax Administration informing REC Silicon that it had dropped its examination regarding deductions taken by REC Silicon during tax years 2009 through 2011. In addition, the Norwegian Tax Administration informed REC Silicon that after a thorough examination, also considering the elapsed time, they did not find a reason to move forward with other issues raised in the draft decision including the classification of capital inflows as equity deposits.
See note 18 to the consolidated financial statements.
The loss from total operations was USD 30.1 million in 2021 compared to USD 46.7 million in 2020.
Net cash outflows from operating activities were USD 14.6 million in 2021 compared to USD 2.2 million in 2020. Operating cash flows during 2021 included EBITDA of USD 7.7 million, which included USD 8.3 million of other income from the forgiveness of the C.A.R.E.S. (Coronavirus Aid, Relief, and Economic Security) Act loan. The decrease in working capital of USD 9.3 million consisted of a decrease in inventories of USD 7.9 million and an increase in accounts payable and accruals of USD 3.1 million. These were offset by sales in excess of customer collections of USD 2.4 million. Cash outflows included USD 21.4 million of interest and a USD 1.6 million contribution to the defined benefit pension plan in the United States.
Net cash outflows from investing activities were USD 6.8 million in 2021 compared to cash inflows of USD 0.1 million in 2020. Capital expenditures were USD 8.3 million in 2021 and were primarily associated the Dichlorosilane (DCS) gas expansion project and FBR upgrades for ultrahigh purity granular. The DCS expansion project is expected to cost approximately USD 8.0 million, take approximately 18 months to complete, and will result in an increase in DCS production capacity of approximately 200MT per year. Costs associated with FBR upgrades represent long lead activities to support the potential restart of FBR production in Moses Lake (see risks and uncertainties).
Capital expenditures also include cost savings and improvement initiatives, routine replacement of production equipment, and capital necessary to maintain safe and reliable operations.
In addition, cash inflows included a decrease in restricted cash balances of USD 0.1 million and USD 1.4 million due to the maturity of municipal bonds held by the Company.
Cash outflows from financing activities in 2021 were USD 3.0 million and were payments of USD 0.9 million on the property tax note and USD 2.1 million payments of long-term lease liabilities.
In total, cash balances decreased by USD 24.4 million in 2021 to USD 110.5 million at December 31, 2021.
Shareholders' equity decreased to USD 33.3 million (11.3 percent equity ratio) at December 31, 2021 compared to USD 59.0 million (17.3 percent equity ratio) at December 31, 2020.
This decrease was primarily the result of a loss from total operations of USD 30.1 million. In 2021 the loss from operations included other income of USD 8.3 million from the forgiveness of the C.A.R.E.S Act loan. In addition, other comprehensive income in 2021 was a gain of USD 4.3 million due to the re-measurement of defined benefit pension plans.
Net debt increased by USD 1.7 million to USD 86.4 million at December 31, 2021 from USD 84.7 million at December 31, 2020. This increase was primarily the result of the decrease in cash balances of USD 24.4 million discussed above. This was offset by decreases in debt due to the C.A.R.E.S. Act loan of USD 8.3 million being forgiven as well as the settlement of the indemnification loans on October 18, 2021, which resulted in a decrease of USD 12.0 million in the outstanding liability. Also, a USD 0.9 million decrease in the Grant County WA property tax note. Lease liabilities decreased by USD 1.3 million. In addition, the indemnification loan, which is denominated in NOK, decreased by USD 0.2 million due to the effects of stronger USD relative to the NOK.
Net debt includes unamortized loan fees. Excluding unamortized capitalized borrowing costs, nominal net debt was USD 87.1 million at December 31, 2021 which represents an increase of USD 1.3 million from USD 85.7 million at December 31, 2020 (See note 17 to the consolidated financial statements).
The Board of Directors confirms that the Financial Statements have been prepared under the assumption that the Company is a going concern and that this assumption is appropriate at the date of the accounts.
The Board of Directors also refers to the risk factors discussed in this report. Specifically, the sections on the Company's liquidity risk and the impacts of tariffs imposed by China on US polysilicon and the impacts of the COVID-19 pandemic which creates uncertainty for the Group, its customers, certain other competitors, and the industry as a whole.
REC Silicon ASA (the Company) prepares its financial statements according to NGAAP. The Company is a holding company with corporate management and financial functions.
REC Silicon ASA (the Company) prepares its financial statements according to NGAAP. The Company is a holding company with corporate management and financial functions.
In 2021, REC Silicon ASA had a negative EBIT of USD 2.3 million compared to a negative EBIT of USD 1.4 million in 2020. The Company recorded a net loss of USD 32.0 million in 2021. The net loss included net financial expenses of USD 29.8 million which includes impairment of loans to US subsidiaries of USD 25.7 million, impairment of loan to REC Silicon Pte Ltd of USD 5.2 million, and interest expenses of USD 13.1 million. Other major remaining items of net financial items were net currency gains of USD 0.8 million and other financial income related to the settlement of the indemnity loan in the amount of USD 13.4 million. Interest income from subsidiaries was suspended for 2020 and 2021 due to the financial position and outlook of the borrowing companies. In 2020 the net loss included net financial expenses of USD 74.8 million which included impairment of loans to subsidiaries of USD 58.0 million, impairment of shares in REC Silicon AS of USD 12.9 million, and interest expenses of USD 13.2 million. Other major remaining items of net financial items were net currency gains of USD 4.5 million and other financial expenses of USD 4.7 million. the net loss included USD 13.7 million due to the impairment of REC Silicon ASA's loans to its subsidiaries in the United States and USD 57.0 million due to the impairment of REC Silicon Pte. Ltd. (See note M to the financial statements for REC Silicon ASA).
Total equity for the parent Company was USD 168.4 million at December 31, 2021 compared to USD 200.4 million at December 31, 2020. This decrease is a result of the net loss of USD 32.0 million discussed above.
The Board proposes that the net loss for the year of USD 32.0 million be distributed to other equity.
The USD Senior Secured Bond agreement and the Indemnification loan have change of control provisions. If a shareholder or a group of shareholders gains control of more than 50 percent of the share capital, bondholders acquire a put option entitling them to cancel the commitments and declare all outstanding amounts and accrued unpaid interest due and payable. More detailed information can be obtained from the bond trustee, Nordic Trustee ASA. Under the terms of the indemnification loan, if a shareholder or a group of shareholders gains control of more than 50 percent of the share capital, the indemnified parties may declare the loan due and payable.
The Group's activities expose it to a variety of financial risks, including market risk, operational risk, liquidity risk, credit risk, currency risk, interest-rate risk, refinancing risk, and others (See note 3 to the consolidated financial statements).
REC Silicon's Board of Directors is responsible for determining the acceptable risk profile for the Company. The Board oversees risk management processes and conducts reviews of risks faced by the company and internal control procedures.
REC Silicon's management is responsible for reviewing and operationalizing the defined risk profile by maintaining a system for risk management. Management performs risk assessments and actively monitors the development of material risks and initiates actions accordingly.
Risk assessments are performed periodically. The materiality of each risk factor is determined by assessing the likelihood and consequence of that risk. Risks are evaluated to determine whether the level is acceptable or unacceptable and to prioritize activities to mitigate those risks that have the greatest potential to impact Company performance.
REC Silicon believes that there are significant uncertainties related to market developments going forward. This uncertainty relates primarily uncertain market conditions and Chinese tariffs on polysilicon produced in the United States. These uncertain market conditions have forced REC Silicon to shut down the FBR plant in Moses Lake, Washington. The Company expects to restart the Moses Lake manufacturing facility when Chinese markets for solar grade polysilicon re-open, a non-Chinese Solar PV value chain is developed, silicon anode battery technology based on silane gas is commercialized, and/or other significant positive developments occur in solar grade polysilicon markets. If these events do not materialize, REC Silicon may be unable to restart the FBR facility, which could have a significant adverse effect on the Group's business, prospects, financial results, and results of operations.
Market disruptions caused by the COVID-19 pandemic are dissipating. However, current global shipping delays and port congestion is expected to result in the delay of shipments. REC Silicon has successfully mitigated the impact of the COVID-19 pandemic on its operations. However, increased infection rates in certain geographic regions and industries are having an adverse impact on economic activity and have affected markets serviced by REC Silicon.
Company management and the Board of Directors will continue to monitor COVID-19 and take appropriate action as additional developments occur.
Company management and the Board of Directors are monitoring the Russian invasion of Ukraine and will take necessary action to minimize market risk if required.
The Group's production processes involve manufacturing, processing, storage, use, handling, distribution and transport of silane gas and other substances of an explosive or hazardous nature. Accidents or mishandlings involving these substances could cause property damage or injury, which could lead to significant liabilities and costs for the Group. The occurrence of a catastrophic event at one of the Group's polysilicon production facilities could adversely impact production capacity at such facility for a significant period of time. In addition, an interruption in the supply of materials and services to one of the Group's manufacturing facilities could disrupt production capacity for a significant period of time. Despite insurance coverage, the Group could incur uninsured losses and liabilities arising from such events, and/or suffer substantial losses in operational capacity, which could have a significant adverse effect on the Group's business, prospects, financial results, and results of operations.
REC Silicon's Moses Lake, Washington facility was shut down during the second quarter of 2019 due to difficult market conditions and Chinese
tariffs on polysilicon produced in the United States. Accordingly, operating costs and activities have been reduced to levels required to safely maintain the facility in a non-operating status and to retain the capability to restart the facility in 2023.
The Company's plans to reopen the Moses Lake facility are in part dependent upon the restoration of access to polysilicon markets in China, the creation of a non-Chinese solar value chain, or the development and commercialization of technology for the use of silane to manufacture silicon anode material for use in lithium-ion batteries. The realization of these initiatives is subject to substantial uncertainty and may depend upon the implementation of trade measures to incentivize investments and will require REC Silicon to make additional investments. Accordingly, plans to restart the facility in Moses Lake, Washington is subject to substantial uncertainty.
Additional impairments and provisions would be required if the Moses Lake facility is not restarted.
At December 31, 2021 the Group has sufficient available cash to meet debt service and other anticipated operating cash flow requirements. The settlement of the strategic equity investment by Hanwha Solutions was successfully completed on January 19, 2022. Gross proceeds were NOK 964 million. Debt payments in 2022 include the indemnification loan of USD 10.8 million, Grant County Washington property tax settlement of USD 1.8 million and interest of USD 12.7 million on the senior secured bond (see note 17).
Credit risk is primarily related to trade receivables and guarantees provided for discontinued operations. In trade receivables, sources of credit risk include geographic, industry and customer concentrations; and risks related to the collection. Policies and procedures are in place for managing credit risk, including obtaining securities where possible. Market and customer specific developments affect credit risk.
The Company's net cash flows from continuing operations are primarily in USD. Debt is denominated in USD and NOK. Accordingly, the Group's currency risk on a consolidated basis relates primarily to the sufficiency of net positive cash flows in USD to meet liabilities in NOK. The Group does not currently hold any hedging instruments to offset the risk of changes in exchange rates between the USD and NOK.
Good corporate governance is essential to ensure that our business is run in a way that protects the long-term interest of all stakeholders. The Board of Directors has approved and implemented corporate governance principles endorsing and complying with the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance. The Group's compliance with the Code of Practice is described in the report on Corporate Governance for 2021 which is included in this Annual Report.
The Company has directors and officers liability insurance. The insurance covers the Board of Directors as well as officers of the company from legal personal liability for financial damage caused by the performance of their duties.
Market disruptions caused by the COVID-19 pandemic are dissipating. However, current global shipping delays and port congestion is expected to result in the delay of shipments. In addition, increases in infection rates may adversely impact economic activities in certain geographic areas and industries. The outlook for markets provided below is focused on the long-term development of markets and assumes that economies recover from the COVID-19 pandemic.
The company is monitoring the Russian invasion of Ukraine and will take appropriate action as necessary to minimize risk.
Semiconductor supply chain participants and industry analysts continue to indicate that demand for semiconductor devices is expected to remain strong through the first quarter of 2022. While visibility of demand and order commitments are clear, order fulfillment and execution may be adversely affected by delays in the global logistics supply chain. However, REC Silicon will continue to take action to mitigate any disruption to our customers and revenue expectations.
Demand for REC Silicon's semiconductor grade polysilicon and silicon gases are expected to increase in 2022. Factors associated with data transmission and storage, mobility, and increasing silicon content in automobiles and other consumer goods are expected to result in demand growth. The increasing trend towards electrification and the adoption of new technologies is also expected to increase demand for REC Silicon's advanced silicon products.
Solar grade polysilicon prices increased to approximately USD 32.0/kg at the beginning of the first quarter of 2022. Polysilicon supply will increase through 2022 as new capacity comes online. While capacity expansions have been announced that may result in oversupply, opportunities to restart the Moses Lake FBR facility will be impacted by the potential passage of the Solar Energy Manufacturing for America (SEMA) act as well as current initiatives to develop PV supply chains outside of China. These initiatives are expected to result in opportunities for supply agreements for solar grade granular polysilicon and result in the restart of the Moses Lake facility. Increases in wafer capacity and increased demand for PV installations should result in strong demand for solar grade polysilicon. Polysilicon supply is expected to remain constrained in the first half of 2022 and become more balanced towards the end of the year. Industrial analysts estimate global demand for PV installations of approximately 230-250GW.
In addition, developments with respect to silicon anode battery materials appear to be taking shape. Developers continue to qualify their silicon-based anode material in commercial applications. Developer forecasts predict large scale silane demand by 2025.
This report contains statements regarding the future in connection with the Group's growth initiatives, profit figures, outlook, strategies and objectives. In particular, the section "Outlook" contains forward-looking statements regarding the Group's expectations. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual results and developments deviating substantially from what has been expressed or implied in such statements. These factors include the risk factors relating to REC Silicon's activities described in section "Risk Factors" above.
Lysaker, March 24, 2022 Board of Directors
Kristian Røkke Chairman of the Board
Annette Malm Justad Member of the Board
Audun Stensvold Member of the Board
Lene Landøy
Member of the Board
Seung Deok Park Member of the Board
James A. May II President and CEO
The Board of Directors and the Chief Executive Officer (CEO) have today considered and approved the report from the Board of Directors and CEO, the financial statements for the Group and for the parent company REC Silicon ASA (the Company) for the year ending December 31, 2021.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements as stated in the Norwegian Accounting Act that are applicable at December 31, 2021. The financial statements for the Company have been prepared in accordance with the Norwegian Accounting Act and Generally Accepted Accounting Principles in Norway that are applicable at December 31, 2021. The report from the Board of Directors and CEO, including the report on corporate governance, for the Group and the Company has been prepared in accordance with the Norwegian Accounting Act and the Norwegian Accounting Standard no. 16 applicable at December 31, 2021.
We confirm that, to the best of our knowledge:
Lysaker, March 24, 2022 Board of Directors
Kristian Røkke Chairman of the Board
Annette Malm Justad Member of the Board
Audun Stensvold Member of the Board
Lene Landøy Member of the Board
Seung Deok Park Member of the Board
James A. May II
President and CEO
REC Silicon is a global leader in silane-based, high-purity silicon materials, delivering high-purity polysilicon and silicon gases to the solar and electronics industries. REC Silicon operates manufacturing facilities in Moses Lake, Washington and Butte, Montana in the USA. The Group's sales and marketing activities for solar grade polysilicon, semiconductor grade silicon and silicon gases are carried out in China, Japan, Korea, Taiwan and in the United States. The Group also has a JV investment in Yulin, China.
Through its products for the Solar PV industry, REC Silicon participates in the global value chain for renewable energy. Furthermore, our products for the semiconductor industry place the Group in the global value chain for digitalization, a key driver for more efficient resource use in the world. As such, REC Silicon is well integrated in the drive to make the world more environmentally sustainable. Nevertheless, we recognize our
responsibility to ensure that our own operations and value chain minimize its environmental footprint. REC Silicon strives to be recognized as a safe and fair employer with proper attention to all stakeholders and with a best-practice governance structure.
REC Silicon has conducted a materiality analysis to define focus areas that are strategically important to the Group and its stakeholders. This analysis is a combination of industry materiality analyses from the Sustainability Accounting Standards Board (SASB) that cover "Solar Technology & Project Developers" and "Chemicals", as well as a more granulated, internal analysis of key aspects where we believe attention and focus is needed to ensure that REC Silicon has the right platform to execute its strategy. The sustainability focus areas for REC Silicon going forward are: POVERTY ZERO HUNGER GOOD HEALTH POVERTY ZERO HUNGER GOOD HEALTH AND WELL-BEING QUALITYEDUCATION GENDER
ECONOMIC GROWTH INDUSTRY, INNOVATION
ECONOMIC GROWTH INDUSTRY, INNOVATION
AND COMMUNITIES RESPONSIBLE
AND INFRASTRUCTURE REDUCED
CONSUMPTION AND PRODUCTION
AND INFRASTRUCTURE REDUCED
CLIMATE ACTION LIFE
INEQUALITIES SUSTAINABLE CITIES
CLIMATE
INEQUALITIES SUSTAINABLE CITIES
AND COMMUNITIES RESPONSIBLE
AND COMMUNITIES RESPONSIBLE
CONSUMPTION AND PRODUCTION
CONSUMPTION AND PRODUCTION
LIFE ON LAND PEACE, JUSTICE
BELOW WATER PARTNERSHIPS
ACTION LIFE BELOW WATER PARTNERSHIPS
EQUALITY CLEAN WATER
CLEAN ENERGY DECENT WORK AND
EQUALITY CLEAN WATER
AND SANITATION
AND SANITATION
ECONOMIC GROWTH INDUSTRY, INNOVATION
CLEAN ENERGY DECENT WORK AND
CLEAN ENERGY DECENT WORK AND
INEQUALITIES SUSTAINABLE CITIES
AFFORDABLE AND
AND INFRASTRUCTURE REDUCED
EDUCATION GENDER
EDUCATION GENDER
AFFORDABLE AND
Safety for everyone involved in the production and use of REC Silicon's products is of top priority.
The production of polysilicon and silicon gases consumes substantial volumes of energy, which has a direct impact on the environment, as well as on costs.
The production of polysilicon and silicon gases consumes and discharges substantial volumes of water, which has a direct impact on water resources and water quality if not managed correctly.
Our production processes generate significant volumes of waste, where increased recycling will be important to reduce the environmental footprint. Emissions to air are also important, as is the protection of local biodiversity. REC Silicon needs access to raw materials with low environmental impact, which make its value chain more resilient to future, climate-related changes.
The Group needs access to qualified personnel and strives to be seen as an attractive workplace that respects all aspects of human rights and gives everyone an equal opportunity to succeed.
REC Silicon adheres to the strictest principles of fair business behavior and integrates the governance of sustainability matters along with the overall corporate governance, which places the ultimate accountability with the executive management and the Board of Directors.
REC Silicon supports the United Nations Sustainable Development Goals (SDGs) and has identified seven SDGs that are particularly relevant to our operations.
These are areas where we can contribute towards implementing the UN Agenda for Sustainable Development by 2030. Some of the above SDGs are relevant to more than one of REC Silicon's focus areas.
Each SDG has underlying targets, which we have aligned with our own focus areas as illustrated below.
Furthermore, we have attempted to tie the SDGs to the key operational and strategic parameters we use to set targets and measure performance. This means that we can have a clear view of which of the SDGs our efforts contribute to:
Based on this, we are developing a framework for our sustainability strategy going forward. Importantly, we have identified a range of KPIs grouped around each focus area, so that we can operationalize our improvement efforts and initiatives with the appropriate focus and link these to longer term goals.
| FOCUS AREA | KPI |
|---|---|
| Safety | LTI rate, Total Recordable Injuries rate |
| Safe job analyses | |
| Sick hours % | |
| Hazard recognition audits | |
| Serious incidents | |
| Supply chain audits | |
| Energy | Energy use |
| Emissions from energy use | |
| Energy mix | |
| Energy efficiency | |
| Reliability of energy sourcing | |
| Water | Water consumption |
| Waste-water discharge | |
| Water use efficiency | |
| Environment | Waste production volumes, including hazardous waste |
| Waste recycling | |
| Raw materials sourcing | |
| Emissions to air | |
| Initiatives to preserve biodiversity | |
| Equal treatment and | % women in workforce and management |
| human rights | Salary gap male vs female |
| Initiatives and programs to promote gender equality | |
| Human rights audits and violations in supply chain | |
| Donations and contributions to community | |
| Governance | Anti-corruption audits and violations |
| Number of whistleblower incidents | |
| Transparency of ESG governance structure | |
| Stewardship initiatives in value chain | |
It is the ambition of REC Silicon to develop a full suite of strategic targets relating to sustainability during the coming year with associated KPIs that are monitored on a regular basis and related to initiatives, plans and programs set to improve our performance.
This section outlines how REC Silicon performed during 2021 in relation to established KPIs. These are reported monthly or quarterly and are subject to audits on all levels in the organization.
Compared to previous years, we are now also expressing certain KPIs on a per-unit-produced basis to get a better understanding of the resource efficiency of our production. This will be an important part of our sustainability strategy going forward.
| ENVIRONMENTAL DISCLOSURES | UNIT | 2021 | 2020 | % CHANGE |
|---|---|---|---|---|
| Polysilicon production | Mt | 1,225 | 906 | 35% |
| Silane gas production and other production | Mt | 5,142 | 4,545 | 13% |
| Total production | Mt | 6,367 | 5,451 | 17% |
| Energy | ||||
| Heating Oil | L | 28,185 | 22,105 | 28% |
| Diesel | L | 21,703,326 | 21,272,146 | 2% |
| Natural gas | m3 | 17,063 | 26,099 | -35% |
| Gasoline | L | 8,253 | 2,079 | 297% |
| Propane | L | 0 | 0 | n.m. |
| Hydrogen | m3 | 0 | 0 | n.m. |
| Other (Unleaded gasonline and propane) | L | 0 | 0 | n.m. |
| Direct Energy Consumption (Scope 1) | GWh | 231 | 227 | 2% |
| Indirect Energy Consumption (Grid Electricity) (Scope 2) | GWh | 562 | 497 | 13% |
| Total Energy Use | GWh | 794 | 724 | 10% |
| GJ | 2,856,735 | 2,607,004 | 10% | |
| Share from Grid Electricity | % | 71% | 69% | 2% |
| Share from Renewable Energy | % | 0% | 0% | 0% |
| Energy per produced unit | MWh/Mt | 125 | 133 | -6% |
| CO2 emissions | ||||
| Direct emissions (Scope 1) | tCO2e | 61,168 | 59,982 | 2% |
| Indirect emissions from electricity (Scope 2) | tCO2e | 164,052 | 145,112 | 13% |
| Total CO2 emissions | tCO2e | 225,220 | 205,094 | 10% |
| CO2 emissions per produced unit | tCO2e/Mt | 35 | 38 | -6% |
| Water | ||||
| Municipal water consumption | Mill m3 | 0.1 | 0.1 | -2% |
| Surface water consumption | Mill m3 | 2.2 | 2.4 | -8% |
| Total water consumption | Mill m3 | 2.3 | 2.5 | -8% |
| Waste water discharge | Mill m3 | 1.5 | 1.4 | 3% |
| Share of water from regions with High Water Baseline Stress | % | 0 | 0 | 0% |
| Share of water from regions with Extremely High Water Baseline Stress | % | 0 | 0 | 0% |
| Waste water share of water consumption | % | 64% | 57% | 7% |
| Water consumption per produced unit | '000 m3/Mt | 0.4 | 0.5 | -21% |
| Waste water discharge per produced unit | '000 m3/Mt | 0.2 | 0.3 | -11% |
| Waste | ||||
| Recycled waste | Mt | 17 | 31 | -45% |
| Non-hazardous waste | Mt | 5,297 | 5,144 | 3% |
| Hazardous waste | Mt | 1 | 0 | 276% |
| Total waste | Mt | 5316 | 5176 | 3% |
| Recycled waste share of total waste | % | 0% | 1% | 0% |
| Hazardous waste share of total waste | % | 0% | 0% | 0% |
| Hazardous waste per produced unit | Mt | 0.0 | 0.0 | 222% |
| Total waste per produced unit | Mt | 0.8 | 0.9 | -12% |
| Ecological Impacts | ||||
| Total number of permit breaches | 3 | 3 | 0% | |
| Number of serious incidents or environmental releases | 0 | 0 | n.m. |
| SOCIAL DISCLOSURES | UNIT | 2021 | 2020 | % CHANGE |
|---|---|---|---|---|
| Number of Employees | # | 289 | 281 | 3% |
| Job Safety | ||||
| Safe Job Analyses | 299 | 334 | -10% | |
| Hazard Recognition Audits | 331 | 414 | -20% | |
| Lost time injuries rate | LTI/Mill hrs | 7.4 | 3.8 | 97% |
| Total recordable injuries rate | TRI/Mill hrs | 14.8 | 11.3 | 31% |
| Sick hours | # | 2,027 | 1,786 | |
| Sick hours share | % | 0.4 % | 0.3 % | |
| Workforce composition | ||||
| Male | % | 83% | 83% | |
| Female | % | 17% | 17% | |
| Management composition | ||||
| Male | % | 86% | 75% | |
| Female | % | 14% | 25% | |
| Human rights and corruption | ||||
| On-site audits of suppliers on human rights | # | 3 | 0 | |
| Self-directed audits of suppliers on human rights | # | 0 | 0 | |
| Human Rights Violations | # | 0 | 0 | |
| Corruption Violations | # | 0 | 0 | |
| Local community interaction | ||||
| Donations to Local Communities | USD | 1,250 | 23,000 | |
| - Contribution by employees | % | 62% | 33% | |
| Volunteer hours to programs and charitable organizations | # | 611 | 900 | -32% |
The performance of the Group in relation to environmental objectives are governed by a set of policies and plans. These include:
The production of polysilicon and silicon gases increased by 17 percent compared to the previous year. With the facility in Moses Lake still being idled, all production took place at the Butte facility, which employed 74 percent of the Group's employees.
Despite the production increase, REC Silicon saw only a moderate increase in resource use. Energy use per produced unit fell by 6 percent year-on-year, while water use and waste production per produced unit fell by 12-21 percent year-on-year. The CO2 emissions per produced unit were down by 6 percent. This variation in intensities is related to some reactors being held idle for some periods during the year but is within a normal range.
The energy used in the production process is still nearly 100% diesel, which is something the Group would like to improve going forward. The electricity consumed by the Group is grid electricity. The Moses Lake facility uses electricity from hydropower, but until this is back in production, the Company has no access to renewable electricity for its production.
The number of environmental permit breaches was flat from last year at 3, which is above the company's target. Nevertheless, none of these breaches were serious or involved any spills. REC Silicon's discharged water needs to be above drinking water standard and the Company uses two test labs to ensure compliance. During 2021, a program was undertaken to pinpoint the reasons for test variability between the labs, which in some cases may result in a recordable permit breach.
Health and safety have the highest priority and the Company aims to prevent all work-related accidents, injuries, and occupational illnesses. The target is zero incidents, zero injuries, and no harm to employees, contractors, partners, customers, and communities.
The Company has an extensive set of HSE procedures, safety departments at each facility, and employee-driven processes that monitor, audit, and further develop safety procedures, practices, and protocols. Policies and codes also cover equal opportunities, ethics and human rights:
All employees have the right and the responsibility to stop unsafe activities as needed.
The safety performance took a turn for the worse during 2021. There were four lost time injuries during 2021, double that of the previous year. Total recordable injuries numbered eight during the year, an increase of two from 2020. None of the injuries resulted in serious injury to personnel. The number of Safe Job Analyses declined by 10 percent, while the number of Hazard Recognition Audits fell by 20 percent. This owes itself to the effects of the COVID-19 pandemic, which resulted in the company encouraging reduced interaction between employees, and in particular any exposure to the production employees.
REC Silicon's compensation policy provides a benefit for paid time off (PTO) for its employees. The policy accounts for different Sick PTO regulations in the states of Washington and Montana. Designating PTO as Sick PTO is voluntary rather than required in both states, but the total sick hours designated are nevertheless disclosed below. The Company maintains a health and wellness program which facilitates healthy lifestyle choices and activities.
Although REC Silicon was affected by the global pandemic in the same manner as the rest of the world, we were able to mitigate any production interruptions or losses with internal policies to ensure people maintained compliance with mandates and continued safe work practices. REC Silicon is considered essential due to the hazardous chemicals on site and therefore, there was no interruption in our production. Employees were provided with masks, cleaning materials, sanitizer, paid time away if sick, and social distancing was practiced throughout the organization.
REC Silicon is committed to provide equal opportunities for all employees in an inclusive work culture. All employees and applicants are treated without regard to age, gender, sexual orientation, nationality, race, religion, disability, marital situation, or any other protected status. The gender composition of the workforce was unchanged during 2021, while the female proportion at the management level was down year-onyear due to an employee leaving the company without being replaced.
REC Silicon does not accept any form of harassment or discrimination. In the United States, REC Silicon's employment policies and practices are in compliance with Title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000) as amended.
The Group's standard terms through its supply chain require adherence to standards on human rights, freedom of association, child and forced labor, corruption, and occupational health and safety. All strategic suppliers had contractual clauses or are subject to regulations regarding respect for human rights. There were no human right violations reported in 2021.
REC Silicon and its employees focus on local community participation. Donations to local communities are made on a regular basis, and its employees also contribute directly. Volunteer hours to programs and charitable organizations continue at a reasonably high level but were impacted by the COVID-19 restrictions during the year as most businesses were shut down and fundraising in general was made more difficult.
REC Silicon sets high standards of integrity and believes that a sound business must be based on value-based management and clear guidelines on ethics and sustainability. The Code of Conduct, the Anti-Corruption Policy and related procedures describe the behavior expected of our employees. Every employee is required to sign the Code of Conduct to acknowledge their commitment to adherence, and new employees receive training on the Code of Conduct, including information about REC Silicon's Anti-Corruption Policy and procedures.
REC Silicon investigates all potential integrity concerns and cooperates fully with the authorities. The Company takes every accusation of corruption seriously, performs thorough investigations, reports to the Board of Directors, and takes necessary action. No adverse action will be taken against an employee due to complaints submitted in good faith. Complaints can be made anonymously.
No incidents of corruption were reported in 2021. REC Silicon has a whistleblower program in place, but there were no whistleblower complaints recorded during the year.
REC Silicon endorses the Norwegian Code of Practice for Corporate Governance (Code of Practice) issued by the Norwegian Corporate Governance Board, most recently revised in 2021. For additional information on this, please refer to the Board of Directors Report on Corporate Governance, which is a separate section in this Annual Report.
The composition of the Board of Directors remained unchanged from 2020 at December 31, 2021. There were four directors at December 31, 2021 with the gender balance at 50 percent female and 50 percent male. At the completion of the Hanwha investment in January 2022, the number of directors increased to five with the gender balance changed to 40 percent female and 60 percent male.
The governance structure of REC Silicon is highlighted in the figure below. As part of the process to expand its focus on sustainability, the governance of sustainability matters will become more integrated into the overall governance structure.
REC Silicon ASA (the "Company") and its subsidiaries (together REC Silicon Group/the Group), endorses the Norwegian Code of Practice for Corporate Governance (Code of Practice) issued by the Norwegian Corporate Governance Board, most recently revised on October 14, 2021.
The Board of Directors of REC Silicon ("Board") has prepared the following report that explains the Group's corporate governance practices and how it has complied with the Code of Practice in the preceding year. The application of the Code of Practice is based on the "comply or explain" principle and deviations from the code, if any, is explained under the relevant item. The Group's corporate governance practices are subject to annual reviews and discussions by the Board.
REC Silicon Group deviated from the recommendations in the Code of Practice on two sections at year-end 2021. These deviations pertained to separate proxy voting for candidates to the Board (Section 6) and separate regulations for takeover bids (Section 14).
REC Silicon believes the solar industry plays a key role as a long-term supplier of sustainable energy and its business is focused on the production of polysilicon and silicon gases for the solar and electronics industries. To make solar electricity competitive with traditional energy sources, the Group focuses on product improvements and cost reductions through the introduction of new process and product technologies as well as continuous productivity enhancement and technology development.
The Group's business corresponds with the purpose of the Company which is described in its Articles of Association § 3: "The Company's purpose is development and sale of products and services related to renewable energy sources, and to perform other financial operations related to such. The Company may, through subscription of shares or in any other ways, including granting of loans, acquire interests in other companies with identical or similar purposes".
The Board of Directors has defined clear strategies, business goals and risk profile for the Group's business activities, to create value for its shareholders in a sustainable manner considering financial, social and environmental factors. This includes efficient and responsible utilization of resources to the benefit of all its stakeholders.
Sustainability is at the core of REC Silicon's business model and the Company acknowledges its responsibilities toward the environment, society and the local communities in which it operates. The Board carries the responsibility to secure acceptable sustainability performance and has implemented various policies providing business practice guidance and reporting procedures to ensure continuous improvement. An account of the company's sustainability performance is included in the Board of Directors' report in the annual report.
The Group's strategies, business goals and risk profile are reviewed on an annual basis and presented in the annual report, quarterly reports, and at various investor meetings.
The Group's consolidated equity was USD 33.3 million at December 31, 2021, which represented 11.3 percent of total assets. The debt-toequity ratio was 7.9. The Board monitors the Group's capital structure and takes actions necessary to ensure that it is appropriate for the current objectives, strategy, and risk profile. Reference is also made to the consolidated financial statements note 3.3 regarding capital structure and financing and note 3.1 regarding financial risk and to the report of the Board of Directors.
The Group's ambition is to give its shareholders a high and stable return on their investment and to be competitive compared with alternative investment opportunities with comparable risk.
To support committed investments and productivity improvements, the Board's view so far has been that retained earnings should be used within the Company. Accordingly, there has been no distribution of dividends to the shareholders since the Company was publicly listed in 2006, and no proposed dividend payments for the financial year 2021.
The Board will continue to assess the capital structure based on the goals, strategies, risk profile, and the financial situation of the Company.
At the Annual General Meeting (AGM) on May 11, 2021, the Board was granted the following authorities:
These authorities were restricted for defined purposes and each mandate was considered separately. They are valid until the AGM in 2022 or no later than 15 months from the date of the 2021 AGM.
For further information about the mandates given to the Board, reference is made to the minutes from REC Silicon's 2021 AGM and EGM, which are available on the Company's website (www.recsilicon.com).
The Company seeks to conform to the principles for equal treatment of shareholders.
In the event of a share capital increase based on authorization from the general meeting, where the pre-emptive rights of shareholders are set aside, grounds will be provided in the stock exchange notice in which the share capital increase is announced.
In the event of a share buy-back program, the Board will aim to ensure that all related transactions are carried out either through the trading system or at prevailing prices at Oslo Børs. The Board will consider company's and shareholders' interests and aim to maintain transparency and equal treatment of all shareholders. In the event of limited liquidity in the Company's shares, the Company shall consider other ways to ensure equal treatment of all shareholders. There were no transactions in own shares during 2021.
REC Silicon ASA has one class of shares and each share confers one voting right at the General Meetings. The Company's shares are listed on the Oslo Stock Exchange, where they are freely transferable. There are no restrictions on owning, trading or voting for shares in the articles of association.
The General Meeting is the Company's highest authority, and open to all shareholders. The Company encourages shareholders to participate and exercise their rights. To attend and vote at the General Meeting, shares must be registered in the Central Securities Depository (VPS) by the fifth business day prior to the General Meeting.
The AGM is held by the end of June every year in the municipality where the Company has its registered business address or in Oslo. If required, the Board may hold the AGM as an electronic meeting. The 2021 Annual General Meeting was held on May 11, 2021 in Oslo, with 36.16 percent of the Company's shares represented.
The Board, auditor, or shareholders representing at least 5 percent of the shares can call for Extraordinary General Meetings when deemed necessary. In 2021, the Board called for EGMs on March 4 to name Kjell Inge Røkke as board chair and Annette Malm Justad as deputy chair of REC Silicon. A total of 41.43 percent of the company's shares were represented. Additionally in 2021, the board called for an EGM on December 22 to name Kristian Monsen Røkke as board chair and Seung Deok Park as board member. A total of 31.72 percent of the company's shares were represented.
The notice of the General Meeting and supporting documents are made available on the Company's website no later than 3 weeks prior to the date of the meeting. Shareholders may request the documents by mail. Efforts are made to ensure that proposed resolutions and supporting information are sufficiently detailed and comprehensive to allow the shareholders to form a view on all matters to be considered at the meeting. The notice includes information about shareholders' rights. The notice period, right to attend and agenda proposals are regulated in the Articles of Association.
Shareholders may request that specific matters be considered by a general meeting by written notice to the Board within 7 days prior to the time limit for notice of the General Meeting together with a proposal for resolution and reasons why the matter is proposed for consideration. If the notice has already been distributed, a new notice shall be distributed if the time limit for notice to the General Meeting has not expired.
Shareholders wishing to participate at the General Meeting shall notify the Company within a specific time limit, and a minimum 5 days prior to the General Meeting. Shareholders who have not given notice within the time limit may be denied participation at the meeting.
Shareholders who cannot attend the General Meeting may vote by proxy. They may elect a proxy of their choice, and the Company also nominates a person that shareholders may elect as a proxy. Information about the
procedure shareholders must observe to participate and vote is given together with the notice of the meeting. A proxy form is prepared in a way that allows separate voting instructions to be given for each matter considered. The Articles of Association allow the Board to accept written advance votes subject to the existence of a satisfactory method for verifying the identity of the shareholder.
The Articles of Association also allow the Board to accept votes cast through electronic communication.
The Chairman of the Board, the Board members, the auditor, and the members of the Nomination Committee are normally present at the General Meeting. All Board members are encouraged to attend the meeting.
The General Meeting is opened by the Chairman of the Board who nominates an independent chair for election to lead the meeting.
The Code recommends separate voting for candidates to the Board. However, it is not possible to vote separately on each candidate nominated to the Board because the composition of the Board must be in accordance with applicable legislation regarding gender representation and qualifications for committee assignments. The nomination committee's proposal is given with respect to such legislation. Should a situation arise where the composition of the Board might conflict with applicable legislation, the situation and consequences of electing a board contrary to legislation should be discussed at the General Meeting and shareholders should base their votes on the views discussed.
The Nomination Committee is governed by the Articles of Association section 6. The AGM on May 11, 2021, elected the following three members for the Nomination Committee for the period until the AGM in 2022: Mr. Engebret G. Hisdahl (chair), Ms. Liv Nona Stubholdt, and Mr. Kjetil Kristiansen.
The nomination committee does not include any executive personnel or any member of the company's Board of Directors. Mr. Kjetil Kristiansen currently holds the positions as head of HR at Aker BP ASA, a subsidiary of Aker ASA and a related company to Aker Horizons AS, which is the main shareholder of REC Silicon. The remaining members of the
Nomination Committee are independent of the Board of Directors and Group Management.
The General Meeting stipulates the rules of procedure for the Nomination Committee and determines the Committees' remuneration.
The Nomination Committee gives its recommendation to the general meeting on election of and compensation to members of the Board of Directors, in addition to election of members of the Nomination Committee. Each proposal is justified on an individual basis. All shareholders are entitled to nominate candidates to the Board of Directors, and information on how to propose candidates can be found on the company's website.
Pursuant to the articles of association section 6, the company's Board of Directors shall consist of three to twelve members. On 31 December 2021, the Board of Directors consisted of four members (see table below), of which two were female. The directors are elected by the General Meeting for a term of one year and may be re-elected.
The EGM on March 4, 2021, elected Kjell Inge Røkke and Lene Landøy as new Board members, replacing Inger Berg Ørstavik and Espen Klitzing. Kjell Inge Røkke is the principal owner of Aker ASA, the parent company of REC Silicon's main shareholder Aker Horizons AS. Lene Landøy was at the time employed by Aker BP, and is currently employed by Aker ASA, both companies within the Aker group.
The AGM on May 11, 2021, elected Kjell Inge Røkke as Chair of the Board, Anette Malm Justad was elected Deputy Chair, while Lene Landøy and Audun Stensvold were elected members of the board, all for a term until the AGM in 2022.
The EGM on December 22, 2021, elected Seung Deok Park as a new member of the Board and Kristian Monsen Røkke as the Chair of the Board, replacing Kjell Inge Røkke who resigned. The election of Kristian Monsen Røkke was effective immediately, while the election of Seung Deok Park was effective from January 14, 2022, with the notification of the completion of Hanwha Solutions Corporation's subscription and acquisition of 70,104,276 shares in the Company.
Overview of the Board at December 31, 2021:
| NAME | ROLE | CONSIDERED INDEPENDENT OF MAIN SHAREHOLDERS |
INDEPENDENT OF GROUP MANAGEMENT AND MATERIAL BUSINESS CONTACTS |
SERVED SINCE | TERM EXPIRES | PARTICIPATION BOARD MEETINGS 2021 |
|---|---|---|---|---|---|---|
| Kristian Monsen Røkke | Chair (from 22 December 2021) | No | Yes | 22 Dec 2021 | AGM 2022 | NA |
| Anette Malm Justad | Board Member (Chair until March 4, 2021) | Yes | Yes | 12 May 2020 | AGM 2022 | 11 of 11 |
| Audun Stensvold | Board member | Yes | Yes | 12 May 2020 | AGM 2022 | 11 of 11 |
| Lene Landøy | Board member | No | Yes | 04 Mar 2021 | AGM 2022 | 10 of 11 |
All members of the Board of Directors are considered independent of the company's executive management and material business contacts.
The company's annual report and the website provides information to illustrate the expertise of the members of the Board of Directors. The Board of Directors considers its composition to be diverse and represent required competencies including financial and industrial experience. Board members are encouraged to own shares in the company. An overview of board members' share ownership in the Company is available in note 16 to the consolidated financial statements.
The Board has the ultimate responsibility for the management of the Company and the Group and for supervising Group Management.
The Board has adopted "Rules of procedures for the Board of Directors", which regulates the Board's responsibilities, duties and administrative procedures as well as the tasks and duties of the Chief Executive Officer. The Board has also adopted a Chart of Authority regulating matters that are to be decided by the Board and matters that may be decided by Group Management. The Chart of Authority distinguishes between investment decisions, customer contracts, procurement contracts, compensation, and finance and is reviewed on an annual basis. The Board holds at least one meeting per year with the auditor and without any members of Group Management or administration present.
The Board has adopted guidelines to ensure it is informed of and how to handle potential transactions and matters to be considered by the Board, in which members of the Board, Group Management or close associates are involved. The Board must review and approve all transactions between the Group and Group Management or the Board of Directors.
The Company uses independent third-party valuations in case of significant transactions with closely related parties which are not to be considered by the General Meeting. There was one agreement announced in 2021 between the Group and its shareholders, directors, Group Management or other related parties that could be described as a material transaction. Details on the related-party transaction are disclosed in the consolidated financial statements, note 10.
The Board has established two committees: an Audit Committee and a Compensation Committee.
The Company's Audit Committee is governed by the Norwegian Public Limited Liability Companies Act and the Audit Committee Charter, which sets out the tasks and rules of procedure of the Committee.
The Committee members are appointed by and among the Board of Directors. At December 31, 2021, the audit committee members were Mr. Audun Stensvold (chair) and Ms Lene Landøy, both considered independent of Group Management. The Audit Committee held 6 meetings in 2021.
The Committee supports the Board with the assessment and control of financial risk, financial reporting, auditing, control, and prepares discussions and resolutions for Board meetings. It has no decisionmaking authority. The Committee reviews complaints regarding accounting, internal controls, and auditing matters. In addition, under the whistle-blower procedure, complaints from employees and other concerned parties are received and followed up by the Committee.
The Committee makes recommendations to the Board with respect to the Group auditor and the auditor's fees, as assessing the auditor's independence, including considering any non-audit-related services provided.
The Compensation Committee is governed by the Norwegian Public Limited Liability Companies Act and the Compensation Committee Charter, which sets out the tasks and procedures of the Committee. The Committee members are appointed by and among the Board of Directors. At December 31, 2021, the compensation committee members were Annette Malm Justad and Kristian Røkke, both independent of the Group Management. During 2021, the Committee met 2 times.
The Compensation Committee supports the Board by preparing resolutions on the terms and conditions of employment for the Chief Executive Officer and the general principles and strategies for compensation of Group Management including bonus and share based compensation as well as other personnel matters.
The Group's risk management system shall ensure that the Group has a systematic and uniform approach to risk management. The system defines roles, responsibilities, processes and procedures, standards, tools and documentation, including considerations related to integrating stakeholders in relation to the Company's value creation.
Group Management sets the context in which risks are managed and supervises the risk management process. Group Management performs separate risk evaluations based on a top-down approach. Risk assessments are presented to the Audit Committee and the Board of Directors. The Board performs a review of risks in connection with the approval of the annual budget.
Group Management regularly updates the Board of Directors including operational reviews, HSE (Health, Safety and Environment) measures, financial highlights and key performance indicators. Prior to each Board meeting, the CEO prepares a report to the Board of Directors, which includes this information in addition to any items requested by Board members and items requiring action by the Board of Directors.
Because the Group operates internationally, it is required to comply with numerous national and international laws and regulations. All business activities and processes must be conducted in accordance with laws, and regulations.
To strengthen internal control, the Group has established an Anticorruption Policy and procedures, provided training to employees and managers, and performed a fraud risk assessment. Whistleblower complaints and other internal control activities are presented to the Audit Committee according to the Audit committee charter.
To ensure consistent financial reporting throughout the Group, financial information is reported through a computerized financial reporting system utilizing a common chart of accounts and procedures designed to ensure the consistency of information reported. Subsidiaries accumulate transactional information, period end balances, and performance statistics through ERP systems designed to meet the business requirements of each operation. Quarterly and year-end reporting processes are expanded to meet various supplementary requirements.
The quarterly and yearly reporting process and significant accounting and reporting issues are discussed with the Audit Committee in the presence of the external auditor.
The Group's financial risk management is described in the consolidated financial statements (note 3). Reference is also made to the Board of Directors' report that includes an analysis of the financial statements and the risk factors.
The members of the Board receive remuneration in accordance with their individual roles. Prior to May 12, 2020, Board members who participate in the Audit Committee or the Compensation Committee received additional compensation.
Board remuneration is not linked to Company performance and members are not granted share options.
Details on the remuneration of the Board of Directors are disclosed in the consolidated financial statements (note 16).
Members of the Board of Directors and/or companies with which they are associated should not take on specific assignments for the Company in addition to their appointment as a member of the Board of Directors, but if they do, this shall be disclosed to the full Board. The remuneration for such additional duties will be approved by the Board of Directors. There were no such assignments in 2021.
The guidelines for salary and other compensation to Executive Management was presented at the AGM in May 2021. The policy was last updated in 2021 and was approved by the general meeting. The Board determines remuneration of the Chief Executive Officer while remuneration of Group Management is determined according to guidelines. The Board's statement regarding compensation of leading employees, required by accounting act act §7-31b, is included in note 16 of the consolidated financial statements.
The remuneration of the Group Management consists of a basic salary, relevant additional benefits and membership in the Company's pension and insurance schemes. The remuneration also includes performance bonuses for selected individuals based on an annual performance related compensation system. In addition, the Board has adopted an incentive program for retaining key personnel. The performance bonuses are linked to the Group's financial performance and defined KPI's over time and includes incentives related to performance the employees can influence. There are absolute limits for the performance-related remuneration, where maximum performance bonus pay-out for the management varies between 25 and 100 percent of the annual basic salary.
Details on the remuneration of the Chief Executive Officer and other members of Group Management are disclosed in the consolidated financial statements (note 16).
The Board extended the long-term incentive program for retaining key personnel, whereby employees' entitlements are linked to the share price development of the Company's shares. The share-based program was introduced in 2014 and includes a lock-up period for shares awarded and an absolute limit for the maximum gain in each calendar year. Further details on the incentive program is disclosed in note 32 of the consolidated financial statements.
The 2021 AGM voted separately on the compensation to leading employees and the statement regarding long-term incentive plans.
The Company treats its investors equally. Timely information is published simultaneously to all investors in accordance with applicable legislation and regulation in order to provide the best possible basis for evaluation of Company performance. All information is provided in English.
The Board has adopted an Investor Relations (IR) policy specifying, among other things, who is entitled to speak on behalf of the Company on various subjects and with guidelines for the Company's contact with shareholders other than through General Meetings.
Interim reports are published on a quarterly basis, in line with Oslo Stock Exchange's recommendations. Interim reports include presentations to provide an overview of operational and financial developments, market outlook, and the Company's prospects. The presentations are open to the public and made available through a webcast. The Chief Executive Officer, the Chief Financial Officer and the IR Officer are normally present at the quarterly presentations. Furthermore, the Company keeps an ongoing dialogue with its investors and makes presentations to analysts and investors through various conferences and events.
The Company observes a "Silent Period" extending from the last day of the quarter until operating results are released publicly. During this period, Group Management is not available for discussions with investors or analysts. The IR Officer is available on a limited basis to provide material previously released and to facilitate the collection and distribution of consensus forecasts. The Investor Relations function is in charge of coordinating the Company's communications to the market and to existing and potential investors of the Company. The Investor Relations Officer is an independent contractor that reports to the Chief Financial Officer.
The Company has no defence mechanism to prevent take-over bids. The Board is open to initiatives that are commercially and financially attractive for the shareholders. The Board will assess potential offers in accordance with applicable legislation and Code of Practice requirements in due course.
Any transaction that effectively constitutes a disposal of a majority of the Company's activities will be decided by the General Meeting.
The Board has not established separate guidelines in the event of a takeover bid as recommended by the Code of Practice. Take-over bids are usually specific, one-off, events which makes preparation of guidelines challenging. In the event of a take-over process, the Board will ensure that the Company's shareholders are treated equally, and that the Company's activities are not unnecessarily interrupted. The Board will further seek to comply with the relevant recommendations from the Code of Practice.
The Company's external auditor, KPMG, is appointed by the General Meeting and is independent from the Company.
The auditor participates at Board meetings with respect to the Annual Financial Statements. The auditor comments on any material changes in the Company's accounting principles, material estimates used to calculate accounting figures, and reports disagreements between the auditor and Group Management.
The auditor presents significant identified weaknesses and proposals for improvements of the internal control procedures annually to the Board with an annual confirmation that the auditor has satisfied the requirements for independence together with a summary of all services provided to the Group. The auditor meets with the Audit Committee and the Board once a year without the Chief Executive Officer or any other member of the Group Management present.
The auditor is also required to participate in meetings of the Audit Committee and present the main features of the audit plan to the Committee.
Remuneration of the auditor is approved by the General Meeting. The auditor provides a break-down between audit and non-audit services, and information is provided to the General Meeting about non-audit services provided by the auditor. The Board has issued guidelines regarding Group Management's use of the auditor for services other than audit. These guidelines include a list of services that are preapproved for fees up to NOK 500,000 and requires audit committee approval for all other non-audit services or if fees are more than NOK 500,000. For more information about remuneration to the auditor, see note 22 to the consolidated financial statements.
The auditor participates at the AGM and presents the independent auditor's report.
| Consolidated statement of financial position | 30 |
|---|---|
| Consolidated statement of income | 32 |
| Consolidated statement of comprehensive income | 33 |
| Consolidated statement of changes in equity | 34 |
| Details of consolidated comprehensive income | 35 |
| Consolidated statement of cash flows | 36 |
| Index of the notes to the consolidated financial statements | 37 |
| Notes to the consolidated financial statements | 38 |
| Balance sheet (NGAAP) | 82 |
|---|---|
| Income statement (NGAAP) | 84 |
| Statement of cash flows (NGAAP) | 85 |
| Index of the notes to the financial statements | 86 |
| Notes to the financial statements | 87 |
| (USD IN MILLION) | NOTES | 2021 | 2020 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 6 | 0.9 | 1.0 |
| Land and buildings | 6 | 33.3 | 35.6 |
| Machinery and production equipment | 6 | 34.7 | 50.5 |
| Other tangible assets | 6 | 2.6 | 3.1 |
| Assets under construction | 6 | 12.5 | 6.1 |
| Property, plant and equipment | 6 | 83.1 | 95.4 |
| Right of use assets | 7 | 33.2 | 35.7 |
| Other non-current receivables | 12 | 0.0 | 1.1 |
| Financial assets and prepayments | 0.0 | 1.1 | |
| Total non-current assets | 117.3 | 133.3 | |
| Current assets | |||
| Inventories | 13 | 33.1 | 41.3 |
| Trade and other receivables | 12 | 29.6 | 27.5 |
| Restricted bank accounts | 14 | 4.4 | 4.5 |
| Cash and cash equivalents | 14 | 110.5 | 134.9 |
| Total current assets | 177.6 | 208.2 | |
| Total assets | 294.9 | 341.4 |
| (USD IN MILLION) | NOTES | 2021 | 2020 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Paid-in capital | 2,918.2 | 2,918.2 | |
| Other equity and retained earnings | -2,884.9 | -2,859.2 | |
| Total shareholders' equity | 33.3 | 59.0 | |
| Non-current liabilities | |||
| Retirement benefit obligations | 19 | 13.4 | 18.9 |
| Non-current provision, interest calculation | 20 | 20.2 | 14.7 |
| Non-current financial liabilities, interest bearing | 17 | 115.2 | 118.0 |
| Non-current lease liabilities | 7 | 67.9 | 69.7 |
| Other non-current liabilities, not interest bearing | 32 | 1.6 | 1.6 |
| Total non-current liabilities | 218.2 | 222.9 | |
| Current liabilities | |||
| Trade payables and other liabilities | 20 | 29.4 | 26.1 |
| Derivatives | 11 | 0.0 | 1.5 |
| Current financial liabilities, interest bearing | 17 | 11.3 | 29.8 |
| Current lease liabilities | 7 | 2.6 | 2.1 |
| Current prepayments, interest calculation | 20 | 0.2 | 0.0 |
| Total current liabilities | 43.5 | 59.6 | |
| Total liabilities | 261.6 | 282.5 | |
| Total equity and liabilities | 294.9 | 341.4 |
Lysaker, March 24, 2022 Board of Directors
Kristian Røkke Chairman of the Board
Annette Malm Justad Member of the Board
Audun Stensvold
Member of the Board
Lene Landøy Member of the Board
Seung Deok Park Member of the Board
James A. May II President and CEO
| (USD IN MILLION) | NOTES | 2021 | 2020 |
|---|---|---|---|
| Revenues | 5 | 143.2 | 122.1 |
| Cost of materials | -17.1 | -16.0 | |
| Changes in inventories | -8.9 | -4.7 | |
| Employee benefit expenses | 16, 24, 32 | -41.7 | -39.4 |
| Other operating expenses | 22 | -75.6 | -55.1 |
| Other income and expenses | 21, 23 | 7.9 | 16.9 |
| EBITDA 1) | 7.7 | 23.8 | |
| Depreciation | 6 | -25.2 | -36.7 |
| Amortization | 6 | 0.0 | -0.1 |
| Depreciation of right of use assets | 7 | -3.0 | -2.9 |
| Impairment | 6, 7, 8 | -0.3 | -23.0 |
| Total depreciation, amortization and impairment | -28.5 | -62.7 | |
| EBIT 2) | -20.8 | -38.9 | |
| Financial income | 25 | 0.1 | 0.3 |
| Net financial expenses | 9, 25 | -23.6 | -35.2 |
| Net currency gains/losses | 25 | 0.8 | 4.5 |
| Net financial items | -22.7 | -30.4 | |
| Profit/loss before tax from continuing operations | -43.5 | -69.3 | |
| Income tax expense/benefit from continuing operations | 18 | 0.0 | 22.6 |
| Profit/loss from continuing operations | -43.5 | -46.7 | |
| Profit/loss from discontinued operations, net of tax 1) | 17, 30 | 13.4 | 0.0 |
| Profit/loss from total operations | -30.1 | -46.7 | |
| Attributable to: | |||
| Owners of REC Silicon ASA | -30.1 | -46.7 | |
| Earnings per share (In USD) | |||
| From continuing operations | |||
| -basic | 26 | -0.12 | -0.16 |
| -diluted | -0.12 | -0.16 | |
| Earnings per share (In USD) | |||
| From total operations | |||
| -basic | 26 | -0.08 | -0.16 |
| -diluted | 26 | -0.08 | -0.16 |
1) EBITDA - EBIT excluding depreciation, amortization and impairment.
2) EBIT - Profit/loss excluding income tax expense/benefit, net financial items, and profit/loss from investments in associates.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Profit/loss | -30.1 | -46.7 |
| Other comprehensive income, net of tax: | ||
| Items that will not be reclassified to profit or loss: | ||
| Remeasurement of defined benefit plans | 4.3 | -1.1 |
| Currency translation effects | 0.0 | 0.0 |
| Sum items that will not be reclassified to profit or loss | 4.4 | -1.1 |
| Items that may be reclassified subsequently to profit or loss: | ||
| Currency translation differences | ||
| - taken to equity | 0.0 | 0.0 |
| Sum items that may be reclassified subsequently to profit or loss | 0.0 | 0.0 |
| Total other comprehensive income | 4.3 | -1.1 |
| Total comprehensive income | -25.7 | -47.7 |
| Total comprehensive income attributable to: | ||
| Owners of REC Silicon ASA | -25.7 | -47.7 |
| ATTRIBUTABLE TO EQUITY HOLDERS OF REC SILICON ASA | ||||||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | NOTES | SHARE CAPITAL |
SHARE PREMIUM |
OTHER PAID-IN CAPITAL |
TOTAL PAID-IN CAPITAL |
OTHER EQUITY |
COMPREHENSIVE INCOME |
TOTAL EQUITY |
| Year 2020 | ||||||||
| At January 1, 2020 | 43.4 | 2,727.0 | 41.8 | 2,812.3 | 539.0 | -3,350.5 | 0.8 | |
| Share issue | 10.2 | 95.7 | 0.0 | 105.9 | 0.0 | 0.0 | 105.9 | |
| Total comprehensive income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -47.7 | -47.7 | |
| At December 31, 2020 | 53.6 | 2,822.7 | 41.8 | 2,918.2 | 539.0 | -3,398.2 | 59.0 | |
| Year 2021 | ||||||||
| At January 1, 2021 | 53.6 | 2,822.7 | 41.8 | 2,918.2 | 539.0 | -3,398.2 | 59.0 | |
| Share issue | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Total comprehensive income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -25.7 | -25.7 | |
| At December 31, 2021 | 53.6 | 2,822.7 | 41.8 | 2,918.2 | 539.0 | -3,423.9 | 33.3 |
| TRANSLATION DIFFERENCES | ||||
|---|---|---|---|---|
| (USD IN MILLION) | THAT CAN BE TRANSFERRED TO PROFIT AND LOSS |
ACQUISITION | RETAINED EARNINGS |
TOTAL |
| Year 2020 | ||||
| Accumulated at January 1, 2020 | 27.9 | 20.9 | -3,399.3 | -3,350.5 |
| Profit/loss | 0.0 | 0.0 | -46.7 | -46.7 |
| Other comprehensive income: | ||||
| Items that will not be reclassified to profit or loss: | ||||
| Remeasurement of defined benefit plans | 0.0 | 0.0 | -1.1 | -1.1 |
| Currency translation effects | 0.0 | 0.0 | 0.0 | 0.0 |
| Sum items that will not be reclassified to profit or loss | 0.0 | 0.0 | -1.1 | -1.1 |
| Items that may be reclassified to profit or loss: | ||||
| Currency translation differences taken to equity | 0.0 | 0.0 | 0.0 | 0.0 |
| Sum items that may be reclassified to profit or loss | 0.0 | 0.0 | 0.0 | 0.0 |
| Total other comprehensive income for the period | 0.0 | 0.0 | -1.1 | -1.1 |
| Total comprehensive income for the period | 0.0 | 0.0 | -47.7 | -47.7 |
| Accumulated at December 31, 2020 | 27.9 | 20.9 | -3,447.0 | -3,398.2 |
| Year 2021 | ||||
| Accumulated at January 1, 2021 | 27.9 | 20.9 | -3,447.0 | -3,398.2 |
| Profit/loss | 0.0 | 0.0 | -30.1 | -30.1 |
| Other comprehensive income: | ||||
| Items that will not be reclassified to profit or loss: | ||||
| Remeasurement of defined benefit plans | 0.0 | 0.0 | 4.3 | 4.3 |
| Currency translation effects | 0.0 | 0.0 | 0.0 | 0.0 |
| Sum items that will not be reclassified to profit or loss | 0.0 | 0.0 | 4.4 | 4.4 |
| Items that may be reclassified to profit or loss: | ||||
| Currency translation differences taken to equity | 0.0 | 0.0 | 0.0 | 0.0 |
| Sum items that may be reclassified to profit or loss | 0.0 | 0.0 | 0.0 | 0.0 |
| Total other comprehensive income for the period | 0.0 | 0.0 | 4.4 | 4.3 |
| Total comprehensive income for the period | 0.0 | 0.0 | -25.7 | -25.7 |
| Accumulated at December 31, 2021 | 27.9 | 20.9 | -3,472.7 | -3,423.9 |
| (USD IN MILLION) | NOTES | 2021 | 2020 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit/loss before tax 1) | -43.5 | -69.3 | |
| Less: Government grant (forgiveness of C.A.R.E.S. Act Loan) | -8.3 | 0.0 | |
| Income taxes paid/received | 18 | 0.0 | 2.8 |
| Depreciation, amortization and impairment | 6, 7, 8 | 28.5 | 62.7 |
| Equity accounted investments, impairment financial assets, gains/losses on sale | 9 | 0.0 | 18.0 |
| Changes in receivables, prepayments from customers etc. | 12 | -2.4 | -1.7 |
| Changes in inventories | 13 | 7.9 | 6.4 |
| Changes in payables, accrued and prepaid expenses | 20 | 4.6 | -3.2 |
| Changes in VAT and other public taxes and duties | 20 | -0.6 | -16.6 |
| Currency effects not cash flow or not related to operating activities | 25 | -0.7 | -1.1 |
| Other items | 22 | 0.0 | -0.3 |
| Net cash flow from operating activities | -14.6 | -2.2 | |
| Cash flows from investing activities | |||
| Proceeds/Payments finance receivables and restricted cash | 14 | 1.5 | 1.1 |
| Proceeds from sale of property, plant and equipment and intangible assets | 6 | 0.0 | 0.2 |
| Payments for property, plant and equipment and intangible assets | 6 | -8.3 | -1.3 |
| Net cash flow from investing activities | -6.8 | 0.1 | |
| Cash flows from financing activities | |||
| Increase in equity | 15 | 0.0 | 105.9 |
| -2.1 | |||
| Payments of lease liabilities | 7 | -3.9 | |
| Payments of borrowings and up-front/waiver loan fees | 17 | -0.9 | -2.8 |
| Proceeds from borrowings | 17 | 0.0 | 8.3 |
| Net cash flow from financing activities | -3.0 | 107.5 | |
| Effect on cash and cash equivalents of changes in foreign exchange rates | 25 | 0.0 | 0.0 |
| Net increase/decrease in cash and cash equivalents | -24.4 | 105.5 | |
| Cash and cash equivalents at the beginning of the period | 134.9 | 29.4 | |
| Cash and cash equivalents at the end of the period | 110.5 | 134.9 | |
| 1) PROFIT/LOSS BEFORE TAX FROM CONTINUING OPERATIONS INCLUDES | |||
| Interest Paid | -22.3 | -20.5 | |
| Interest Received | 0.1 | 0.3 | |
1 Profit/loss before tax from continuing operations does not include non-cash gain from the settlement of the indemnification agreement of USD 13.4 million (see notes 17 and 30).
| NOTE | PAGE | |
|---|---|---|
| 1 | General information | 38 |
| 2 | Summary of significant accounting policies | 38 |
| 3 | Financial risk management | 43 |
| 4 | Critical accounting judgments and key sources of | |
| estimation uncertainty | 44 | |
| 5 | Segment information | 45 |
| 6 | Fixed assets | 48 |
| 7 | Leases | 50 |
| 8 | Impairments of cash-generating units | 52 |
| 9 | Investments | 55 |
| 10 | Related party transactions | 56 |
| 11 | Derivative financial instruments | 57 |
| 12 | Receivables | 57 |
| 13 | Inventories | 58 |
| 14 | Cash and cash equivalents and restricted bank accounts | 58 |
| 15 | Shareholder information | 59 |
| 16 | Management and Board of Directors' compensation, | |
| loans, shares, bonds | 60 | |
| 17 | Borrowings | 63 |
| 18 | Income tax expense and deferred tax assets and liabilities | 66 |
| 19 | Retirement benefit obligations and expenses | 69 |
| 20 | Trade payables, provisions and other liabilities | 71 |
| 21 | Government grants | 72 |
| 22 | Other operating expenses | 72 |
| 23 | Other income and expenses | 73 |
| 24 | Employee benefits | 73 |
| 25 | Financial income and expenses | 74 |
| 26 | Earnings per share | 74 |
| 27 | Dividends per share | 75 |
| 28 | Research and development | 75 |
| 29 | Commitments, guarantees, pledges | 76 |
| 30 | Other information financial instruments | 77 |
| 31 | Claims, disputes, contingent liabilities and contingent assets | 80 |
| 32 | Share-based compensation | 80 |
| 33 | Events after the reporting period | 81 |
REC Silicon ASA was established in Norway on December 3, 1996. The Company is headquartered in Lysaker, Norway.
Company and its subsidiaries (together, "REC Silicon Group" or "Group") have a presence in the international solar energy industry. Group operations are focused on the production of polysilicon and silicon gases for the solar and electronics industries.
The Company is a public limited liability company incorporated and domiciled in Norway. The address of its registered office is Lysaker Torg 5, 3. etg, Lysaker, Norway.
These consolidated financial statements have been approved for issue by the Board of Directors on March 24, 2022 and are subject to approval by the Annual General Meeting scheduled for May 11, 2022.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
The financial statements are presented in USD, rounded to the nearest tenth of million, unless otherwise stated. As a result of rounding adjustments, the figures in one or more rows or columns included in the financial statements and notes may not add up to the total of that row or column.
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS), relevant interpretations, and the Norwegian Accounting Act. The consolidated financial statements have been prepared under the historical cost convention, as modified by the impairment of certain assets.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. Actual outcomes may differ substantially. It also requires management to exercise judgment in applying the Group's accounting policies. Areas involving a high degree of judgment or complexity, and areas where assumptions and estimates have a significant impact are disclosed in note 4.
Subsidiaries are entities controlled by the Group. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date control is obtained until the date that control ceases.
All subsidiaries are owned 100 percent and there are no noncontrolling interests.
Intercompany transactions, balances, and unrealized gains on transactions between group companies are eliminated.
A joint venture is an arrangement where two or more parties have joint control. Joint control exists only when decisions require the unanimous consent of the parties sharing control. Investments in joint ventures are accounted for by the equity method of accounting.
Associates are entities over which the Group has significant influence but not control. Investments in associates are accounted for by the equity method of accounting.
REC Silicon produces silicon gas and polysilicon for the semiconductor industries at its manufacturing facility in Butte, Montana. The Company also produces polysilicon for the photovoltaic industry at its manufacturing facility in Moses Lake, Washington. The Company's organization structure, management team, operating strategy, and performance measurement reporting support the determination that these businesses represent separate distinguishable operating segments. Accordingly, there are two operating segments: Solar Materials (Moses Lake, Washington) and Semiconductor Materials (Butte, Montana). The operating segments include revenues less cost of manufacturing excluding depreciation for products sold. Other includes general, administrative, and selling expenses which support both operating segments in addition to administrative costs for the Company's headquarters in Lysaker, Norway. Eliminations include the reversal of the impact of transactions between group members and affiliates. The results of the operating segments plus Other and Eliminations taken together reconcile to total EBITDA for the Group.
Group Management is headed by the Chief Executive Officer (CEO), and the CEO makes decisions regarding the allocation of resources and performance assessment for all segments. Accordingly, the CEO is regarded as the Chief Operating Decision Maker (CODM).
An operating segment is a distinguishable component of the Group that is engaged in providing products that are subject to similar risks and returns and corresponds to management reporting.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The Group's reporting currency continues to be USD. Accordingly, these consolidated financial statements are presented in USD.
Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates on the reporting date. Foreign exchange gains and losses resulting from the settlement, or the translation of monetary assets and liabilities are recognized in the statement of income, except when deferred in equity as qualifying hedges or as a part of a net investment.
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
On consolidation, exchange differences arising from the translation of the net investment in subsidiaries, including monetary items that are regarded as a part of the net investment, are included in OCI. When a subsidiary is disposed of, exchange differences are recognized in the statement of income as part of the gain or loss on sale. At December 31, 2021 and 2020, an intercompany loan to REC Silicon, Inc. of USD 132 million was regarded as a part of the net investment in REC Silicon Inc.
Assets and liabilities are classified as current when they are expected to be realized or settled within 12 months after the reporting date.
Property, plant and equipment are stated at cost less accumulated depreciation and un-reversed impairment losses. Cost includes expenditures that are directly attributable to the acquisition, construction, or installation of the item. Borrowing costs incurred
for the construction of qualifying assets are capitalized during the period required to complete and prepare the asset for its intended use. Costs are included in an asset's carrying amount when it is probable that future economic benefits associated with the item will flow to the Group and costs can be measured reliably.
Depreciation is calculated using the straight-line method based on the costs of the assets less any residual value over their estimated useful lives.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets. Goodwill is carried at cost less accumulated impairment losses. Goodwill related to equity accounted investments is included in the carrying value of investments. At December 31, 2021 and 2020 the Group had no goodwill.
Other intangible assets that have finite useful lives are carried at cost less accumulated amortization and un-reversed impairment. Amortization is calculated using the straight-line method on the costs of assets over their estimated useful lives from the date they are available for use. The Group has no intangible assets with indefinite useful lives.
Research expenditures are recognized in expense as incurred. Development expenditures (relating to the design, construction and testing of a chosen alternative for new or improved materials, devices, products, processes, or systems) are capitalized when it is probable that the project will be successful considering its commercial and technological feasibility. Costs expensed in prior reporting periods are not later capitalized. Other development expenditures are recognized in expense as incurred.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the statement of income for the amount by which the asset's carrying amount exceeds its estimated recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which cash inflows that are largely independent from the cash inflows associated with other assets can be identified (cash-generating units). Generally, any impairment is allocated to goodwill first, then proportionately to other non-current assets within a cash-generating unit. Assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment includes losses associated with assets determined to have no future economic benefits and assets that are replaced prior to the end of their useful lives.
Financial assets are classified and subsequently measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income based on both the use of the assets within the entity's business model and the nature of the cash flows. A financial asset is derecognized when expired or when the entity no longer has control of the cash flows related to the assets. Any rights or obligations retained in any transfer of assets are booked separately as assets or liabilities. Financial liabilities are classified and subsequently measured at amortized cost, except for financial liabilities (including derivatives) which are classified at fair value.
Financial assets are assessed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets are impaired includes default or delinquency by a debtor; indications that a debtor or issuer will enter bankruptcy; and adverse changes in the payment status of borrowers or issuers.
The Group considers evidence of impairment for financial assets measured at amortized cost at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through profit or loss.
Derivatives are recognized at fair value on the date a derivative contract is entered into and are subsequently measured for changes in fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative unless the Group has the intention and ability to settle the contracts net. The method of recognizing resulting gains or losses depends on whether the derivative is designated and qualifies as a hedging instrument and the nature of the item being hedged. Derivatives are
categorized as held for trading unless they are designated and qualify as hedging instruments. See note 11.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost, less impairment. A provision for the impairment of trade receivables is recognized based upon lifetime expected credit losses (ECLs). The Group calculates ECLs based upon the Group's historic credit loss experience adjusted for forward-looking factors specific to the debtors and the economic environment. In addition, provisions are recorded for accounts which are greater than 60 days past due unless there is a clear indication that payment will be received. Balances are written off when collection efforts have been exhausted and the probability of recovery is unlikely.
Cash and cash equivalents include cash on hand, demand deposits at banks, and money market funds with terms less than three months.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of any income tax, from the proceeds.
Borrowings are recognized initially at fair value. Borrowings that are not maintained at fair value through profit or loss are recognized net of transaction costs and subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of income over the period the borrowings are outstanding using the effective interest method. Commitment fees for bank credit facilities are recognized as part of interest expenses as incurred.
A financial liability is removed from the statement of financial position when the obligation is discharged, cancelled, or expires. Substantial modifications to the terms of existing financial liabilities or an exchange of debt instruments with an existing lender at substantially different terms are treated as extinguishments of the original liability. The difference between the carrying amount of a financial liability and the consideration paid to extinguish the liability is recognized in profit or loss.
Inventories are stated at the lower of cost or net realizable value (NRV).
Purchased inventories are stated at average cost less estimated obsolescence. Reserves for obsolescence include the write down of items no longer required (held for disposal) and the estimated decline in NRV caused by slow moving items.
The cost of finished goods and work in progress inventories are determined on a first in, first out basis and consists of raw materials, direct labor, other direct costs, and related indirect overheads. Costs associated with abnormal waste or unused normal operating capacity are not included in inventories. NRV is the estimated sales price less incremental costs to complete and sell the item. Net adjustments to reduce inventory to the lower of cost or NRV are recognized in inventory changes in the statement of income.
Income tax expense (benefit) includes current and deferred tax. Income tax expense (benefit) is recognized in profit or loss except to the extent it relates to items recognized directly in equity or in other comprehensive income.
Current tax is the estimated tax payable or receivable on the taxable income or loss for the year, and any adjustments to tax payable for previous years. Deferred tax includes the effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax also includes the carry forward of unused net operating losses and credits.
Current and deferred tax amounts are determined using rates and laws that have been enacted or substantially enacted at the reporting date or are expected to apply when temporary differences reverse. Net deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which deferred amounts can be utilized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and the Group intends to settle its current tax assets and liabilities on a net basis.
Utilization of net operating losses and tax credit carry forwards are subject to certain limitations under Section 382 and 383 of the Internal Revenue Code of the United States in the event of a change in the Company's ownership.
Provisions for product warranties, onerous contracts, asset retirement obligations, restructuring costs, termination benefits, loss on financial guarantees, environmental restoration, and legal claims are recognized when: The Group has a present or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are discounted only when the effect is material and the distribution in time can be reliably estimated.
The Group grants synthetic share options to certain employees. The cost of these share-based options (settled in cash) is determined by the fair value of the option at the date when the grant is made using the Black Scholes option pricing model (see note 32).
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets.
Re-measurements arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity via other comprehensive income in the period in which they arise.
Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs.
Obligations for contributions to defined contribution pension plans are recognized as an expense during the period incurred.
REC Silicon's primary performance obligation is related to sale of goods in which the performance obligations are the delivery of an agreed volume of products within an agreed specification. REC Silicon has both short term and long-term contracts. Spot market sales, normally one month, cover delivery of an agreed volume at market price at the date the order is placed. The short-term contracts cover a period of a few months and up to one year, where the prices normally are fixed within a volume range. REC Silicon also has some long-term contracts that cover a period longer than one year. In these contracts the prices are normally negotiated on an annual basis.
Revenue is recognized when control of the goods is transferred to the customer at an amount that reflects the consideration to which REC Silicon expects to be entitled in exchange for those goods or services. Control is transferred to the buyer, according to the agreed delivery term for each sale. Delivery terms are based on Incoterms specified within sales contracts. Generally, the main terms are "Ex Works" and "FCA".
The Group recognizes a provision for discounts and expected returns when a discount provisions or a right of return is specified in purchase contracts. The Group recognizes revenue from the sale of goods measured at the fair value of consideration received or receivable, which includes a provision of allowances for discounts and expected returns.
Goods are normally sold with standard warranties that the goods comply with the agreed-upon specifications. These standard warranties are accounted for using IAS 37 Provisions, Contingent Liabilities and Contingent Assets. REC Silicon does not have any other significant obligations for returns or refunds.
At the inception of a contract, the Group assesses whether a contract is, or contains a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of the costs to dismantle and remove the underlying assets or to restore the underlying asset or the site on which it is located, less any lease incentives received.
Right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, right-of-use assets are periodically adjusted for impairment losses, if any, and for certain remeasurements of the associated lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments are amortized to interest expense and to reduce the associated lease liability based upon the present value calculation used at inception to determine the lease liability.
Leases of 'low-value' assets and short-term leases (lease terms of 12 months or less) are recognized as expense in profit or loss when incurred.
Government grants are recognized at their fair values when there is reasonable assurance that the grants will be received and that the Group will comply with attached conditions. Government grants related to assets are presented in the statement of financial position as a reduction to the carrying amount of the assets and reduce depreciation in the statement of income. Government grants relating to income are listed separately under other income.
Government grant assets are recognized for the unsettled portions of grants and are discounted if the effect of discounting is significant. Significant changes to estimates of timing of utilization or discount rates are recognized as a change in the grant asset and offset to production assets or expenses based on the classification at the inception of the grant (see note 21).
The Group presents the statement of cash flows using the indirect method. Cash inflows and outflows are shown separately for investing and financing activities, while operating activities include both cash and non-cash line items. Interest received and paid are reported as a part of operating activities, except borrowing costs capitalized as part of the construction of a non-current asset that are included in investing activities, and payment of up-front and loan fees that are reported as part of financing activities.
Operating activities include all cash flow effects from derivatives. Currency gains and losses are recognized in the statement of income. Amounts related to borrowing (financing activities), noncurrent financial assets and investments (investing activities) and unrealized gains or losses on cash and cash equivalents held at the end of the periods are reclassified in a separate line item under operating activities.
Financing activities include the repayment of prepayments received from customers on which interest is calculated.
The consolidated statement of cash flows presents changes in cash balances with respect to total operations (continuing and discontinued) and therefore does not reflect the performance of continuing operations during prior periods or the performance that is likely to be achieved in future periods.
The Group, in practice, adopts new and amended standards and interpretations, issued by the IASB and approved by the EU, that are relevant to its operations as effective. A number of new standards were effective beginning January 1, 2021 but they did not have a material effect on the Group's financial statement.
The Group's activities expose it to a variety of financial risks, including currency risk, interest-rate risk, liquidity risk, credit risk, refinancing risk and others.
The goals for the Group finance policy and the treasury operations are primarily to minimize the risk of financial distress, secure longterm funding, manage currency risk of expected future net cash flows, and manage interest rate risk. The Company's finance policy sets the framework and limits for hedging activities in the Group. It defines risk management objectives, responsibilities, and operational requirements.
The disclosures that are required regarding financial risks below focus on the risks that arise from financial instruments and how they have been managed. Derivative financial instruments may be used to reduce risks from commercial transactions; the existence of derivative financial instruments exposes the Company to additional risks.
The Company operates internationally and is exposed to currency risk. At December 31, 2021, the Group's working capital is almost exclusively in USD, equity is in NOK, and debt is in NOK and USD. Currency risk arises from transactions in currencies other than the Group's reporting currency and borrowings denominated in NOK. Currency risk relates primarily to the sufficiency of net positive cash flows in USD to meet liabilities denominated in NOK.
Net cash flow is defined as the consolidated external cash flows of the Group. The Group's policy provides the ability to hedge external net cash flows with a maximum time horizon of 24 months. The purpose is to reduce the currency risk of expected future net cash flows. The Company manages currency risk on an overall level.
At December 31, 2021 and 2020, the Group did not hold any derivative financial instruments related to mitigating currency risks.
Credit risk is the risk of loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligation and is primarily related to trade receivables and guarantees provided for discontinued operations. The Group maintains policies to ensure that credit is extended to customers with appropriate liquidity and credit histories in combination with requiring guarantees when appropriate.
Liquidity risk is measured by subtracting the Group's liabilities from cash considering historic and anticipated operating results. Liquidity risk management requires maintaining sufficient available cash or access to capital markets to compensate for anticipated volatility in operating cash flows or to fund additional investments.
Liquidity risk is impacted by changes in market conditions, potential claims against the Company, and uncertainty associated with critical judgements used to arrive at accounting estimates. In addition, the Company's access to capital markets may be impacted by overall market conditions (notes 4, 17, and 30).
The Company's liquidity has been adversely impacted by contingent liabilities, market conditions, and the shut-down the FBR facility in Moses Lake, Washington. During 2021, affected parties entered into an agreement to settle claims related contingent liabilities associated with the indemnification loan (see note 17). During 2020, contingent liabilities associated with an examination by the Norwegian Tax Administration (see note 18) and a dispute with Grant County, Washington regarding property taxes (see notes 17 and 23) were resolved.
Accordingly, the Board of Directors confirms that the Financial Statements have been prepared under the assumption that the Company is a going concern, and that this assumption is appropriate at the date of the accounts.
Changes in market interest rates affect the fair value of assets and liabilities or the variability in cash payments. The Group is exposed to interest rate risk through funding and cash management activities, primarily in REC Silicon ASA. Cash in bank accounts and liabilities have primarily carried variable interest rates. The Company has borrowings through bonds and indemnification loans.
Interest income and interest expense in the statement of income, as well as interest receipts and payments, are influenced by interest rate changes for financial instruments that carry variable interest rates. See note 30 for interest rate sensitivity.
When the Group is exposed to changes in the total costs from specific input factors it may hedge the associated risk. As of yearend 2021 and 2020, no hedges were in place, except certain forward energy purchase contracts.
Fair value estimation is discussed in notes 9 and 30.
In determining the appropriate capital structure for the Group, various factors have been considered. These include risks associated with the Group's business profile and the fact that the polysilicon production has high capital intensity.
The Group's goal is to maintain sufficient capital to maintain current operating cash flow requirements and to meet debt service obligations. Taking into account market volatility and risk related to future cash flows, the Group aims to maintain a capital structure with a high ratio of equity funding.
Management's judgments in applying the Group's accounting policies which have the most significant effect on the financial statements are discussed below and in the relevant notes.
The Group's presentation currency is USD. The functional currencies of REC Silicon AS and REC Solar AS are NOK. The functional currency of all other group companies is USD. The activities of the Group are primarily in the subsidiaries in the USA. Functional currency affects the reporting of currency gains and losses and exchange differences as well as hedging strategies and effects. Facts or circumstances may change in the future.
The selection of cash generating units for impairment testing is a critical and difficult judgement. For impairment testing REC Silicon consisted of two cash generating units.
The Group's operations are subject to environmental laws and regulations. These laws and regulations and their interpretations are subject to change. Changes may require investment and/or increased costs to meet more stringent standards or to take remedial actions related to past activities. The Company has reported a provision for asset retirement obligations (AROs) associated with the eventual cleanup and restoration of the Company's manufacturing sites in the United States (note 20).
The preparation of financial statements in accordance with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts included in or affecting the Group's financial statements and related disclosures must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared.
Changes in facts and in management's evaluations and assumptions may give rise to further impairment losses, or reversals. The estimated recoverable amounts of the Group's assets are sensitive to small changes to key assumptions (notes 8 and 9).
Financial assets are also periodically reviewed for impairment. Provisions for losses on trade receivables have been made using a provision matrix based on the Group's historical credit loss experience adjusted for forward-looking factors specific to the debtors and the economic environment. Actual losses may turn out significantly different from the evaluations made based on the knowledge and assumptions at the time of approving the accounts.
Changes in facts and in management's evaluations and assumptions may give rise to changes in provisions for asset retirement obligations (AROs). Provisions may change due to changes in amounts or timing of estimated expenditures to restore production sites or changes in governmental regulations governing restoration requirements. In addition, estimates of provisions are sensitive to changes in discount rates used to calculate provisions for AROs reported by the Group.
Changes in facts and in management's evaluations and assumptions may give rise to changes in fair value estimates of the Company's investment in the Yulin JV. The estimate of fair value may change due to changes in amounts or timing of cashflows generated by the Yulin JV. In addition, estimates of fair value are sensitive to changes in the discount rate used to arrive at estimates of fair value.
| SEMICONDUCTOR MATERIALS | SOLAR MATERIALS | OTHER | REC SILICON | |||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | % | % | % | % | ||||
| Customer 1 | 40.6 | 28.4% | 40.6 | 28.4% | ||||
| Customer 2 | 24.7 | 17.3% | 24.7 | 17.3% | ||||
| Customer 3 | 14.4 | 10.1% | 14.4 | 10.1% | ||||
| Customer 4 | 0.1 | 0.1% | 0.2 | 100% | 0.3 | 0.2% | ||
| Customer 5 | 0.1 | 48% | 0.1 | 0.0% | ||||
| Customer 6 | 0.0 | 41% | 0.0 | 0.0% |
| SEMICONDUCTOR MATERIALS | SOLAR MATERIALS | OTHER | REC SILICON | ||||
|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | % | % | % | % | |||
| Customer 1 | 41.5 | 34.1% | 41.5 | 34.0% | |||
| Customer 2 | 21.9 | 18.1% | 21.9 | 18.0% | |||
| Customer 3 | 0.2 | 31.9% | 0.2 | 0.1% | |||
| Customer 4 | 0.2 | 30.7% | 0.2 | 0.1% | |||
| Customer 5 | 0.1 | 17.9% | 0.1 | 0.1% |
| SEMICONDUCTOR MATERIALS | SOLAR MATERIALS | OTHER | REC SILICON | |||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | % | % | % | % | ||||
| China | 39.7 | 27.8% | 0.1 | 48.2% | 0.0 | 0.0% | 39.8 | 27.8% |
| Korea | 20.9 | 14.6% | 0.0 | 0.0% | 0.0 | 0.0% | 20.9 | 14.6% |
| Singapore | 20.3 | 14.2% | 0.0 | 0.0% | 0.0 | 0.0% | 20.3 | 14.2% |
| Taiwan | 20.1 | 14.1% | 0.0 | 0.0% | 0.0 | 0.0% | 20.1 | 14.0% |
| USA | 17.8 | 12.4% | 0.0 | 10.4% | 0.2 | 100.0% | 18.0 | 12.6% |
| Japan | 9.7 | 6.8% | 0.0 | 0.0% | 0.0 | 0.0% | 9.7 | 6.8% |
| Denmark | 9.5 | 6.6% | 0.0 | 0.0% | 0.0 | 0.0% | 9.5 | 6.6% |
| Other | 1.8 | 1.3% | 0.0 | 41.3% | 0.0 | 0.0% | 1.8 | 1.3% |
| Czech Republic | 1.3 | 0.9% | 0.0 | 0.0% | 0.0 | 0.0% | 1.3 | 0.9% |
| Belgium | 1.1 | 0.8% | 0.0 | 0.0% | 0.0 | 0.0% | 1.1 | 0.8% |
| France | 0.6 | 0.4% | 0.0 | 0.0% | 0.0 | 0.0% | 0.6 | 0.4% |
| Canada | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% |
| Germany | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% |
| Hong Kong | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% |
| Switzerland | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% | 0.0 | 0.0% |
| Total revenues | 142.8 | 100.0% | 0.1 | 100.0% | 0.2 | 100.0% | 143.2 | 100.0% |
Customer location is based on the sales ship-to address. Customers may distribute the products to other countries.
| SEMICONDUCTOR MATERIALS | SOLAR MATERIALS | OTHER | REC SILICON | |||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | % | % | % | % | ||||
| Silane gas | 88.0 | 61.6% | 0.0 | 2.8% | 0.0 | 0.0% | 88.0 | 61.5% |
| Polysilicon | 54.8 | 38.4% | 0.1 | 97.2% | 0.0 | 0.0% | 54.9 | 38.4% |
| Other | 0.0 | 0.0% | 0.0 | 0.0% | 0.2 | 100.0% | 0.2 | 0.2% |
| Total revenues | 142.8 | 100.0% | 0.1 | 100.0% | 0.2 | 100.0% | 143.2 | 100.0% |
| SEMICONDUCTOR MATERIALS | SOLAR MATERIALS | OTHER | REC SILICON | |||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | % | % | % | % | ||||
| Silane gas | 83.0 | 68.4% | 0.0 | 0.0% | 0.0 | 0.0% | 83.0 | 68.0% |
| Polysilicon | 38.3 | 31.6% | 0.5 | 91.4% | 0.0 | 0.0% | 38.8 | 31.8% |
| Other | 0.0 | 0.0% | 0.0 | 8.6% | 0.1 | 100.0% | 0.2 | 0.2% |
| Total revenues | 121.4 | 100.0% | 0.5 | 100.0% | 0.1 | 100.0% | 122.1 | 100.0% |
| (USD IN MILLION) | SEMICONDUCTOR MATERIALS |
SOLAR MATERIALS |
OTHER & ELIMINATIONS |
TOTAL |
|---|---|---|---|---|
| Revenues | 142.8 | 0.1 | 0.2 | 143.2 |
| Cost of materials | -16.9 | -0.2 | 0.0 | -17.1 |
| Change in inventories | -10.8 | 1.9 | 0.0 | -8.9 |
| Employee benefit expense | -24.2 | -6.8 | -10.7 | -41.7 |
| Other operating expenses | -62.1 | -4.6 | -9.0 | -75.6 |
| Other income and expenses | 4.5 | 3.9 | -0.4 | 7.9 |
| Total current costs | -109.4 | -5.8 | -20.2 | -135.4 |
| 0.0 | 0.0 | 0.0 | 0.0 | |
| EBITDA contribution | 33.4 | -5.7 | -20.0 | 7.7 |
| Depreciation of fixed assets | -12.1 | -12.4 | -0.6 | -25.2 |
| Amortization | 0.0 | 0.0 | 0.0 | 0.0 |
| Depreciation of leased assets | -2.4 | -0.6 | 0.0 | -3.0 |
| Impairment | 0.0 | -0.3 | 0.0 | -0.3 |
| Total depreciation, amortization, and impairment | -14.6 | -13.3 | -0.6 | -28.5 |
| EBIT contribution | 18.9 | -19.0 | -20.6 | -20.8 |
| (USD IN MILLION) | SEMICONDUCTOR MATERIALS |
SOLAR MATERIALS |
OTHER & ELIMINATIONS |
TOTAL |
|---|---|---|---|---|
| Revenues | 121.4 | 0.5 | 0.1 | 122.1 |
| Cost of materials | -15.7 | -0.3 | 0.0 | -16.0 |
| Change in inventories | -6.1 | 1.3 | 0.0 | -4.7 |
| Employee benefit expense | -20.8 | -6.6 | -12.0 | -39.4 |
| Other operating expenses | -43.3 | -4.6 | -7.1 | -55.1 |
| Other income and expenses | 0.8 | 16.3 | -0.2 | 16.9 |
| Total current costs | -85.1 | 6.2 | -19.4 | -98.2 |
| EBITDA contribution | 36.3 | 6.7 | -19.3 | 23.8 |
| Depreciation of fixed assets | -20.7 | -15.2 | -0.8 | -36.7 |
| Amortization | 0.0 | -0.1 | 0.0 | -0.1 |
| Depreciation of leased assets | -2.4 | -0.5 | 0.0 | -2.9 |
| Impairment | 0.0 | -23.0 | 0.0 | -23.0 |
| Total depreciation, amortization, and impairment | -23.2 | -38.8 | -0.8 | -62.7 |
| EBIT contribution | 13.2 | -32.0 | -20.0 | -38.9 |
Substantially all of the Group's non-current assets are located in the United States.
The following table disaggregates revenues by contract type and reconciles to total revenues.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Non-Contract Revenue | 92.7 | 73.4 |
| Structured (Regional/Volume pricing) | 45.1 | 44.7 |
| Tiered (Volume pricing) | 5.3 | 3.9 |
| Contract Revenue | 50.5 | 48.6 |
| Total | 143.2 | 122.1 |
| (USD IN MILLION) | LAND AND BUILDINGS |
MACHINERY AND EQUIPMENT |
OTHER TANGIBLE FIXED ASSETS |
ASSETS UNDER CONSTRUCTION |
TOTAL PROPERTY, PLANT AND EQUIPMENT |
|---|---|---|---|---|---|
| Carrying value at January 1, 2021 | 35.6 | 50.5 | 3.1 | 6.1 | 95.4 |
| Net additions 1) | 0.0 | 6.5 | 0.0 | 6.3 | 12.8 |
| Disposals | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Depreciation and amortization | -2.3 | -22.4 | -0.5 | 0.0 | -25.2 |
| Carrying value at December 31, 2021 | 33.3 | 34.7 | 2.6 | 12.5 | 83.1 |
| At December 31, 2021 | |||||
| Historical cost | 140.9 | 2,156.6 | 76.5 | 69.0 | 2,443.0 |
| Accumulated depreciation/amortization/impairment | -107.5 | -2,121.9 | -73.8 | -56.6 | -2,359.9 |
| Carrying value at December 31, 2021 | 33.3 | 34.7 | 2.6 | 12.5 | 83.1 |
| Carrying value at January 1, 2020 | 39.1 | 73.1 | 4.2 | 3.9 | 120.2 |
| Net additions 1) | 0.0 | 9.5 | 0.1 | 2.3 | 11.9 |
| Disposals | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Depreciation and amortization | -2.5 | -33.3 | -0.9 | 0.0 | -36.7 |
| Impairment | -0.9 | 1.1 | -0.1 | 0.0 | 0.1 |
| Carrying value at December 31, 2020 | 35.6 | 50.5 | 3.1 | 6.1 | 95.4 |
| At December 31, 2020 | |||||
| Historical cost | 140.9 | 2,150.3 | 79.1 | 62.7 | 2,432.9 |
| Accumulated depreciation/amortization/impairment | -105.2 | -2,099.7 | -76.0 | -56.6 | -2,337.5 |
| Carrying value at December 31, 2020 | 35.6 | 50.5 | 3.1 | 6.1 | 95.4 |
At year-end 2021, estimated useful lives by asset class were as follows:
Assets under construction are not yet ready for their intended use and depreciation has not started.
Reviews of estimated useful lives of property, plant, and equipment for 2021 and 2020 resulted in only minor changes.
| ASSETS UNDER | TOTAL INTANGIBLE |
||
|---|---|---|---|
| (USD IN MILLION) | DEVELOPMENT | OTHER | ASSETS |
| Carrying value at January 1, 2021 | 0.5 | 0.4 | 1.0 |
| Amortization | 0.0 | 0.0 | 0.0 |
| Carrying value at December 31, 2021 | 0.5 | 0.4 | 0.9 |
| At December 31, 2021 | |||
| Historical cost | 0.8 | 67.9 | 68.7 |
| Accumulated amortization/impairment | -0.3 | -67.5 | -67.8 |
| Carrying value at December 31, 2021 | 0.5 | 0.4 | 0.9 |
| Carrying value at January 1, 2020 | 0.5 | 0.6 | 1.1 |
| Disposals | 0.0 | -0.1 | -0.1 |
| Amortization | 0.0 | -0.1 | -0.1 |
| Carrying value at December 31, 2020 | 0.5 | 0.4 | 1.0 |
| At December 31, 2020 | |||
| Historical cost | 0.8 | 67.9 | 68.7 |
| Accumulated amortization/impairment | -0.3 | -67.4 | -67.7 |
| Carrying value at December 31, 2020 | 0.5 | 0.4 | 1.0 |
Intangible assets above have estimated useful lives, over which the assets are amortized on a straight-line basis. Intangible assets under development are not ready for their intended use, and consequently amortization has not started.
Intangible assets are primarily related FBR technology in REC Silicon (4-11 years).
Reviews of estimated useful lives of intangible assets for 2021 and 2020 resulted in only minor changes.
| (USD IN MILLIONS) | LAND AND BUILDINGS |
MACHINERY | GAS PLANTS | COMPUTER HW/SW |
MOTOR VEHICLES | OFFICE EQUIPMENT |
TOTAL |
|---|---|---|---|---|---|---|---|
| Balance at January 1, 2021 | 0.0 | 1.7 | 33.9 | 0.0 | 0.1 | 0.1 | 35.7 |
| Depreciation | 0.0 | -0.2 | -2.7 | 0.0 | 0.0 | 0.0 | -3.0 |
| Additions | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 |
| Adjustments | 0.0 | -0.3 | 0.7 | 0.0 | 0.0 | 0.0 | 0.4 |
| Balance at December 31, 2021 | 0.1 | 1.2 | 31.9 | 0.0 | 0.0 | 0.0 | 33.2 |
| Balance at January 1, 2020 | 0.0 | 0.1 | 33.7 | 0.0 | 0.0 | 0.0 | 33.8 |
| Depreciation | 0.0 | -0.1 | -2.8 | 0.0 | 0.0 | 0.0 | -2.9 |
| Additions | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 | 0.2 |
| Impairment 1) | 0.0 | 0.0 | -23.0 | 0.0 | 0.0 | 0.0 | -23.0 |
| Adjustments | 0.0 | 1.6 | 26.0 | 0.0 | 0.0 | 0.0 | 27.7 |
| Balance at December 31, 2020 | 0.0 | 1.7 | 33.9 | 0.0 | 0.1 | 0.1 | 35.7 |
1) See note 8 for details of impairment.
Adjustments during 2021 consist of USD 0.7 million related to contractual increases in lease payments tied to economic indices and USD 0.3 million related to decreases in leased asset retirement obligation (ARO) estimates.
During 2020, adjustments include USD 25.5 million associated with an 8-year extension of a long-term lease on the existing plant gas facility in Moses Lake, WA, USD 1.6 million associated with the remeasurement of asset retirement obligations associated with leases, and USD 0.8 million related to contractual increases in lease payments tied to economic indices.
Lease Liabilities
| (USD IN MILLIONS) | 2021 | 2020 |
|---|---|---|
| Maturity analysis - contractual undiscounted cash flows | ||
| Less than 1 year | 11.1 | 10.8 |
| 1 - 2 years | 11.0 | 10.8 |
| 2 - 3 year | 14.4 | 10.7 |
| 3 - 4 years | 14.4 | 14.3 |
| 4 - 5 years | 14.4 | 14.3 |
| More than 5 years | 58.0 | 71.9 |
| Total undiscounted lease liabilities at December 31 | 123.3 | 132.9 |
| Lease liabilities included in the statement of financial position at December 31 | 70.5 | 71.8 |
| Current | 2.6 | 2.1 |
| Non-current | 67.9 | 69.7 |
The Company includes rights to extend or terminate leases in the lease term when the Company intends to exercise a right to extend or terminate a lease. The Company is not a party to any lease that includes material rights to extend or terminate the term of a lease.
The weighted average incremental borrowing rate applied to lease liabilities is 13.2 percent at December 31, 2021 and December 31, 2020.
| (USD IN MILLIONS) | 2021 | 2020 |
|---|---|---|
| Interest on lease liabilities | 8.8 | 7.6 |
| Depreciation of right-of-use assets | 3.0 | 2.9 |
| Gain(-)/loss(+) due to terminations, purchases, impairments, and other changes | 0.3 | 23.0 |
| Expenses relating to short-term leases | 0.2 | 0.2 |
| Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets | 0.0 | 0.0 |
Right-of-use assets associated with contracts with a term less than 12 months at the time of initiation are expensed in accordance with the low-value assets and short-term lease exemptions available upon implementation of IFRS 16.
In 2021, the Group made lease payments totaling USD 10.9 million, comprised of USD 2.1 million of lease liability payments and USD 8.8 million imputed interest. See note 25 below.
In addition, payments of USD 0.2 million related to leases for low-value-assets and short-term durations which are exempt under IFRS 16 have been expensed in 2021. See note 22 below.
REC Silicon routinely monitors assets for indications that the carrying values of assets are no longer recoverable. If impairment indicators exist, impairment tests will be carried out to determine whether the carrying value of affected assets can be justified. If estimates conclude that asset values are no longer recoverable, the assets are written down to the recoverable amount which is the greater of fair value less cost to sell and value in use (discounted cash flows).
REC Silicon consisted of two cash generating units at December 31, 2021 and 2020.
Management has performed an evaluation of the Company's operations and determined that the Group consisted of two cash generating units (CGUs) based upon the Company's operations and management structures. This determination included consideration for segment reporting which includes segments for Solar Materials and Semiconductor Materials which were determined by management to represent the smallest units for which cash flows can be reasonably determined. Net Costs associated with Other have been allocated to the individual CGUs based upon estimated activity, volume, and revenue factors.
During 2021, decreases in the market capitalization of the Company, recurring net operating losses, and changes in the timing of the anticipated restart of FBR production at the Moses Lake facility were determined to be indicators of potential changes in impairment for the Solar Materials Segment. Impairment testing was performed at December 31, 2021 on the Solar Materials CGU and resulted in estimated values in use that approximated the carrying value of the Solar Materials CGU. Consequently, no additional impairment or reversal of impairment was recognized in 2021.
Impairment review conducted at December 31, 2021 included evaluating the estimated impacts of developing a non-Chinese Solar PV value chain and to partner with G14 to develop a silicon anode battery materials production facility. An increase in the Solar CGU's fair value due to these agreements is difficult to estimate because the development of a functional non-Chinese Solar PV value chain and/or the realization of demand for the Group's products for use in lithium-silicon batteries are subject to substantial uncertainty. Enhancement of the FBR plants current capabilities would be required to enable the production of polysilicon for a supply chain outside of China or to deliver gases for use in lithium-silicon batteries. REC is working towards maintaining the ability to restart production of FBR in 2023. Forecasts used to arrive at estimated future cash flows include the assumption that market conditions will support the restart of production in the Moses Lake FBR facility at the beginning of 2024.
During 2020, increases in the market capitalization of the Company, recurring net operating losses, and changes in the timing of the anticipated restart of FBR production at the Moses Lake facility were determined to be indicators of potential changes in impairment for the Solar Materials Segment. Accordingly, impairment testing was performed at March 31, 2020, June 30, 2020, and December 31, 2020 on the Solar Materials CGU. The net carrying value of the Solar Materials CGU exceeded the resulting value in use calculated at June 30, 2020. Therefore, additional impairments of USD 23.0 million were recognized in the statement of income at June 30, 2020. Because the increase in the carrying value of the Solar Materials CGU is a result of the modification of a long-term lease, impairments have been recorded against right of use assets (see note 7 leases above). Impairment testing performed at March 31, 2020 and December 31, 2020 on the Solar Materials CGU resulted in estimated values in use that approximated the carrying value of the Solar Materials CGU. Consequently, no additional impairment or reversal of impairment was recognized at March 31, 2020 or December 31, 2020.
Impairments charges are included in the line item "impairment" in the statement of income.
Recoverable amounts for each cash-generating unit subject to impairment testing are based on value in use. Value in use has been estimated using discounted cash flows over a 5-year period with the last year used as a basis for estimating terminal value.
Future cash flows are estimated on the basis of the budget for the next year and the subsequent four forecast years. A terminal value is calculated from the estimated cash flows generated in the last forecast year. A growth rate of zero has been used during the terminal period for both years presented. EBITDA less capital expenditures and changes in working capital have been used to estimate future cash flows.
Assets under construction for which investment has been committed are included with estimated expenditures to complete and estimated cash flows from their operations.
The carrying amounts of cash-generating units include tangible fixed assets, intangible assets, and net working capital only.
The discount rate applied is based on the Company's cost of capital which has been estimated using the weighted average of the required rates of return for the Company's equity and debt (WACC). The required rate of return for the Company's equity is estimated using the capital assets pricing model (CAPM). The required rate of return on debt is estimated on the basis of a risk-free rate of return plus a credit risk premium derived from analysis of the debt costs and
loading of public companies similar to REC Silicon. The discount rate is estimated on an after-tax basis and adjusted to estimate the equivalent before tax discount rate using the Company's estimated
before and after-tax cash flows and evaluated for reasonableness. The discount rates used at December 31, 2021 and 2020 are reflected in the table below:
| 2021 | 2020 | |||
|---|---|---|---|---|
| POST-TAX | PRE-TAX | POST-TAX | PRE-TAX | |
| Solar Materials CGU | 11.8 | 14.9 | 13.1 | 15.8 |
Key assumptions include future revenues (sales prices and sales volume), cost of major inputs, conversion costs and efficiency (production volume), and maintenance capital expenditures.
Price trends are difficult to predict in the current market environment and external views of anticipated market conditions differ widely. When possible, REC Silicon has used third party analyses to estimate product prices. When third party estimates are not available or vary widely, REC Silicon uses internal estimates based on experience and market intelligence to estimate market conditions and prices. Estimates of long-term average solar grade polysilicon prices used in this analysis are at levels which management believes are sufficient to attract the capital necessary for new cost-effective polysilicon capacity to support supply chain expansion consistent with analysts' estimates of growth in end use demand for PV installations.
REC is working towards maintaining the ability to restart production of FBR in 2023, however estimates of future cash flows include the assumption that market conditions will support a restart of the Moses Lake FBR facility at the beginning of 2024. If access to solar grade polysilicon markets is not restored and idled
capacity is not restarted, additional impairment charges would be required. Current market conditions result in negative cashflows until FBR production is restarted. As a result, the estimated timing of the increase in capacity utilization is a key assumption. If market conditions do not improve or if REC Silicon does not regain access to polysilicon markets in China, additional impairment would be required. This sensitivity is reflected in the table of sensitivities below in the line volume (production and sales).
Costs have been estimated using contractual obligations, third party indexes when appropriate, and historical spending trends adjusted for inflation.
Capital expenditures have been estimated using past experience and an evaluation of anticipated replacement requirements of specific items of equipment (useful lives of fixed assets).
The table below presents the estimated change in impairment of the Solar Materials CGU due to an isolated change in the key assumption for all years. Spending includes fixed manufacturing costs, selling general and administrative expenses, and capital expenditures in total. The estimates are based on the assumptions used in the December 31, 2021 impairment analysis.
| KEY ASSUMPTIONS FOR 2021 (USD IN MILLION) |
CHANGE | ESTIMATED CHANGE IN IMPAIRMENT |
|---|---|---|
| Post-tax discount rate | +/-1% point | -13.5/+16.4 |
| Sales prices | +/-2% | +/-21.8 |
| Volume (production and sales) | +/-2% | +/-14.5 |
| Spending | +/-2% | +/-11.3 |
Negative amounts represent an estimated increase in impairment.
The tables below reflect the development of carrying values for each cash generating unit.
| (USD IN MILLION) | SEMICONDUCTOR MATERIALS |
SOLAR MATERIALS |
OTHER | TOTAL |
|---|---|---|---|---|
| Trade and other receivables | 22.7 | 0.7 | 5.1 | 28.5 |
| Inventories | 27.0 | 6.0 | 0.0 | 33.1 |
| Current assets | 49.7 | 6.7 | 5.1 | 61.5 |
| Long term assets | 92.6 | 16.9 | 7.8 | 117.3 |
| Trade payables and other current liabilities | -14.7 | -5.2 | -6.7 | -26.6 |
| Long term liabilities | -13.4 | 0.0 | 0.0 | -13.4 |
| Allocation of other | 5.3 | 0.9 | -6.2 | 0.0 |
| Carrying values | 119.6 | 19.2 | 0.0 | 138.8 |
| (USD IN MILLION) | SEMICONDUCTOR MATERIALS |
SOLAR MATERIALS |
OTHER | TOTAL |
|---|---|---|---|---|
| Trade and other receivables | 21.9 | 0.9 | 3.2 | 26.1 |
| Inventories | 34.9 | 6.4 | 0.0 | 41.3 |
| Current assets | 56.8 | 7.3 | 3.2 | 67.3 |
| Long term assets | 100.6 | 23.2 | 8.4 | 132.2 |
| Trade payables and other current liabilities | -11.6 | -5.0 | -6.7 | -23.3 |
| Long term liabilities | -18.9 | 0.0 | 0.0 | -18.9 |
| Allocation of other | 4.1 | 0.8 | -4.9 | 0.0 |
| Carrying values | 131.0 | 26.3 | 0.0 | 157.3 |
The Group entered into a joint arrangement in China; Shaanxi Non-Ferrous Tian Hong REC Silicon Materials Co., Ltd. (Yulin JV) in February 2014. On February 1, 2018, REC Silicon Pte. Ltd (REC Silicon) and Shaanxi Non-Ferrous Tian Hong New Energy Co. Ltd. (SNF) entered into a supplemental agreement in relation to outstanding capital contributions.
This supplemental agreement reduced REC Silicon's equity ownership to 15 percent and REC Silicon agreed to pay interest of USD 0.6 million to the Yulin JV and a penalty of USD 10.4 million to SNF in annual installments. The remaining liability associated with this agreement was USD 4.7 million at December 31, 2021 and December 31, 2020.
REC Silicon's option to either buy back the 34 percent equity interest from SNF pursuant to a valuation and public bidding process as required by PRC state-owned asset disposal regulations expired in Q3 of 2021. REC Silicon currently maintains its previously reported 15 percent equity interest in the Yulin JV.
The corporate governance of the Yulin JV remains unchanged from previous reports. At the time that REC Silicon's equity interest in the Yulin JV was reduced to 15 percent, the Board of Directors of the Yulin JV was adjusted to five directors, of which four are appointed by SNF and one is appointed by REC. REC nominates the Chief Technology Officer while the remaining executive management of the Yulin JV is nominated by SNF.
In accordance with International Financial Reporting Standards (IFRS) 9, the carrying amount of the Yulin JV is reported at fair value and the Company has designated the investment as an equity security at fair value through profit and loss (FVTPL).
At year-end 2021, REC Silicon performed an analysis to estimate the fair value of its investment in the Yulin JV using discounted estimated future cashflows. Due to the impact of continued delays in realizing designed production capacities, and continued
deterioration in REC Silicon's ability to influence business decisions, increases in anticipated cashflows have not been realized. In addition, the Yulin JV has accumulated additional long-term debt to fund operating losses, to complete construction, and to maintain operations. The market value of the investment was estimated using the discounted estimated future cash flows from Yulin JV operations over a 5-year period with the last year used as a basis for the terminal value. A discount rate of 11.8 percent was estimated on an after-tax basis and adjusted to estimate the equivalent before tax discount rate of 14.9 percent. As a result, estimated enterprise value less long-term debt results in a negative value of approximately USD 13.1 million for REC Silicon's 15 percent equity interest. REC Silicon has no obligation to contribute additional equity as a result of these deficits. Accordingly, REC Silicon's investment in the Yulin JV remains at a value of zero at December 31, 2021.
At year-end 2020, REC Silicon performed an analysis to estimate the fair value of its investment in the Yulin JV using discounted estimated future cashflows. Due to the impact of continuing losses, continued delays in realizing designed production capacities, and continued deterioration in REC Silicon's ability to influence business decisions, increases in anticipated cashflows have not been realized. In addition, the Yulin JV has accumulated additional longterm debt to fund operating losses, to complete construction, and to maintain operations. The market value of the investment was estimated using the discounted estimated future cash flows from Yulin JV operations over a 5-year period with the last year used as a basis for the terminal value. A discount rate of 13.1 percent was estimated on an after-tax basis and adjusted to estimate the equivalent before tax discount rate of 14.3 percent. As a result, estimated enterprise value less long-term debt results in a negative value of approximately USD 0.2 million for REC Silicon's 15 percent equity interest. REC Silicon has no obligation to contribute additional equity as a result of these deficits. Accordingly, REC Silicon adjusted the investment in the Yulin JV to a value of zero and recognized a loss of USD 18.0 million to income during the fourth quarter of 2020.
| KEY ASSUMPTIONS FOR 2021 (USD IN MILLION) |
CHANGE | ESTIMATED CHANGE IN REC'S EQUITY VALUE |
|---|---|---|
| Post-tax discount rate | +/-1% point | -11.3/+13.4 |
| Sales prices | +/-2% | +/-9.0 |
| Volume (production and sales) | +/-2% | +/-5.2 |
| Spending | +/-2% | +/-2.3 |
REC Silicon has not made the final payment of USD 4.7 million under the supplemental agreement to settle REC Silicon's obligation to contribute equity to the Yulin JV which was payable during December 2020 due to delinquent outstanding invoices for services provided to the Yulin JV by REC Silicon and disagreements with respect to performance testing criteria and interpretation specified in the Technology Transfer Agreement (TTA). REC Silicon is currently seeking a resolution to these issues.
The Yulin JV continues to increase production, quality performance, and is steadily increasing product sales. Both silane units and the FBR reactors have demonstrated design capacities and utilization rates are increasing. The Yulin JV is increasing production of high purity granular polysilicon using high purity liners as they are delivered.
The Group has related party relationships with its subsidiaries, associates, joint ventures and with its Group Management and Board of Directors.
Transactions with subsidiaries have been eliminated on consolidation and are not reported as related party transactions in the consolidated financial statements for the Group.
Group Management and Board of Directors' compensation, ownership of REC Silicon ASA shares, options and bonds, loan agreements and guarantees are shown in note 16.
REC Silicon Inc. invoiced the Yulin JV USD 0.8 million in 2021 and USD 1.8 million in 2020 for engineering and project services. In addition, REC Silicon purchased small quantities of finished granular polysilicon from the JV for analytical purposes in 2020.
Cognite, an Aker company, invoiced REC Silicon Inc. for consulting and software in the amount of USD 0.2 million.
REC Silicon has not made the final payment of USD 4.7 million which was payable during December 2020 due to disagreements with respect to performance testing and interpretation specified in the Technology Transfer Agreement (TTA) as well as delinquent receivables of USD 2.3 million for services provided to the Yulin JV by REC Silicon. REC Silicon and the Yulin JV continue to seek a resolution to these issues (See note 9 above).
See note 30 below for additional information on the fair value of financial instruments.
| 2021 | 2020 | |||
|---|---|---|---|---|
| (USD IN MILLION) | ASSETS | LIABILITIES | ASSETS | LIABILITIES |
| Option contract | 0.0 | 0.0 | 0.0 | 1.5 |
| Total | 0.0 | 0.0 | 0.0 | 1.5 |
In 2020, derivatives consisted of an option contract which was a part of the indemnification agreement associated with the REC Wafer bankruptcy and are denominated in NOK.
On October 18, 2021, REC Silicon and Nordea entered into an agreement to settle claims associated with the indemnification loans. The liability for the option contract related to the indemnification loan was reduced to zero (see note 31).
| 2021 | 2020 | |||
|---|---|---|---|---|
| (USD IN MILLION) | ASSETS | LIABILITIES | ASSETS | LIABILITIES |
| Total non-current derivatives | 0.0 | 0.0 | 0.0 | 0.0 |
| Total current derivatives | 0.0 | 0.0 | 0.0 | 1.5 |
| Total derivatives | 0.0 | 0.0 | 0.0 | 1.5 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Trade receivables and accrued revenues | 37.2 | 34.6 |
| Provision for loss on trade recivables | -14.4 | -14.4 |
| Trade receivables - net | 22.8 | 20.2 |
| Prepaid costs | 5.4 | 5.6 |
| VAT and other public taxes and duties receivables | 0.0 | 0.0 |
| Other non-current and current receivables | 1.3 | 1.6 |
| Total Trade and other receivables | 29.6 | 27.5 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| At January 1 | -14.4 | -14.4 |
| Change in provisions | 0.0 | 0.0 |
| At December 31 | -14.4 | -14.4 |
The provision for doubtful accounts includes the impact of adopting IFRS 9 which requires the Company to estimate expected credit losses (ECL) based upon historical experience.
At December 31, 2021 Other non-current and current receivables are primarily related to municipal bonds of USD 1.1 million issued by a local taxing district in the United States which are secured by future property tax payments made by the Company.
| 2021 | 2020 | |||||
|---|---|---|---|---|---|---|
| (USD IN MILLION) | BEFORE WRITEDOWNS |
WRITEDOWNS | AFTER WRITEDOWNS |
BEFORE WRITEDOWNS |
WRITEDOWNS | AFTER WRITEDOWNS |
| Stock of materials, merchandise, production supplies | 3.3 | 0.0 | 3.3 | 2.2 | 0.0 | 2.2 |
| Spare parts | 42.6 | -33.7 | 8.9 | 42.4 | -33.1 | 9.3 |
| Work in progress | 11.9 | -2.0 | 9.9 | 11.4 | -1.0 | 10.4 |
| Finished goods | 15.4 | -4.4 | 11.0 | 35.8 | -16.4 | 19.4 |
| Total | 73.1 | -40.1 | 33.1 | 91.8 | -50.5 | 41.3 |
Inventories have been written down to estimated net realizable values. Write-downs of materials and spare parts represent the estimated obsolescence related to items held in inventories at cost. Write-downs of work in progress and finished goods have been estimated by comparing the net realizable value of anticipated sales to the manufacturing costs of items held in inventory.
Cash and cash equivalents are primarily bank deposits.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Restricted bank accounts non-current | 0.0 | 0.0 |
| Restricted bank accounts current | 4.4 | 4.5 |
| Total prepayments, interest calculation | 4.4 | 4.5 |
At December 31, 2021 restricted bank accounts consisted of USD 3.6 million security for the indemnification loan, USD 0.2 million security for bank guarantees for REC Solar AS (a subsidiary of the Company) and restricted cash for the US subsidiaries of USD 0.5 million. At December 31, 2020, restricted bank accounts consisted of USD 3.8 million security for the indemnification loan, USD 0.2 million security for bank guarantees for REC Solar AS (a subsidiary of the Company) and restricted cash for the US subsidiaries of USD 0.5 million.
The following shareholders held one percent or more of the total outstanding shares in REC Silicon ASA at December 31.
| 2021 | 2020 | ||||
|---|---|---|---|---|---|
| NAME OF SHAREHOLDERS | NO. OF SHARES | OWNERSHIP | NO. OF SHARES | OWNERSHIP | |
| AKER HORIZONS HOLDING AS | Ordinary | 91,995,551 | 24.70% | 91,995,551 | 24.70% |
| MORGAN STANLEY & Co. LLC | Nominee | 10,579,700 | 2.84% | 0 | 0.00% |
| BNP PARIBAS | Nominee | 5,949,185 | 1.60% | 0 | 0.00% |
| NORDNET LIVSFORSIKRING AS | Ordinary | 4,954,248 | 1.33% | 3,884,100 | 1.04% |
| FAZAJU AS | Ordinary | 4,540,000 | 1.22% | 2,870,000 | 0.77% |
| SKANDINAVISKA ENSKILDA BANKEN AB | Nominee | 2,920,000 | 0.78% | 5,208,148 | 1.40% |
| VERDIPAPIRFONDET DNB MILJØINVEST | Ordinary | 2,844,892 | 0.76% | 4,503,633 | 1.21% |
| CACEIS BANK | Nominee | 1,720,778 | 0.46% | 9,608,413 | 2.58% |
| VERDIPAPIRFONDET DNB TEKNOLOGI | Ordinary | 0 | 0.00% | 15,537,491 | 4.17% |
| J.P. MORGAN SECURITIES PLC | Ordinary | 0 | 0.00% | 4,853,378 | 1.30% |
| TOTAL SHARES OUTSTANDING | 372,412,658 | 372,412,658 |
The list of shareholdings above is based on the VPS shareholder register at December 31, 2021 and 2020. Actual shareholding may deviate due to the use of nominee accounts, share lending, forward contracts or other contractual arrangements.
At December 31, 2021, REC Silicon ASA had 39,420 shareholders (30,677 at December 31, 2020). The total number of outstanding shares was 372,412,658 at December 31, 2021 and December 31, 2020, each with a par value of NOK 1.
On November 18, 2021, the Company announced that Aker Horizons Holding AS, REC Silicon and Hanwha Solutions Corporation entered into an agreement pursuant to which REC Silicon shall issue, and Hanwha Solutions shall subscribe for, 48,213,001 new shares in REC Silicon at a subscription price of NOK 20 per share, totaling approximately NOK 964 million in proceeds in a directed share issue. The Share Issue was implemented based on the existing authorization granted to the board of REC Silicon. Aker Horizons sold and Hanwha Solutions shall acquire 21,891,275 existing shares in the Company at a price of NOK 20 per share simultaneously with the Share Issue. At completion of the Share Issue and Share Purchase, Aker Horizons and Hanwha Solutions will each own approximately 16.67 percent of the shares in REC Silicon. This transaction settled on January 19, 2022. After the settlement of the transaction in 2022 The new share capital of the Company is NOK 420,625,659, divided into shares 420,625,659, each with a par value of NOK 1.
On October 14, 2020, the Company raised approximately NOK 1,000 million in gross proceeds through the Private Placement of 92,592,592 new shares, at a price per share of NOK 10.80. The Private Placement consisted of two separate tranches: one tranche with 27,982,000 new shares in the Company and a second tranche with 64,610,592 new shares. The settlement of Tranche 1 occurred on October 27, 2020, and the settlement for Tranche 2 occurred on November 19, 2020, following approval by an Extraordinary
General Meeting in the Company of the issuance of the New Shares under Tranche 2. The completion of Tranche 1 was subject to approval by the Company's Board of Directors pursuant to the authorization granted by the Company's Annual General Meeting held on May 12, 2020. The registration of the new shares issued in Tranche 1 was completed on October 26, 2020, and the Company received proceeds of NOK 290.2 million (approximately USD 31.4 million) net of the brokers fee on October 27, 2020. Subsequent to this registration, the new share capital of the Company was NOK 307,802,066, divided into 307,802,066 shares of NOK 1 par value. The registration of the new shares issued in Tranche 2 was completed on November 18, 2020, and the Company received proceeds of NOK 673.4 million (approximately USD 74.7 million) net of the brokers fee on November 19, 2020. Subsequent to this registration, the new share capital was NOK 372,412,658 divided into 372,412,658 shares of NOK 1 par value.
At the Annual General Meeting on May 11, 2021, the Board was authorized to increase the share capital with up to NOK 74,482,000, which was approximately 20 percent of the share capital at that time, through one or more increases in the share capital. The Annual General meeting also authorized the Board to acquire treasury shares in the Company (up to a maximum of ten percent of the nominal value of the existing share capital). The authorization to acquire treasury shares has not been used and remained available at December 31, 2021. Both authorizations were valid until the 2022 Annual General Meeting, but in any event not longer than 15 months.
The Board's statement on executive management remuneration (the "statement") has been prepared in accordance with the provisions of the Norwegian Public Companies Act (PLA), the Norwegian Accounting Act, and the Norwegian Code of Practice for Corporate Governance. Following amendments to the PLA, the statement is now subject to new and more detailed requirements for determining salaries and other remuneration. From January 1, 2021, the board is required to prepare both guidelines for such determinations (section 6-16 (a)) and a report that provides an overview of paid and outstanding remuneration (section 6-16(b)). The guidelines will be forward-looking and will be adopted by the Annual General Meeting through a binding vote, while the report will be retrospective and will be subject to an advisory vote at the Annual General Meeting. The deadline for adoption of the new guidelines for the company was October 1, 2021, while the deadline for the first presentation of the report is the Annual General Meeting in 2022.
REC Silicon's board has prepared proposed guidelines for the company's executive remuneration policy in accordance with the provision in the new section 6-16 (a). The proposed guidelines, which provide a broader and deeper discussion of the principles for remuneration to key management, were effective from 2021 onwards. The new guidelines were presented to the Annual General Meeting in 2021, where a binding vote on these guidelines was held in accordance with the new regulations. The guidelines are available on REC Silicon's website. The executive management remuneration report in accordance with the new regulations will be prepared for the first time for the Annual General Meeting in 2022 and will have effect for the financial year 2021.
The guidelines for determination of salary and other compensation for leading employees, as outlined in the annual general meeting in 2021, have been complied with in 2021. See www.recsilicon.com/ investors/agm for the Statement of Remuneration.
The Board of Directors has implemented incentive programs during previous periods whereby employee entitlements are linked to the share price development of the Company's shares. See note 32 for details of share-based compensation programs.
Salary and other compensation to the Group's Board of Directors and Management for 2021 and 2020 are described below.
| (AMOUNTS IN USD) | BONUS EARNED AND |
SHARE BASED COMPENSATION |
SHARE BASED COMPENSATION |
PENSION | OTHER TAXABLE |
||
|---|---|---|---|---|---|---|---|
| NAME | BASE SALARY | MAX % | EARNED | PAID | BENEFITS | BENEFITS | SEVERANCE |
| Tore Torvund | 760,044 | 0 | 313,164 | 254,471 | 105,807 | 122,088 | 414,929 |
| President and CEO to November 30, 2021 | 100% | ||||||
| James A. May II | 23,080 | 7,530 | 0 | 0 | 0 | 7,440 | 0 |
| President and CEO from December 1, 2021 | 50% | ||||||
| James A. May II | 275,961 | 89,658 | 36,626 | 39,924 | 20,300 | 2,108 | 0 |
| CFO to November 30, 2021 | 50% | ||||||
| Douglas Moore | 10,685 | 1,169 | 0 | 0 | 748 | 3,188 | 0 |
| CFO from December 1, 2021 | 17.5% | ||||||
| Total 2021 | 1,069,770 | 98,357 | 349,790 | 294,396 | 126,855 | 134,824 | 414,929 |
| (AMOUNTS IN USD) | BONUS EARNED AND |
SHARE BASED COMPENSATION |
SHARE BASED COMPENSATION |
PENSION | OTHER TAXABLE |
||
|---|---|---|---|---|---|---|---|
| NAME | BASE SALARY | MAX % | EARNED | PAID | BENEFITS | BENEFITS | SEVERANCE |
| Tore Torvund | 807 649 | 323 060 | 590 028 | 0 | 102 975 | 132 127 | NA |
| President and CEO | 100% | ||||||
| James A. May II | 290 851 | 58 630 | 151 953 | 0 | 12 385 | 2 083 | NA |
| CFO | 50% | ||||||
| Total 2020 | 1 098 500 | 381 690 | 741 981 | 0 | 115 360 | 134 210 | NA |
All amounts are exclusive of social security tax. There were no payments and benefits from the Group for services outside their functions as Group Management. Base salary represents the amount, including holiday pay that was paid in the year.
Bonus amounts represent bonuses earned during each year and are normally paid and reported as taxable income for the employee in the subsequent year.
Share-based compensation amounts represent synthetic share option programs further described in note 32. The estimated fair value of the options is expensed over the estimated vesting periods. The amounts shown above are the amounts expensed in the relevant year. Amounts reported as share-based compensation earned are derived using the Black Scholes option pricing model and may not match actual payments made depending upon the market value of the Company's stock on the exercise date. During 2021 there were USD 0.7 million in cash payments made with respect to share-based compensation, and zero in 2020.
Pension benefits include benefits earned with respect to defined benefit plans and contributions related to defined contribution plans.
Other taxable benefits include housing, company car / coverage of automobile expenses / vehicle allowance, telephone and internet service, newspapers, health club memberships, reimbursement of home-office related expenses, cash in lieu of paid time off, and certain other benefits. The benefits vary, and the amounts in the table are the amounts that are taxable based on rules and regulations in the relevant tax jurisdictions.
At December 31, 2021 and 2020, members of the Group Management have contracts that entitle them to severance benefits beyond the normal notice period if employment is terminated by the Group. These severance payments are equal to three months of salary for Mr. May and Mr. Moore.
| BOARD COMPENSATION |
COMPENSATION FOR COMMITTEES |
|---|---|
| 50,393 | 0 |
| 39,006 | 0 |
| 6,784 | 0 |
| 6,784 | 0 |
| 102,967 | 0 |
| (AMOUNTS IN USD) | ||
|---|---|---|
| NAME | BOARD COMPENSATION |
COMPENSATION FOR COMMITTEES |
| Kjell Inge Røkke | 62,507 | 0 |
| Lene Landøy | 35,857 | 0 |
| Total 2021 | 98,363 | 0 |
| (AMOUNTS IN USD) | ||
|---|---|---|
| NAME | BOARD COMPENSATION |
COMPENSATION FOR COMMITTEES |
| Jens Ulltveit-Moe | 51,579 | 4,912 |
| Espen Klitzing | 34,386 | 4,912 |
| Raghnild Wiborg | 30,948 | 4,912 |
| Inger Berg Ørstavik | 30,948 | 4,912 |
| Total period May 10, 2019 - May 12, 2020 | 147,861 | 19,649 |
| Annette Malm Justad | 45,005 | 0 |
| Espen Klitzing | 25,203 | 0 |
| Inger Berg Østavik | 25,203 | 0 |
| Audun Stensvold | 25,203 | 0 |
| Total period May 12, 2020 - December 31, 2020 | 120,614 | 0 |
At December 31, 2021 and 2020 there were no outstanding loans or guarantees to members of Group Management, Board members or shareholders or their closely related parties.
The number of shares and options owned by members of the Board of Directors and the Group Management, including closely related parties, are shown in the table below. The table includes board members and key management at December 31, 2021 and 2020. Refer to note 32 for details of the share option program.
| OPTIONS | |||||
|---|---|---|---|---|---|
| NAME | 2021 | 2020 | 2021 | 2020 | |
| Tore Torvund | Group Management | 1,400,000 | 1,644,699 | 163,149 | 163,149 |
| James A. May II | Group Management | 293,818 | 351,357 | 274,204 | 274,204 |
| Douglas Moore | Group Management | 0 | 0 | 0 | 0 |
| Kjell Inge Røkke | Related Party | NA | 0 | NA | 91,995,551 |
| Kristian Røkke | Related Party | 0 | 0 | 91,995,551 | NA |
| Annette Malm Justad | Board of Directors | 0 | 0 | 30,000 | 30,000 |
| Auden Stensvold | Board of Directors | 0 | 0 | 0 | 0 |
| Lene Landøy | Board of Directors | 0 | NA | 0 | NA |
| Espen Klitzing | Board of Directors | NA | 0 | NA | 60,000 |
| Inger Berg Orstavik | Board of Directors | NA | 0 | NA | 5,000 |
| NUMBER OF OPTIONS | |||||
|---|---|---|---|---|---|
| NAME | TORE TORVUND | JAMES A. MAY II | DOUGLAS MOORE | STRIKE PRICE NOK | |
| 2021 Program | 350,000 | 81,077 | 0 | 17.5 | |
| 2020 Program | 350,000 | 73,917 | 0 | 3.5 | |
| 2019 Program | 350,000 | 75,253 | 0 | 8.1 | |
| 2018 Program | 233,334 | 46,674 | 0 | 15.2 | |
| 2017 Program | 116,666 | 16,897 | 0 | 11.9 | |
| Total | 1,400,000 | 293,818 | 0 | ||
November 30, 2021, Mr. Torvund retired from REC Silicon maintaining all awarded options. January 2022 Mr. Torvund passed away wherein the options were bestowed to his estate. See note 32 for additional information.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Non-current financial liabilities, interest bearing | ||
| Senior Secured Bond | 110.0 | 110.0 |
| Capitalized Borrowing Cost 1) | -0.1 | -0.6 |
| C.A.R.E.S. Act loan (USD) | 0.0 | 2.3 |
| Grant County WA tax settlement (USD) | 5.3 | 6.3 |
| Total non-current financial liabilities, interest bearing | 115.2 | 118.0 |
| Current financial liabilities, interest bearing | ||
| Indemnification Loan (NOK) | 10.8 | 23.4 |
| Capitalized Borrowing Cost 1) | -0.5 | -0.4 |
| C.A.R.E.S. Act loan (USD) | 0.0 | 5.9 |
| Grant County WA tax settlement (USD) | 1.0 | 0.9 |
| Total current financial liabilities, interest bearing | 11.3 | 29.8 |
1) Amortized as part of effective interest.
| (USD IN MILLION) | INDEMNIFICATION LOAN |
USD SENIOR SECURED BOND |
C.A.R.E.S ACT LOAN |
TAX SETTLEMENT NOTE |
TOTAL |
|---|---|---|---|---|---|
| Balance at January 1, 2021 | 23.4 | 109.0 | 8.3 | 7.2 | 147.8 |
| Payments of borrowings | 0.0 | 0.0 | 0.0 | -0.9 | -0.9 |
| Change capitalized borrowing cost | 0.0 | 0.4 | 0.0 | 0.0 | 0.4 |
| Effect of changes in foreign exchange rates | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Forgiveness of borrowings | 0.0 | 0.0 | -8.3 | 0.0 | -8.3 |
| Settlement | -12.6 | 0.0 | 0.0 | 0.0 | -12.6 |
| Balance at December 31, 2021 | 10.8 | 109.4 | 0.0 | 6.3 | 126.4 |
On October 14, 2020, the Company entered into a settlement agreement with Grant County, Washington settling its property tax dispute for tax years 2012 through 2015. REC Silicon agreed to pay Grant County USD 3.0 million by December 15, 2020, and USD 1.75 million each year for the next six years. The settlement resulted in the recognition of a note payable using an interest rate of 11.5 percent used to impute the value of the liability. The note is effectively secured, as a matter of law, by the real property at the Moses Lake plant. At December 31, 2021, the remaining fair value of the property tax note was USD 6.3 million. Total remaining undiscounted payments on the property tax note are USD 8.8 million.
On May 4, 2020, REC Silicon executed promissory notes guaranteed by the Government of the United States as part of the Coronavirus Aid, Relief, and Economic Security Act (C.A.R.E.S. Act) of USD 4.4 million for REC Solar Grade Silicon LLC and USD 3.8 million for REC Advanced Silicon Materials LLC. On June 28, 2021, the Company received notification that the C.A.R.E.S. Act loan held by REC Solar Grade Silicon LLC of USD 3.8 million plus accrued interest of USD 0.1 million had been repaid by the US Government. On July 19, 2021, the Company was notified that its application for forgiveness of the C.A.R.E.S. Act loan of USD 4.4 million plus accrued interest of USD 0.1 million held by REC Advanced Silicon Materials LLC had been approved by the US Government. Accordingly, grant income of USD 8.3 million was reported on the other income and expense line of the consolidated statement of income (see note 21 and 23).
The indemnification loan is related to the bankruptcy of a former subsidiary in 2012. On October 18, 2021, REC Silicon and Nordea entered into an agreement to settle claims associated with the indemnification loans. Under the agreement, Nordea releases all claims against REC Silicon for NOK 95 million (USD 10.8 million) resulting in income from discontinued operations, net of tax, of NOK 117.7 million (USD 13.4 million). The settlement will consist of approximately NOK 32 million (USD 3.6 million) to be settled through an existing escrow account, which REC Silicon currently holds with Nordea, with the balance settled in one payment of approximately NOK 63 million (USD 7.2 million) made on February 25, 2022. At December 31, 2021, the indemnification loan is NOK 95 million (USD 10.8 million)
The Company and certain subsidiaries are jointly and severally liable for the USD Senior Secured Bond (REC04, ISIN NO0010820590). REC Silicon ASA, REC Silicon AS, REC Silicon, Inc., REC Solar Grade Silicon, LLC., REC Advance Silicon Materials, LLC., and REC Silicon Pte. Ltd. have provided a guarantee. In addition, the equity and substantially all of the tangible and intangible assets of REC Advanced Silicon Materials, LLC. have been pledged as security in the bond agreement. The net book value of net assets pledged as security was approximately USD 77.6 million at December 31, 2021 and approximately USD 92.6 million at December 31, 2020. Covenants imposed by the bond include a requirement to maintain minimum liquidity of USD 15 million and include a change of control provision which grants the bondholders a put option entitling them to cancel the commitments and declare all outstanding amounts and accrued unpaid interest due and payable if a shareholder or a group of shareholders gains control of more than 50 percent of the share capital. In addition, the bond agreement provides limitations on borrowing, asset sales, and other transactions under certain conditions. The bond agreement includes a cross default clause should the Company default on any financial indebtedness above certain threshold amounts. Please see the registration document at www.recsilicon.com for additional details.
At December 31, 2021 and 2020, the Company had complied with all financial covenants and other restrictions in the loan.
| The following are the contractual maturities of financial liabilities at December 31, 2021 | |||
|---|---|---|---|
| -------------------------------------------------------------------------------------------- | -- | -- | -- |
| MATURITY ANALYSIS | ||||||
|---|---|---|---|---|---|---|
| (USD IN MILLION) | CARRYING AMOUNT |
0-6 MONTHS |
6-12 MONTHS |
2023 | 2024 | AFTER 2024 |
| Retirement benefit obligations | 13.4 | 0.6 | 0.7 | 1.4 | 1.5 | 9.2 |
| USD Senior Secured Bond | 110.0 | 0.0 | 0.0 | 110.0 | 0.0 | 0.0 |
| Grant County WA tax settlement | 6.3 | 0.0 | 1.0 | 1.1 | 1.2 | 3.0 |
| Trade payables and other liabilities | 47.9 | 26.4 | -0.1 | 0.9 | 0.7 | 20.2 |
| Accrued finance cost | 2.8 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Indemnification loan | 10.8 | 10.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Lease Liabilities | 70.5 | 1.3 | 1.3 | 2.8 | 6.8 | 58.3 |
| Total | 261.6 | 41.8 | 2.9 | 116.1 | 10.2 | 90.6 |
| MATURITY ANALYSIS | ||||||||
|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | CARRYING AMOUNT |
TOTAL | UNDETERM | INED 0-6 MONTHS | 7-12 MONTHS |
2022 | 2023 | AFTER 2023 |
| Retirement benefit obligations | 18.9 | 18.9 | 0.0 | 0.6 | 0.7 | 1.4 | 1.5 | 14.7 |
| USD Senior Secured Bond | 110.0 | 110.0 | 0.0 | 0.0 | 0.0 | 0.0 | 110.0 | 0.0 |
| C.A.R.E.S Act loans | 8.3 | 8.3 | 0.0 | 3.2 | 2.8 | 2.3 | 0.0 | 0.0 |
| Grant County WA tax settlement | 7.2 | 7.2 | 0.0 | 0.0 | 0.9 | 1.0 | 1.1 | 4.2 |
| Trade payables and other liabilities | 38.6 | 38.6 | 0.0 | 22.5 | 0.9 | 0.2 | 0.3 | 14.7 |
| Accrued finance cost | 2.8 | 2.8 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Derivatives | 1.5 | 1.5 | 1.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Indemnification loan | 23.4 | 23.4 | 23.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Lease Liabilities | 71.8 | 71.8 | 0.0 | 1.0 | 1.1 | 2.3 | 2.6 | 64.7 |
| Total | 282.5 | 282.5 | 24.9 | 30.2 | 6.4 | 7.2 | 115.5 | 98.3 |
| AT DECEMBER 31, 2021 | MATURITY ANALYSIS - CONTRACTURAL PAYMENTS TO BE MADE, INCLUDING INTEREST | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | CARRYING AMOUNT |
TOTAL | 0-6 MONTHS |
7-12 MONTHS |
2023 | 2024 | 2025 | 2026 | AFTER 2026 |
| Capitalized Borrowing Cost | -0.6 | ||||||||
| Senior secured bond | 110.0 | 129.0 | 6.3 | 6.3 | 116.3 | ||||
| Grant County WA tax settlement | 6.3 | 8.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | ||
| Indemnification loan | 10.8 | 10.8 | 10.8 | ||||||
| Total | 126.4 | 148.5 | 17.1 | 8.1 | 118.1 | 1.8 | 1.8 | 1.8 | 0.0 |
| AT DECEMBER 31, 2020 | MATURITY ANALYSIS - CONTRACTURAL PAYMENTS TO BE MADE, INCLUDING INTEREST | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (USD IN MILLION) | CARRYING AMOUNT |
TOTAL | 0-6 MONTHS |
7-12 MONTHS |
2022 | 2023 | 2024 | 2025 | AFTER 2025 |
| Capitalized Borrowing Cost | -1.0 | ||||||||
| Senior secured bond | 110.0 | 141.6 | 6.3 | 6.3 | 12.7 | 116.3 | |||
| C.A.R.E.S. Act loans | 8.2 | 8.4 | 3.3 | 2.8 | 2.3 | ||||
| Grant County WA tax settlement | 7.2 | 10.6 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | |
| Indemnification loan | 23.4 | 23.4 | |||||||
| Total | 147.8 | 184.0 | 9.6 | 10.9 | 16.7 | 118.1 | 1.8 | 1.8 | 1.8 |
The differences between carrying amounts and total expected payments in the tables above are due primarily to the effect of discounting. Interest payments are estimated using the interest rates at December 31, 2021 and 2020. All cash flows are undiscounted. Amounts in other currencies than USD are translated at the exchange rates at December 31, 2021 and 2020, respectively.
| INTEREST RATE (%) | CURRENCY | AMOUNTS IN MILLION | BORROWER | |
|---|---|---|---|---|
| USD Senior Secured Bond | 11.50 Fixed | USD | 110.0 | REC Silicon ASA |
| Grant County WA tax settlement | 11.50 Fixed | USD | 6.3 | REC Solar Grade Silicon |
| Indemnification loans | 0.00 Variable | NOK | 95.0 | REC Silicon ASA |
| INTEREST RATE (%) | CURRENCY | AMOUNTS IN MILLION | BORROWER | ||
|---|---|---|---|---|---|
| USD Senior Secured Bond | 11.50 Fixed | USD | 110.0 | REC Silicon ASA | |
| C.A.R.E.S. Act loan | 1.00 Fixed | USD | 4.4 | REC Advanced Silicon Materials | |
| C.A.R.E.S. Act loan | 1.00 Fixed | USD | 3.8 | REC Solar Grade Silicon | |
| Grant County WA tax settlement | 11.50 Fixed | USD | 7.2 | REC Solar Grade Silicon | |
| Indemnification loans | 2.00 Variable | NOK | 200.0 | REC Silicon ASA |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Current income tax expense (-) / benefit (+) | 0.0 | 22.6 |
| Deferred tax expense (-) / benefit (+) | 0.0 | 0.0 |
| Total income tax expense (-) / benefit (+) in the statement of income | 0.0 | 22.6 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Profit/loss before tax | -43.5 | -69.3 |
| Tax calculated at domestic tax rates applicable to profits /losses in the respective countries | 9.3 | 14.6 |
| Effects of changes in tax rates and use of another tax rate for parts of profits /losses | -0.9 | 0.4 |
| Expenses not deductible for tax purposes | 0.0 | -2.0 |
| Effects of not recognized deferred tax assets, including reversal of previous years | -1.7 | -35.2 |
| Tax losses, tax credits + temp diff for which no def tax has been rec. this year | -5.2 | 19.7 |
| Change in estimates of prior years income taxes | 0.0 | 22.6 |
| Other permanent differences | -1.5 | 2.5 |
| Total income tax expense (-) / benefit (+) in the statement of income | -0.0 | 22.6 |
| Effective tax rate | 0% | 33% |
During the third quarter of 2020, REC Silicon was informed by the Norwegian Tax Administration through legal counsel that issues raised to deny deductions taken by REC Silicon during tax years 2009 through 2011 had been dropped. As a result, the Company recognized an income tax benefit of USD 22.5 million which represents the reversal of estimated tax expense previously reported by the Company due to this examination. The remaining tax benefit of USD 0.1 million is related to changes in the United States related to an adjustment of refunds previously received. Other permanent differences in 2021 and 2020 are related to tax calculations in REC Silicon ASA where the tax balances are denominated in NOK and the Financial Statements are in USD. This gives rise to differences in profit/loss between the tax calculation and the Financial Statement.
The income tax calculation for the Group is primarily based on blended corporate income tax rates of 22 percent in Norway and approximately 24.0 percent in the USA.
Income tax for REC Silicon in the USA is based on nominal 21 percent federal tax rate plus estimated state taxes. The effective tax rate for REC Silicon in the USA was 0 percent in 2021 and 2020.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Current tax assets | 0.0 | 0.0 |
| Current tax liabilities | 0.0 | 0.0 |
| Net current tax assets (+) / liabilities (-) | 0.0 | 0.0 |
| Deferred tax assets | 0.0 | 0.0 |
| Deferred tax liabilities | 0.0 | 0.0 |
| Net deferred tax assets (+) / liabilities (-) | 0.0 | 0.0 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Deferred tax assets | ||
| Deferred tax asset to be recovered after 12 months | 57.9 | 57.5 |
| Deferred tax asset to be recovered within 12 months | 2.4 | 5.5 |
| Offset deferred tax assets and liabilities | -60.3 | -63.0 |
| Total | 0.0 | 0.0 |
| Deferred tax liability to be settled after 12 months | 60.3 | 63.0 |
|---|---|---|
| Offset deferred tax assets and liabilities | -60.3 | -63.0 |
| Total | 0.0 | 0.0 |
| Net deferred tax liabilities | 0.0 | 0.0 |
Tax losses and tax credit carryforwards are presented as deferred tax assets to be recovered after 12 months in the table above.
| (USD IN MILLION) | BALANCE JAN 1 |
RECOGNIZED IN INCOME |
RECOGNIZED IN OCI/EQUITY |
TRANSLATION DIFFERENCE |
BALANCE DEC 31 |
|---|---|---|---|---|---|
| Total non-current assets | -60.7 | 0.6 | 0.0 | 2.0 | -58.2 |
| Total non-current liabilities | -0.2 | 0.1 | 0.0 | 0.0 | -0.1 |
| Total current liabilities | 5.5 | -3.0 | 0.0 | -0.1 | 2.4 |
| Tax losses and tax credits carry-forward recognized | 55.4 | 2.3 | 0.0 | -1.9 | 55.9 |
| Total | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| (USD IN MILLION) | BALANCE JAN 1 |
RECOGNIZED IN INCOME |
RECOGNIZED IN OCI/EQUITY |
TRANSLATION DIFFERENCE |
BALANCE DEC 31 |
|---|---|---|---|---|---|
| Total non-current assets | -63.9 | 4.5 | 0.0 | -1.4 | -60.7 |
| Total current assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total non-current liabilities | -0.3 | 0.1 | 0.0 | -0.0 | -0.2 |
| Total current liabilities | 5.3 | 0.0 | 0.0 | 0.2 | 5.5 |
| Tax losses and tax credits carry-forward recognized 1) | 58.8 | -4.6 | 0.0 | 1.2 | 55.4 |
| Total | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
1) Tax losses and tax credit carry-forwards recognized at December 31, 2021 related to REC Silicon in the USA were USD 0.0 million and USD 55.9 million related to REC Silicon ASA. Tax losses and tax credit carry-forwards recognized at December 31, 2020 related to REC Silicon in the USA were USD 0.0 million and USD 55.4 million related to REC Silicon ASA.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Effect of transition to IAS 39 at January 1, 2005 | 2.3 | 2.3 |
| Effect of actuarial gains and losses | -4.8 | -4.1 |
| Effect of conversion of convertible bonds | -61.0 | -61.0 |
| Effect of costs for capital increase | 12.9 | 12.9 |
| Effect of translation differences on loans as part of net investment | 12.6 | 12.6 |
| Total deferred tax | -37.9 | -37.3 |
| Current tax - effect of costs for capital increase | 13.1 | 13.1 |
| Total | -24.8 | -24.2 |
Amounts in table above exclude translation differences on deferred tax. Negative numbers are a reduction to equity.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Total non-current assets | 78.0 | 73.3 |
| Total current assets | 2.1 | 1.6 |
| Total non-current liabilities | 14.7 | 22.7 |
| Total current liabilities | 9.1 | 8.7 |
| Tax losses carry forward | 397.3 | 402.9 |
| Total | 501.2 | 509.2 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| REC Silicon ASA (Norway) | 67.8 | 76.4 |
| REC Solar AS (Norway) | 178.1 | 183.4 |
| REC Silicon US operations | 253.4 | 247.5 |
| Other | 1.9 | 1.9 |
| Total | 501.2 | 509.2 |
The deferred tax asset in the United States was generated due to net operating losses on a tax basis, the accelerated reversal of book to tax differences for depreciation caused by the recognition of impairment (financial statement only), and other taxable temporary differences which are expected to reverse on a more definite schedule. The deferred tax asset in the United States associated with net operating losses was USD 143.8 million at December 31, 2021 includes USD 127.8 million associated with net operating losses generated in 2017 and prior years which expire between 2031 and 2037. Deferred tax assets of USD 16.0 million are due to net operating losses generated after 2017 which do not expire.
The deferred tax asset in Norway was generated due to net operating losses on a tax basis and other taxable temporary differences which are expected to reverse on a more definite schedule. In Norway, net operating losses do not expire.
Deferred tax assets have not been recognized due to requirements in IAS 12 for convincing evidence of available future taxable income to offset prior tax losses.
The cost of defined pension benefit plans is expensed in the period that the employee renders services and becomes eligible to receive benefits. The cost of defined contribution plans is expensed as contributions become payable.
REC Silicon has an employer-sponsored defined contribution retirement plan (401 (k)) for employees in the United States. The REC Silicon subsidiary REC Advanced Silicon Materials LLC (ASiMI) in the United States had defined benefit plans at the time it was acquired in 2005. At that time, these plans were frozen, and no future benefits are accruing to the members of the plans. Previous pension rights remain unchanged and are fully vested. The tables below for defined benefit plans are related to Advanced Silicon Materials LLC only.
For defined benefit plans, the plan assets and the projected benefit obligations were measured at December 31, 2021 and 2020. An independent actuary performed actuarial calculations. The present value of the projected defined benefit obligation, and the related current service cost, were measured using the projected unit credit method.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Gross retirement benefit obligations at January 1 | 46.8 | 43.8 |
| Interest cost on pension obligations | 1.1 | 1.3 |
| Remeasurements recognized through OCI | -2.1 | 3.3 |
| Benefits paid, paid-up policies and disability obligation | -1.6 | -1.6 |
| Gross retirement benefit obligations at December 31 | 44.2 | 46.8 |
| Fair values of plan assets at January 1 | 27.9 | 24.3 |
| Actuarial return on plan assets | 2.9 | 3.0 |
| Pension premiums | 1.6 | 2.2 |
| Benefits paid, paid-up policies and disability reserve | -1.6 | -1.6 |
| Fair value of plan assets at December 31 | 30.8 | 27.9 |
| Funded status at December 31 | 13.4 | 18.9 |
| Net retirement benefit obligations at December 31 | 13.4 | 18.9 |
The plan assets relate to one of three ASiMI plans and are currently invested in a mix of 66% equity funds and 34% fixed income funds.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Net retirement benefit obligations at January 1 | 18.9 | 19.5 |
| Net periodic benefit costs including net interest | 0.5 | 0.6 |
| Remeasurements recognized through OCI | -4.4 | 1.1 |
| Pension premiums and benefits paid | -1.6 | -2.2 |
| Net retirement benefit obligations at December 31 | 13.4 | 18.9 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Total benefit plans | 0.0 | 0.0 |
| Defined Contribution | 1.7 | 1.6 |
| Total contribution expenses (see note 24) | 1.7 | 1.6 |
| Net interest expense | 0.5 | 0.6 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Experience adjustments | -0.5 | 0.0 |
| Effects of changes in assumptions | -1.6 | 3.2 |
| Total remeasurements (gains (-)/losses (+)) on gross retirement benefit obligations | -2.1 | 3.3 |
| Return on plan assets, excluding amounts included in interest | -2.3 | -2.2 |
| Total remeasurements (gains (-)/losses (+)) recognized through Other Comprehensive Income | -4.4 | 1.1 |
During 2021 the effects of changes in assumptions were due to an increase in discount rate and changes in financial and demographic assumptions for the ASiMI plans.
The cumulative re-measurement loss recognized to equity through other comprehensive income was USD 21.1 million before income taxes at December 31, 2021. Of this, a loss of USD 21.1 million was related to ASiMI (excluding translation difference).
At December 31, 2021, the mortality table was updated from the Pri-2012 total dataset mortality table with projection scale MP-2020 to the MP-2021 report. The Society of Actuaries (SOA) is an actuarial organization that periodically reviews mortality data and publishes mortality tables and improvement scales. MP-2021 is the most recent improvement scale published by the SOA in 2021.
| 2021 | 2020 | |
|---|---|---|
| Discount rate | 2.70 | 2.4 |
| Future salary increases | NA | NA |
| Future pension increases | NA | NA |
| Future increase in social security base amount | NA | NA |
| Future turnover | NA | NA |
The assumptions used to determine the benefit cost for the year are determined at the beginning of the year. The expected return for the ASiMI plans equals the discount rate.
The expected remaining service life (average, in years) of the defined benefit obligation for the ASiMI plans are approximately 14 at December 31, 2021 and 7.9 at December 31, 2020. Pension premiums of USD 1.3 million are expected to be paid during 2022 to the ASiMI defined benefit plans.
For the ASiMI benefit plans, a one percentage point increase (decrease) in discount rate is estimated to decrease (increase) the pension obligation by approximately USD – 5.1 (6.3) million at December 31, 2021.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Current portion of prepayments interest calculation | 0.2 | 0.0 |
| Total prepayments, interest calculation | 0.2 | 0.0 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Trade and other payables | 10.2 | 8.0 |
| Accrued costs for capex - external | 0.0 | 0.0 |
| VAT and other public taxes and duties payables | 2.9 | 3.5 |
| Accrued operating costs - external | 7.8 | 6.3 |
| Accrued finance costs - external | 2.8 | 2.8 |
| Other non-interest bearing liabilities 1) | 5.8 | 5.5 |
| Trade payables and other liabilities | 29.4 | 26.1 |
1) Includes payment penalty of USD 4.7 million in relation to outstanding capital contribution from REC Silicon to the Yulin JV (see note 9 and 29).
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Provisions non-current - interest bearing | 20.2 | 14.7 |
| Total provision | 20.2 | 14.7 |
| ASSET RETIREMENT (USD IN MILLION) OBLIGATION |
TOTAL |
|---|---|
| At January 1, 2021 14.7 |
14.7 |
| Change in estimate in asset retirement obligation 4.7 |
4.7 |
| Net periodic asset retirement obligation costs including net interest 0.8 |
0.8 |
| At December 31, 2021 20.2 |
20.2 |
Estimated fair values of the Group's guarantees, indemnification loans and option contract related to the REC Wafer bankruptcy are not reported as provisions but included in other line items in the statement of financial position.
During 2021 the Company recorded additional provision for asset retirement obligations (ARO) of USD 5.5 million.
At December 31, 2021 the Company has recorded USD 20.2 million in AROs. These obligations consist of USD 3.2 million to restore leased wastewater containment ponds to conditions specified in the lease agreement and USD 17.0 million for the eventual cleanup of the Company's manufacturing operations in Moses Lake, Washington and Butte, Montana.
The AROs represent the present value of estimated future costs discounted at 3.5 percent for 7 years for the wastewater containment ponds. The restoration of the production sites is discounted at 4.8 percent for 39.5 years. The restoration of production sites is subject to significant uncertainty due to variability in restoration requirements imposed by regulatory authorities as well as the timing of restoration.
On June 28, 2021, the Company received notification that the C.A.R.E.S. Act loan held by REC Solar Grade Silicon LLC of USD 3.8 million plus accrued interest of USD 0.1 million had been repaid by the US Government. Accordingly, grant income of USD 3.9 million was reported on the other income and expense line of the consolidated statement of income (see note 17 and 23).
On July 19, 2021, the Company received notification that the C.A.R.E.S. Act loan held by REC Advanced Silicon Materials LLC of USD 4.4 million plus accrued interest of USD 0.1 million had been repaid by the US Government. Accordingly, grant income of USD 4.5 million was reported on the other income and expense line in the consolidated statement of income (see note 17 and 23).
At December 31,2020 the C.A.R.E.S Act loans were reflected in total non-current and current financial liabilities in the amount of USD 2.3 million and USD 5.9 million respectively.
| (USD IN MILLION) 2021 |
2020 |
|---|---|
| Freight, postage and transportation 3.5 |
3.0 |
| Energy and water 34.9 |
21.1 |
| Lease and rental expenses 0.8 |
1.0 |
| Total operating, service and maintenance costs 22.7 |
19.2 |
| 7.4 Consultancy and auditor fees |
7.2 |
| Own work capitalized on fixed assets -0.3 |
-0.1 |
| IT and telecommunications costs 1.8 |
1.5 |
| Travel and entertainment costs 0.2 |
0.3 |
| Insurance costs 4.1 |
3.1 |
| Other operating costs 1) 0.6 |
-1.2 |
| Other operating expenses 75.6 |
55.1 |
1) Other Operating Costs include the reimbursement of expenses incurred on behalf of the JV (see note 10).
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Statutory Audit (only relating to statutory auditor) | 0.5 | 0.5 |
| Tax advisory services (only relating to statutory auditor) | 0.0 | 0.0 |
| Other non-audit services (only relating to statutory auditor) | 0.0 | 0.0 |
| Total auditors remuneration | 0.5 | 0.6 |
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Restructuring cost and employee termination benefits | -0.4 | 0.0 |
| Grant County WA tax settlement | 0.0 | 16.0 |
| FERC ruling refund | 0.0 | 0.7 |
| State of WA excise tax settlements | 0.0 | 0.2 |
| Employment matter legal settlement | 0.0 | -0.2 |
| C.A.R.E.S. Act Loan Forgiveness | 8.3 | 0.0 |
| Gain/loss on disposal of non-current assets | 0.0 | 0.2 |
| Total other income and expenses | 7.9 | 16.9 |
On June 28, 2021, the Company received notification that the C.A.R.E.S. Act loan held by REC Solar Grade Silicon LLC of USD 3.8 million plus accrued interest of USD 0.1 million had been repaid by the US Government. Accordingly, grant income of USD 3.9 million was reported on the other income and expense line of the consolidated statement of income (see note 17 and 21).
On July 19, 2021, the Company received notification that the C.A.R.E.S. Act loan held by REC Advanced Silicon Materials LLC of USD 4.4 million plus accrued interest of USD 0.1 million had been repaid by the US Government. Accordingly, grant income of USD 4.5 million was reported on the other income and expense line in the consolidated statement of income (see note 17 and 21).
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Salaries | 28.7 | 26.9 |
| Bonus and sales commission - employees | 2.7 | 1.7 |
| Share option expense | 0.4 | 2.4 |
| Social security tax | 2.1 | 2.0 |
| Defined Contribution | 1.7 | 1.6 |
| Other employee related costs | 6.0 | 4.6 |
| Employee benefit expenses | 41.7 | 39.4 |
The average number of permanent employees during 2021 was 289. The average number of permanent employees during 2020 was 280.
There were no loans or guarantees provided to employees at December 31, 2021 or 2020.
| (USD IN MILLION) | 2021 | 2020 |
|---|---|---|
| Interest income from financial assets not at fair value through profit or loss | 0.1 | 0.3 |
| Total income from financial assets not at fair value through profit or loss | 0.1 | 0.3 |
| Interest expenses for CTO tax dispute | 0.0 | -0.2 |
| Interest expenses for USD Senior Secured Bond | -12.7 | -12.7 |
| Interest expenses for Property Tax dispute | -0.9 | -0.3 |
| Interest expenses for PPP loan | 0.0 | -0.1 |
| Interest expenses for financial liabilities not at fair value through profit or loss | 0.0 | 0.0 |
| Expensing of up-front fees and costs | -0.4 | -0.4 |
| Interest on leaase liabilities | -8.8 | -7.6 |
| Other calculated interest expenses | 0.0 | -0.1 |
| Calculated/imputed interest other - added to principal - external | -0.8 | -0.4 |
| Capitalization of borrowing costs | 0.4 | 0.3 |
| Net change in fair value of financial equity investment through profit and loss | 0.0 | -18.0 |
| Other expenses from financial assets and liabilities | -0.5 | 4.2 |
| Net financial expenses | -23.6 | -35.2 |
| Net currency gains/losses | 0.8 | 4.5 |
| Net financial items | -22.7 | -30.4 |
Interest income in 2021 includes interest on municipal bonds of USD 0.1 million.
Calculated interest is interest calculated on prepayments (see note 20).
Interest paid is approximately USD 21.4 million in 2021 and USD 20.5 million in 2020.
Basic earnings per share (EPS) is calculated by dividing the profit/loss attributable to equity holders of the Company by the weighted average number of ordinary shares issued during the year, excluding treasury shares.
| 2021 | 2020 | |
|---|---|---|
| Profit/loss from continuing operations (USD IN MILLION) | -43.5 | -46.7 |
| Profit/loss from total operations (USD IN MILLION) | -30.1 | -46.7 |
| Weighted average number of ordinary shares in issue (IN MILLION) | 372.4 | 292.7 |
| Basic earnings per share from continuing operations (USD per share) | -0.12 | -0.16 |
| Basic earnings per share from total operations (USD per share) | -0.08 | -0.16 |
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares from the employee share options. If the effect increases EPS from continuing operations, it is antidilutive, and is then not included in diluted EPS.
The calculation shows that the share options are anti-dilutive for 2021and 2020. Consequently, dilutive EPS equals basic EPS for both years.
The Board of Directors did not propose any dividend payments for financial years 2021 or 2020.
| (USD IN MILLIONS) | 2021 | 2020 |
|---|---|---|
| Research and development expense | 1.7 | 1.4 |
| Development capitalized | -0.1 | 0.0 |
| Total research and development | 1.6 | 1.3 |
Research and development activities consist of improvements to current production processes and equipment as well as activities designed to enhance quality, improve efficiency, and reduce production cost. Research and development expenses in the table above include depreciation of USD 0.4 million in 2021 and 2020.
Purchase obligations consist of significant items for which the Group is contractually obligated to purchase from third parties at December 31, 2021. Operating lease payments show contractual minimum future payments.
In cases where contracts can be terminated or reduced, the reduced amount has been included as estimated payments in the first period subsequent to the reporting period. Consequently, the amounts presented in the table represent the estimated unavoidable portion of the Group's expected future costs related to purchase obligations and lease payments. It does not reflect the Group's expected future cash outflows.
Purchase obligations and operating lease payments are undiscounted and exclude the payment of amounts recognized for other assets, liabilities, and investments.
| (USD IN MILLION) | TOTAL FUTURE PAYMENTS |
2022 | 2023 | 2024 | 2025 | 2026 | AFTER 2026 |
|---|---|---|---|---|---|---|---|
| Total purchase of goods and services | 19.8 | 19.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total minimum operating lease payments | 0.1 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total purchase obligations and minimum operating lease payments | 19.9 | 19.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Purchase obligations consist primarily of long-term contracts for Metallurgical Grade Silicon. Operating leases are short-term or lowvalue leases that meet the exceptions in IFRS 16 Leases.
In 2018, REC Silicon entered into a supplemental agreement in relation to investment in the Yulin JV in China. The final equity settlement payment of USD 4.7 million, which was payable during December 2020, has not been made due to delinquent invoices for services provided to the Yulin JV by REC Silicon and the completion of performance testing specified in the Technology Transfer Agreement (TTA). REC Silicon and the Yulin JV continue to seek a resolution to these issues (See note 9 above).
Bank guarantees at December 31, 2021 amounted to USD 5.1 million, against which the Company has pledged USD 3.8 million of restricted cash. This includes bank guarantees for the benefit of REC Solar of USD 1.1 million with USD 0.2 million of restricted cash as security. USD 3.6 million of restricted cash will be used as part of the Nordea settlement (see note 14).
Bank guarantees at December 31, 2020 amounted to USD 5.1 million, against which the Company has pledged USD 4.0 million of restricted cash. This included bank guarantees for the benefit of REC Solar of USD 1.1 million with USD 0.2 million of restricted cash as security.
The Group provided parent company guarantees for the REC Solar Group related to the performance of solar panels and systems and the sale of REC ScanModule AB. The Group has been provided with offsetting guarantees by REC Solar Holdings AS. The guarantees are valid for relevant warranty periods and are limited by warranties provided on solar panels and systems. Parent company guarantees for REC Solar were USD 54.7 million at December 31, 2021 and 2020. The guarantees will decrease from 2022 to 2039 when they will expire in their entirety.
The Company has provided guarantees and indemnification agreements in connection with the bankruptcy of a former subsidiary (see notes 11, 17 and 30).
The estimated fair values of the Group's financial instruments are based on market prices and the valuation methods described below.
| 2021 | 2020 | ||||
|---|---|---|---|---|---|
| (USD IN MILLION) | ASSETS | LIABILITIES | ASSETS | LIABILITIES | |
| Derivatives option related to REC Wafer bankruptcy | 0.0 | 0.0 | 0.0 | 1.5 |
Determining the categorization of fair value measurements in accordance with IFRS 13 involves judgment.
Option contract is part of the indemnification agreements in connection with the REC Wafer Norway AS bankruptcy, and the estimated fair value is subject to change. Changes in estimated fair value, when they occur, are reported as part of the net gain on disposal of discontinued operations. On October 18, 2021, REC Silicon and Nordea entered into an agreement to settle claims associated with the indemnification loans. Under the agreement, Nordea releases all claims against REC Silicon for NOK 95 million (USD 10.8 million). The settlement will consist of approximately
NOK 32 million (USD 3.6 million) to be settled through an existing escrow account, which REC Silicon currently holds with Nordea, with the balance settled in one payment of approximately NOK 63 million (USD 7.2 million) by the end of February 2022. At December 31, 2021, the indemnification loan is NOK 95 million (USD 10.8 million) and the liability for the option contract related to the indemnification loan was USD 0.0 million.
The USD Senior Secured bonds (REC04) are traded on the Oslo Stock Exchange. Although trading is limited, market values of the bonds were estimated using trades near year-end (level 2 in the fair value hierarchy).
| 2021 | 2020 | |||||
|---|---|---|---|---|---|---|
| ESTIMATED | ESTIMATED | |||||
| (USD IN MILLION) | NOMINAL VALUE | CARRYING VALUE | FAIR VALUE | NOMINAL VALUE | CARRYING VALUE | FAIR VALUE |
| REC04 | 110.0 | 109.4 | 114.3 | 110.0 | 109.4 | 119.6 |
For all remaining financial assets and liabilities, the carry amounts represent a reasonable approximation of fair value.
The maximum credit risks related to financial assets are estimated in the table below.
| 2021 | 2020 | ||||
|---|---|---|---|---|---|
| (USD IN MILION) | CARRYING AMOUNT | MAX. EXPOSURE | CARRYING AMOUNT | MAX. EXPOSURE | |
| Cash and bank (incl. restricted bank accounts) | 114.9 | 114.9 | 139.4 | 139.4 | |
| Trade receivables and accrued revenues | 22.8 | 22.8 | 20.2 | 20.2 | |
| Other non-current and current receivables | 0.2 | 0.2 | 0.3 | 0.3 | |
| Finance receivables and short-term loans | 1.1 | 1.1 | 2.5 | 2.5 | |
| Total | 139.1 | 139.1 | 162.4 | 162.4 |
The bank guarantees, parent company guarantees, and indemnification agreements (see note 29) expose the Group to credit risk. The fair values of bank and parent company guarantees are estimated at zero. The maximum amount of the indemnification agreements is NOK 95 million and has been recognized in liabilities for NOK 95 million (USD 10.8 million) at December 31, 2021.
| GEOGRAPHICAL | 2021 | 2020 | SECTOR | 2021 | 2020 | INDUSTRY | 2021 | 2020 |
|---|---|---|---|---|---|---|---|---|
| China | 53% | 57% | Manufacturing | 68% | 62% | Electronic | 58% | 54% |
| North America | 15% | 10% | Wholesale | 25% | 30% | Solar | 36% | 38% |
| Taiwan | 12% | 8% | Other | 6% | 8% | Other | 6% | 8% |
| Europe | 9% | 4% | ||||||
| Singapore | 7% | 6% | ||||||
| Korea | 3% | 11% | ||||||
| Japan | 1% | 3% | ||||||
| Other Asia | 1% | 1% | ||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% |
The table above is calculated with respect to gross trade receivables only. The provision for loss on trade receivables is exclusively concentrated on customers in the solar industry in China and Taiwan.
The Group is dependent on a small number of customers. In 2021, three customers represented approximately 57 percent of revenue for the Group. In 2020 three customers represented 61 percent.
Approximately 57 percent of the revenue in 2021 for the Semiconductor segment consisted of three customers in both 2021 and 61 percent in 2020. The Solar Materials segment was represented by two customers in both 2021 and 2020.
Four customers represented approximately 50 percent of total trade receivables for The Group at December 31, 2021 (three customers represented approximately 50 percent at December 31, 2020).
Approximately 60 percent of the trade receivables for the Semiconductor segment consisted of three customers in both 2021 and 50 percent in 2020, while approximately 100 percent of the trade receivables for the Solar Materials segment was represented by four customers in both 2021 and 2020. See note 5 Segment Information above.
Generally, a more challenging and competitive market environment increases credit risk due to financially weaker customers and extended payment terms. Amounts overdue but not impaired between 90 and 365 days were associated with one customer for 2021 and 2020. (see table below)
| AGING OF RECEIVABLES | ||||||
|---|---|---|---|---|---|---|
| (USD IN MILLION) | TOTAL CARRYING AMOUNT |
NOT DUE | < 30 DAYS | PAST DUE >30<90 DAYS |
>90<365 DAYS | >365 DAYS |
| Trade receivables | 37.2 | 17.0 | 3.3 | 0.6 | 1.3 | 14.4 |
| Provision for loss on trade recivables | -14.4 | 0.0 | 0.0 | 0.0 | 0.0 | -14.4 |
| Other non-current and current receivables | 1.3 | 1.3 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total receivables | 24.2 | 18.4 | 3.3 | 0.6 | 1.3 | 0.0 |
| Prepaid Costs | 5.4 | |||||
| Total trade and other receivables | 29.6 |
| AGING OF RECEIVABLES PAST DUE |
||||||
|---|---|---|---|---|---|---|
| (USD IN MILLION) | TOTAL CARRYING AMOUNT |
NOT DUE | < 30 DAYS | >30<90 DAYS | >90<365 DAYS | >365 DAYS |
| Trade receivables | 34.6 | 18.7 | 0.6 | 0.8 | 0.1 | 14.4 |
| Provision for loss on trade recivables | -14.4 | 0.0 | 0.0 | 0.0 | 0.0 | -14.4 |
| Other non-current and current receivables | 1.6 | 1.6 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total receivables | 21.9 | 20.3 | 0.6 | 0.8 | 0.1 | 0.0 |
| Prepaid Costs | 5.6 | |||||
| Total trade and other receivables | 27.5 |
The provision for doubtful accounts includes the impact of adopting IFRS 9 which requires the Company to estimate expected credit losses (ECL) based upon historical experience. The Company has prepared analyses to calculate an ECL estimated at 0.31 percent of sales. However, because expected credit losses are low and accounts receivable consists of relatively large outstanding balances, use of the ECL to record credit losses at the time of sale would result in provisions for losses on trade receivables for future sales. Therefore, the Company uses the ECL rate as a guideline and evaluates the potential that balances will not be received based upon days outstanding, customer payment histories, and other information regarding past due balances. In general, provisions are recorded for accounts which are greater than 60 days past due unless there is a clear indication that payment will be received.
At December 31, 2021, approximately 45 percent of the not due receivables were secured by bank guarantees with no past due receivables secured by credit insurance. At December 31, 2020, approximately 63 percent of not due trade receivables were secured by bank guarantees.
A change in interest rates will affect interest payments on variable interest rate liabilities, cash, and restricted cash. The net effect of a one percentage point increase (decrease) in interest rates is estimated to affect profit or loss for the year by USD 1.0 (-0.1) million calculated on outstanding amounts at December 31, 2021 and USD -0.6 (0.6) million calculated on outstanding amounts at December 31, 2020.
The table below shows the estimated impact of a 10 percent increase in foreign currency rates compared to functional currencies for each entity. A decrease in the same percentage would create the opposite effect. The amounts calculated in the table below are for REC Silicon ASA at period end and do not reflect fluctuations during the year. The table below shows the effects of changes in exchange rates on positions denominated in NOK for 2021 and 2020.
CHANGE + 10% COMPARED TO FUNCTIONAL CURRENCIES (USD IN MILLION) 2021 2020 Financial assets 1.3 7.3 Financial liabilities -1.2 -2.5 Total 0.1 4.8 Of which to equity USD receivables as part of net investment 0.0 0.0 Rest is to profit or loss 0.1 4.8
The Group is involved in legal disputes in the ordinary course of business. Provisions are recognized for the expected outcomes in accordance with applicable accounting rules. Provisions are based on Group Management's estimate of likely outcomes based on prior experience, the source, and the facts and circumstances of a claim. The final outcomes of such disputes and litigation are subject to significant uncertainty and actual outcomes may vary from provisions recognized. Provisions are adjusted to reflect the most recent facts and circumstances.
Market disruptions caused by the COVID-19 pandemic are dissipating. However, current global shipping delays and port congestion is expected to result in the delay of shipments. REC Silicon has successfully mitigated the impact of the COVID-19 pandemic on its operations. However, increased infection rates in certain geographic regions and industries are having an adverse impact on economic activity and have affected markets serviced by REC Silicon.
Company management and the Board of Directors will continue to monitor the situation and take appropriate action as additional developments occur.
REC Silicon's Moses Lake, Washington facility was shut down during the second quarter of 2019 due to difficult market conditions and Chinese tariffs on polysilicon produced in the United States. Accordingly, operating costs and activities have been reduced to levels required to safely maintain the facility in a non-operating status and to retain the capability to restart the facility in the future. The Company's plans to reopen the Moses Lake facility are in part dependent upon the restoration of access to polysilicon markets in China, the creation of a non-Chinese solar value chain, or the development and commercialization of technology for the use of silane to manufacture silicon anode material for use in lithium-ion batteries. The realization of these initiatives is subject to substantial uncertainty and may depend upon the implementation of trade measures to incentivize investments and will require REC Silicon to make additional investments. Accordingly, plans to restart the facility in Moses Lake, Washington is subject to substantial uncertainty.
Additional impairments and provisions would be required if the Moses Lake facility is not restarted.
If production at the Moses Lake facility is restarted, the reversal of impairments might be required.
The indemnification loan is related to the bankruptcy of a former subsidiary in 2012. On October 18, 2021, REC Silicon and Nordea entered into an agreement to settle claims associated with the indemnification loans. Under the agreement, Nordea releases all claims against REC Silicon for NOK 95 million (USD 10.8 million). At December 31, 2021, the indemnification loan is NOK 95.0 million (USD 10.8 million). For additional information regarding the indemnification loan refer to note 17.
In 2017, 2018, 2019, 2020 and 2021 1,200,000 share options were granted to certain key employees. These programs are for five years. The first three years are a lock-up period. The vesting of the options for eligible employees will take place in equal parts after the third, fourth and fifth years of each program, on each June 30 of each year. The options were granted at a strike price of NOK 11.9 for 2017, NOK 15.2 for 2018, 8.1 in 2019, 3.5 in 2020, and 17.5 in 2021. These option programs are synthetic programs; the options will be settled in cash. Cash payments due to an eligible employee following any disbursement date is limited to a maximum amount in each calendar year equal to the employee's base annual salary
effective January 1st in the year of the disbursement. Any unexercised options are forfeited upon termination of employment, unless the employee retires, in which case options are maintained.
Fair values were estimated using the Black-Scholes option price model. Expected volatility was based on historical volatility and no dividends were expected in the periods. Expected lifetime and vesting periods were set at the time of allocation based on expectations that employees would exercise options early due to the structure of the programs, including the annual profit cap, and the volatility of the Company's share price.
| PROGRAM | EXERCISE PRICE (NOK) |
NO. OPTIONS | TOTAL FAIR VALUE (USD MILLION) |
REMAINING CONTRACTUAL LIFE (YEAR) |
TOTAL EXPENSED (USD MILLION) |
REMAINING TO BE EXPENSED (USD MILLION) |
|---|---|---|---|---|---|---|
| 2017 | 11.9 | 310,726 | 0.2 | 0.5 | 0.2 | 0.0 |
| 2018 | 15.2 | 731,416 | 0.5 | 1.5 | 0.4 | 0.1 |
| 2019 | 8.1 | 1,089,423 | 1.3 | 2.5 | 0.9 | 0.4 |
| 2020 | 3.5 | 1,089,704 | 1.5 | 3.5 | 0.7 | 0.9 |
| 2021 | 17.5 | 1,200,000 | 1.0 | 4.5 | 0.2 | 0.8 |
| Total | 4,421,269 | 4.5 | 2.2 | 2.3 |
Differences between the number of options granted for each year and the number of outstanding options in the table above are due to options that have been forfeited upon termination of employment, and also by options exercised. Options forfeited for 2021 and 2020 were 370,275 and 89,147 respectively. During 2021 the total amount of shares exercised were 597,022 from program year 2016, 621,451 from program year 2017, and 365,708 from program year 2018.
The amount recognized in the statement of income for share-based compensation was USD 0.4 million in 2021 and USD 2.4 million in
The settlement of the previously announced strategic equity investment by Hanwha Solutions was successfully completed on January 19, 2022. Gross proceeds of the settlement were NOK 964 million (48,213,001 shares at NOK 20). The new share capital of the Company is NOK 420,625,659, divided into shares 420,625,659, each with a par value of NOK 1.
On March 23, 2022 Aker Horizons ASA's wholly owned subsidiary Aker Horizons Holding AS ("Aker Horizons") entered into an agreement with Hanwha Solutions Corporation and Hanwha Corporation (together, "Hanwha") to sell all of Aker Horizons' shares in REC Silicon ASA ("REC Silicon"). Aker Horizons will sell 70,104,276 shares in REC Silicon at a purchase price of NOK 20 per share, resulting in total proceeds to Aker Horizons of approximately NOK 1,402 million. Following completion of the transaction, Aker Horizons will no longer own any shares or hold any voting rights in REC Silicon. After completion Hanwha will own 140,208,552 shares, 33.33 percent, of REC Silicon.
Completion of the transactions is expected to occur before the annual general meeting in REC Silicon scheduled in May 2022, subject to a customary anti-trust filing in the U.S. Kristian Røkke will step down as chairman of the board of REC Silicon in connection with completion of the transaction. An extraordinary general meeting in REC Silicon will be called for to appoint new board members.
| NOTES | 2021 | 2020 |
|---|---|---|
| B | 30 | 30 |
| C | 133 | 133 |
| D | 193,700 | 219,400 |
| E | 3,630 | 3,747 |
| 197,493 | 223,310 | |
| D | 0 | 5,208 |
| 277 | 165 | |
| E | 225 | 214 |
| 502 | 5,587 | |
| E | 93,550 | 108,194 |
| 94,052 | 113,781 | |
| 291,545 | 337,091 | |
| AT DECEMBER 31 (USD IN THOUSAND) | NOTES | 2021 | 2020 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Share capital | G | 44,125 | 44,125 |
| Share premium | G | 95,670 | 95,670 |
| Total paid-in capital | G | 139,795 | 139,795 |
| Other equity and retained earnings | G | 28,559 | 60,589 |
| Total shareholders' equity | G | 168,354 | 200,384 |
| Non-current liabilities | |||
| Interest-bearing liablities | F | 109,389 | 108,972 |
| Total non-current liabilities | 109,389 | 108,972 | |
| Current liabilities | |||
| Trade payables | 146 | 48 | |
| Social security tax, VAT and other taxes | 23 | 16 | |
| Interest-bearing liabilities | F | 10,772 | 23,440 |
| Derivatives | L | 0 | 1,488 |
| Other current liabilities | L | 2,862 | 2,744 |
| Total current liabilites | 13,802 | 27,735 | |
| Total liabilities | 123,191 | 136,708 | |
| Total equity and liabilities | 291,545 | 337,091 | |
Lysaker, March 24, 2022 Board of Directors
Kristian Røkke Chairman of the Board
Annette Malm Justad Member of the Board
Audun Stensvold Member of the Board
Lene Landøy Member of the Board
Seung Deok Park
Member of the Board
James A. May II President and CEO
| YEAR ENDED DECEMBER 31 (USD IN THOUSAND) | NOTES | 2021 | 2020 |
|---|---|---|---|
| Revenues | 0 | 0 | |
| Employee benefit expenses | H | -307 | -216 |
| Other operating expenses | J | -1,973 | -1,190 |
| EBIT | -2,279 | -1,407 | |
| Interest income, internal | K | 0 | 0 |
| Interest income, external | 22 | 89 | |
| Other financial income | K | 13,407 | 0 |
| Interest expense, external | K | -13,066 | -13,175 |
| Other financial expenses | K | -27 | 4,718 |
| Net currency gains/losses | K | 822 | 4,507 |
| Impairment of financial assets | M | -30,908 | -70,975 |
| Net financial items | -29,750 | -74,836 | |
| Profit/loss before income tax | -32,030 | -76,243 | |
| Income tax expenses | I | 0 | 22,525 |
| Profit/ loss for the year | -32,030 | -53,718 | |
| Profit/loss for the year is distributed as follows | |||
| Other equity (uncovered loss) | G | -32,030 | -53,718 |
| Total distributed | -32,030 | -53,718 |
| YEAR ENDED DECEMBER 31 (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Cash flows from operating activities | ||
| Profit/loss before tax | -32,030 | -76,243 |
| Impairment losses financial assets 1) | 30,908 | 70,975 |
| Changes in receivables external | -112 | -51 |
| Changes in receivables internal 1) | 0 | -5,208 |
| Changes in payables | 216 | -5,149 |
| Reversal of derivatives and indemnification loan | -13,407 | 0 |
| Currency effects not cash flow or not related to operating activities 2) | -741 | -1,095 |
| Other items 3) | 416 | 367 |
| Net cash flow from operating activities | -14,750 | -16,404 |
| Cash flow from investing activities | ||
| Proceeds from finance receivables and restricted cash | 106 | -141 |
| Net cash flow from investing activities | 106 | -141 |
| Cash flow from financing activities | ||
| Increase in equity | 0 | 105,877 |
| Net cash flow from financing activities | 0 | 105,877 |
| Net increase/decrease in cash and cash equivalents | -14,644 | 89,331 |
| Cash and cash equivalents at the beginning of the period | 108,194 | 18,862 |
| Cash and cash equivalents at the end of the period | 93,550 | 108,194 |
| 1) Impairment losses financial assets. See note M. |
2) The Currency gains and losses are primarily related to liabilities in NOK.
3) Other items consist of the expensing of up-front loan fees and amortization of interests.
| NOTE | PAGE | |
|---|---|---|
| A | Summary of significant accounting principles and general | 87 |
| B | Equipment and intangible assets | 88 |
| C | Shares in subsidiaries | 88 |
| D | Receivables from subsidiaries | 89 |
| E | Cash and cash equivalents and restricted bank accounts | 89 |
| F | Interest bearing liabilities | 90 |
| G | Equity | 90 |
| H | Employee benefits | 91 |
| I | Income taxes | 92 |
| J | Other operating expenses | 94 |
| K | Interest and currency | 95 |
| L | Derivatives, other current liabilities | 96 |
| M | Impairment of financial assets | 96 |
| N | Research and development | 97 |
| O | Guarantees and indemnification agreements | 98 |
| P | Related parties | 98 |
| Q | Contingent liabilities | 98 |
| R | Events after the reporting period | 98 |
REC Silicon ASA (the Company) is a holding company with corporate management and financial functions.
The financial statements have been prepared in compliance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles (NGAAP) in effect at December 31, 2021 The Company's reporting and functional currency is in US Dollar (USD).
The reporting currency used in the consolidated financial statements is US Dollar (USD). The consolidated financial statements of the Group have been prepared in accordance with IFRS. The Company's accounting principles are similar to the accounting principles for the Group unless otherwise noted. Financial statement disclosures for the Company that are substantially different from the disclosures for the Group are shown below. See notes to the consolidated financial statements.
Group contributions and dividends that are subject to approval by the Annual General Meeting are recognized according to IFRS in the consolidated financial statements at the time of approval. For the Company's financial statements according to NGAAP, these are recognized in the fiscal year they relate to. Group contributions to subsidiaries are recognized as investment in shares in subsidiaries, net of tax.
Subsidiaries, jointly controlled entities, and associates are carried at the lower of cost or estimated recoverable amount in the Company's financial statements. In the consolidated financial statements, these are consolidated or accounted for using the equity method.
In the Company's financial statements, payments expected to be made during the next 12 months on non-current financial assets or liabilities are not reclassified to current financial assets or liabilities. In the consolidated financial statements, these are reclassified.
The financial statements are presented in USD, rounded to the nearest thousand unless otherwise stated. As a result of rounding adjustments, the figures in one or more rows or columns included in the financial statements may not add up to the total of that row or column.
The financial statements of the Company have been approved for issue by the Board of Directors on March 24, 2022 and are subject to approval by the Annual General Meeting scheduled for May 11, 2022.
88 Notes to the financial statements, REC Silicon ASA REC Silicon Annual Report 2021
Equipment and intangible assets consist of office equipment and furniture.
There has been no addition and disposal during 2021 and 2020. The tangible assets were fully depreciated at December 31, 2019.
| CARRYING AMOUNT DECEMBER 31 (USD IN THOUSAND) |
||||
|---|---|---|---|---|
| COMPANY | OWNERSHIP/ VOTING RIGHT | BUSINESS OFFICE | 2021 | 2020 |
| REC SILICON AS | 100% | Bærum | 11 | 11 |
| REC SOLAR AS | 100% | Bærum | 122 | 122 |
| Total | 133 | 133 |
In 2020 the Company impaired the shares in REC Silicon AS with USD 12,927 thousand as a consequence of REC Silicon AS similar impairment of their shares in REC Silicon Pte Ltd. See note M.
| SUB-SUBSIDARIES | OWNERSHIP/VOITING RIGHT | BUSINESS OFFICE |
|---|---|---|
| REC Solar AS subsidiaries | ||
| Gitzeli Solar Energy Production S.A. | 100% | Greece |
| REC Greece S.A. | 100% | Greece |
| REC Silicon AS subsidiaries | ||
| REC Silicon Inc | 100% | Moses Lake, USA |
| REC Solar Grade Silicon LLC | 100% | Moses Lake, USA |
| REC Advanced Silicon Materials LLC | 100% | Butte, USA |
| REC Silicon Pte. Ltd. | 100% | Singapore |
At December 31, 2021, REC Solar AS's subsidiaries were under liquidation.
Non-current interest-bearing receivables from subsidiaries are USD loans to the subsidiaries in USA (REC Silicon Inc. and REC Solar Grade Silicon LLC) with carrying value USD 193,700 thousand at December 31, 2021 and USD 219,400 thousand at December 31, 2020. In 2021 the Company impaired these receivables by USD 25,700 thousand and by USD 58,048 thousand in 2020. See note M.
Other current receivables consist of receivable/ loan to REC Silicon Pte. Ltd. The Company has impaired the receivables/ loan to REC Silicon Pte. Ltd due to the subsidiary's financial situation and obligations. See note M.
Cash and cash equivalents consist of bank deposits.
| AT DECEMBER 31 (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Non-current | 3,630 | 3,747 |
| Current | 225 | 214 |
| Total restricted bank accounts | 3,855 | 3,961 |
The non-current restricted bank account of USD 3,630 thousand is an escrow account which the Company holds with Nordea and has been used as a part of the settlement of the indemnification loan by the end of February 2022. See note F.
At December 31, 2021 current restricted bank accounts include USD 41 thousand to secure employees' tax deductions (board members) in REC Silicon ASA.
At December 31, 2020 current restricted bank accounts include USD 24 thousand to secure employees' tax deductions in REC Silicon ASA.
| AT DECEMBER 31 (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Non-current | ||
| USD senior secured bond | 110,000 | 110,000 |
| Unamortized fees | -611 | -1,028 |
| USD senior secured bond | 109,389 | 108,972 |
| Total non-current interest bearing liabilities | 109,389 | 108,972 |
| Current | ||
| Indemnification loan | 10,772 | 23,440 |
| Total interest bearing liabilities | 120,160 | 132,412 |
On October 18, 2021 the Company and Nordea entered into an agreement to settle claims associated with the indemnification loans. Under the agreement Nordea releases all claims against the Company for NOK 95 million (USD 10.8 million). Consequently, NOK 105 million (USD 11.9 million) of total NOK 200 million of the indemnification loans have been taken to profit and loss. The settlement consists of approximately NOK 32 million (USD 3.6 million) to be settled through an existing escrow account which the Company holds with Nordea with the balance settled in one payment of approximately NOK 63 million (USD 7.2 million) by the end of February 2022.
See note 17 to the consolidated financial statements for details of the Company's interest-bearing liabilities.
| OTHER EQUITY AND RETAINED EARNINGS |
||||
|---|---|---|---|---|
| (USD IN THOUSAND) | SHARE CAPITAL | SHARE PREMIUM | (UNCOVERED LOSSES) | TOTAL |
| Equity at January 1, 2020 | 33,918 | 0 | 114,307 | 148,225 |
| Share issue | 10,207 | 95,670 | 0 | 105,877 |
| Profit for the year | 0 | 0 | -53,718 | -53,718 |
| Equity at December 31, 2020 | 44,125 | 95,670 | 60,589 | 200,384 |
| Profit for the year | 0 | 0 | -32,030 | -32,030 |
| Equity at December 31, 2021 | 44,125 | 95,670 | 28,559 | 168,354 |
At December 31, 2021, REC Silicon ASA had 39,420 shareholders (30,677 at December 31, 2020). The total number of outstanding shares was 372,412,658 at December 31, 2021 and at December 31, 2020, each with a par value of NOK 1.
No capital increase has taken place in 2021. However, see note R Event after reporting period, regarding private placement in January 2022.
On October 14, 2020, the Company raised approximately NOK 1,000 million in gross proceeds through the Private Placement of 92,592,592 new shares, at a price per share of NOK 10.80.
The Private Placement consisted of two separate tranches: one tranche with 27,982,000 new shares in the Company and a second tranche with 64,610,592 new shares. The settlement of Tranche 1 occurred on October 27, 2020 and the settlement for Tranche 2 occurred on November 19, 2020 following approval by an Extraordinary General Meeting in the Company of the issuance of the New Shares under Tranche 2. The completion of Tranche 1 was subject to approval by the Company's Board of Directors pursuant to an authorization granted by the Company's Annual General Meeting held on May 12, 2020. The Board of Directors of REC resolved to issue 27,982,000 new shares in the Company, referred to as the "Tranche 1" shares.
The registration of the new shares issued in Tranche 1 with the Norwegian Register of Business Enterprises was completed on October 26, 2020 and the Company received proceeds of NOK 290.2 million (approximately USD 31.4 million) net of the brokers fee on October 27, 2020. Subsequent to this registration, the new share capital of the Company was NOK 307,802,066, divided into 307,802,066 shares of NOK 1 par value.
The registration of the new shares issued in Tranche 2 with the Norwegian register of Business Enterprises was completed on November 18, 2020 and the Company received proceeds of NOK 673.4 million (approximately USD 74.7 million) net of the brokers fee on November 19, 2020. Subsequent to this registration, the new share capital was NOK 372,412,658 divided into 372,412,658 shares of NOK 1 par value.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Payroll | -232 | -168 |
| Social security tax | -16 | -46 |
| Pension expense including social security tax | 0 | -2 |
| Other employee related costs | -59 | -2 |
| Employee benefit expenses | -307 | -217 |
The average number of employees measured in man-years was 0.0 during 2021 and 0.25 for 2020. There were no loans or guarantees to employees at December 31, 2021 and 2020.
Payroll includes compensation to Board of Directors. For compensation and shareholdings for Group management and Board of Directors see note 16 to the consolidated financial statements.
At December 31, 2021 the Company had no employees and had thereby stopped to maintain a defined contribution pension plan for employees. As long as the company had employees, the company maintained a contribution plan that fulfilled the requirements of Norwegian law: "Lov om obligatorisk tjenestepensjon" during 2020.
| 2021 (USD IN THOUSAND) |
2020 | |
|---|---|---|
| Current income tax benefit (+) / expense (-) for the year | 0 | 0 |
| Total deferred tax benefit (+) / expense (-) for the year | 0 | 0 |
| Changes in estimates related to prior years1) | 0 | 22,525 |
| Total income tax benefit (+) / expense (-) for the year in the income statement | 0 | 22,525 |
1) See note Q Contingent Liabilities in relation to the reversal of the estimated tax expense of USD 22,525 thousands in 2020.
| (USD IN THOUSAND) 2021 |
2020 |
|---|---|
| Profit/Loss for before taxes -32,030 |
-76,243 |
| Tax calculated at domestic tax rate of 22 % 7,047 |
16,773 |
| Expenses not deductible for tax (-) /reversal (+)(permanent differences) 1) 0 |
1,015 |
| Impairment loss (permanent differences) 2) -6,800 |
-15,614 |
| Other permanent differnces 3) 4,266 |
2,513 |
| Effects of not recognized deferred tax assets, including reversal of previous years -4,514 |
-4,687 |
| Current income tax benefit (+) / expense (-) for the year 0 |
0 |
| Changes in estimates related to prior years 0 |
22,525 |
| 0 Total income tax benefit (+) / expense (-) for the year in the income statement |
22,525 |
| Effective tax rate 0% |
0% |
1) Reversal of prior years' calculated interest on tax liability
2) Impairment of financial assets.
3) Other permanent differences consist of income and cost registered in USD financial statement, but not applicable for tax calculation, and income and cost registered in NOK Tax financial statement, but not applicable for the USD financial statement.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Profit/Loss for before taxes | -32,030 | -76,243 |
| Impairment and losses on shares and loans - permanent differences | 30,908 | 70,975 |
| Expenses not deductible for tax (+) / reversal (-) (permanent differences) | 0 | -4,613 |
| Other permanent differnces 1) | -19,171 | -11,423 |
| Changes in temporary differences | 31,682 | 9,363 |
| Basis for income tax before utilization (-) / increase (+) of tax losses carried forward | -11,389 | -11,940 |
| Utilization (-) / increase (+) of tax losses carried forward | 11,389 | 11,940 |
| Basis for current tax in the income statement | 0 | 0 |
| Estimated 22 percent current income tax | 0 | 0 |
| Current income tax benefit (+) expense (-) for the year | 0 | 0 |
| Basis for current tax in the income statement | 0 | 0 |
| Cost for capital increase | 0 | -4,336 |
| Tax loss caried forward | 0 | 4,336 |
| Basis for current tax in balance sheet | 0 | 0 |
| Current tax asset (+) / liability (-) | 0 | 0 |
1) Other permanent differences consist of income and cost registered in USD financial statement, but not applicable for tax calculation, and income and cost registered in NOK Tax financial statement, but not applicable for the USD financial statement.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Fixed assets | -42 | -63 |
| Up-front fee and Capitalized borrowing cost | 550 | 956 |
| Interest bearing liabilities | -10,772 | -23,440 |
| Derivatives | 0 | -1,488 |
| Net urealized gains on non-current foreign exchange receivables and liabilities | 302,065 | 285,448 |
| Other | -9,071 | -9,376 |
| Tax losses carried forward 1) | -590,949 | -599,331 |
| Total temporary differences and tax loss carried forward | -308,219 | -347,294 |
| Tax percentage | 22% | 22% |
| Deferred tax assets (-) / liabilities (+) | -67,808 | -76,405 |
| Deferred tax assets not recognized | 67,808 | 76,405 |
| Deferred tax assets (-) / liabilities (+) in the balance sheet | 0 | 0 |
| Change in deffered tax assets (-)/ liabilities (+) in the balance sheet | 0 | 0 |
| Total deferred tax benefit (-)/ expense (+) for the year | 0 | 0 |
1) Tax losses carried forward expressed in NOK have increased in 2021, however due to translation differences, the tax losses carried forward have decreaased when expressed in USD. See following table
| (USD IN THOUSAND) | BALANCE JAN 1, 2021 |
RECOGNIZED IN INCOME |
RECOGNIZED IN EQUITY |
TRANSLATION DIFFERENCES |
BALANCE DEC 31, 2021 |
|---|---|---|---|---|---|
| Fixed assets | -63 | 19 | 0 | 2 | -42 |
| Up-front fee and capitalized borrowing cost | 956 | -384 | 0 | -22 | 550 |
| Interest bearing liabilities | -23,440 | 12,211 | 0 | 457 | -10,772 |
| Derivatives | -1,488 | 1,477 | 0 | 11 | 0 |
| Net urealized gains on non-current foreign exchange receivables and liabilities | 285,448 | 29,748 | 0 | -13,131 | 302,065 |
| Other | -9,376 | 0 | 0 | 305 | -9,071 |
| Tax losses carried forward | -599,331 | -11,389 | 0 | 19,771 | -590,949 |
| Total | -347,294 | 31,682 | 0 | 7,393 | -308,219 |
| (USD IN THOUSAND) | BALANCE JAN 1, 2020 |
RECOGNIZED IN INCOME |
RECOGNIZED IN EQUITY |
TRANSLATION DIFFERENCES |
BALANCE DEC 31, 2020 |
|---|---|---|---|---|---|
| Fixed assets | -86 | 23 | 0 | 0 | -63 |
| Up-front fee and capitalized borrowing cost | 1,264 | -312 | 0 | 5 | 956 |
| Interest bearing liabilities | -22,778 | 0 | 0 | -661 | -23,440 |
| Derivatives | -1,446 | 0 | 0 | -42 | -1,488 |
| Net urealized gains on non-current foreign exchange receivables and liabilities | 299,438 | -20,589 | 0 | 6,599 | 285,448 |
| Other | -9,111 | 0 | 0 | -264 | -9,376 |
| Interest limitation | -12,328 | 11,515 | 0 | 813 | 0 |
| Tax losses carried forward | -571,405 | -11,940 | -4,336 | -11,650 | -599,331 |
| Total | -316,454 | -21,304 | -4,336 | -5,201 | -347,294 |
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Operating lease expenses | -18 | -17 |
| Audit remuneration | -147 | -132 |
| Consultancy fee | -865 | -606 |
| Insurance | -229 | -170 |
| Other operating expenses | -713 | -265 |
| Total Other operating expenses | -1,973 | -1,190 |
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Statutory audit | -122 | -132 |
| Other non-audit services | -25 | 0 |
| Total auditor's remuneration expensed | -147 | -132 |
The future aggregate minimum payment obligation are as follows
| 2021 | 2020 | |||||
|---|---|---|---|---|---|---|
| (USD IN THOUSAND) | OPERATING LEASE | OTHER | TOTAL | OPERATING LEASE | OTHER | TOTAL |
| No later than 1 year | 0 | 67 | 67 | 7 | 40 | 47 |
| Later than 1 year but not later than 5 years | 0 | 0 | 0 | 0 | 0 | 0 |
| Later than 5 years | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 0 | 67 | 67 | 7 | 40 | 47 |
The Company conducts financing for the Group. The Company has loans to the US operation and minor receivables on REC Silicon Pte Ltd. See note D and M. In 2019 the Company and the US borrowers agreed to make addendums to the loan agreements. Due to the borrowers' financial position and outlook for the next two years (2019 and 2020) no interest should be calculated and paid. In 2021 the Company and the borrowers agreed to make new addendums to the loan agreements. Due to the borrowers' financial position and outlook for the next two years (2021 and 2022) no interest should be calculated and paid. If the circumstances change during the period, the interest shall be changed back to the interest described in the loan agreements. No interest has been recognized in 2019, 2020 and 2021.
Other financial income consists of reversal of derivatives and partly reversal of the indemnification loan.
On October 18, 2021 the Company and Nordea entered into an agreement to settle claims associated with the indemnification loans. Under the agreement Nordea releases all claims against the Company for NOK 95 million (USD 10.8 million). Consequently, NOK 105 million (USD 11.9 million) of total NOK 200 million of the indemnification loans have been taken to profit and loss. The settlement will consist of approximately NOK 32 million (USD 3.6 million) to be settled through an existing escrow account which the Company holds with Nordea with the balance settled in one payment of approximately NOK 63 million (USD 7.2 million) by the end of February 2022.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Calculated interest on tax liability | 0 | -158 |
| Interest USD Senior Secured bond | -13,066 | -13,017 |
| Total Interest expenses, external | -13,066 | -13,175 |
Interest expenses on USD Senior Secured bond include expensing of upfront fees, see note 25 to the consolidated financial statements.
Other financial expenses of USD 4,507 thousand in 2020, refers to reversal of accrued interest on tax liabilities solved in 2020.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Net currency gains on liabilities denominated in NOK | 749 | 1,450 |
| Net currency gains / losses on other - mainly bank deposit | 73 | 3,057 |
| Total Net currency gains and losses | 822 | 4,507 |
Derivatives consisted of an option contract as part of the indemnification agreement associated with the REC Wafer bankruptcy. On October 18, 2021 the Company and Nordea entered into an agreement to settle claims associated with the indemnification loans. Consequently, the derivative has been taken to profit and loss, NOK 12.7 million (USD 1.4 million). The liability for the option contract related to the indemnification loans is zero at December 31, 2021.
| AT DECEMBER 31 (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Accrued interest on interest-bearing liabilities | 2,741 | 2,741 |
| Accrued operating costs | 121 | 0 |
| Total Other current liabilities | 2,862 | 2,741 |
| (USD IN THOUSAND) 2021 |
2020 |
|---|---|
| 108,104 At cost January 1 |
108,104 |
| New Shares 0 |
0 |
| At cost December 31 108,104 |
108,104 |
| Accumulated impairment at January 1 -108,093 |
-95,167 |
| Impairment 0 |
-12,926 |
| -108,093 Accumulated impairment at December 31 |
-108,093 |
| Carrying value at December 31 11 |
11 |
REC Silicon ASA owns all the shares in REC Silicon AS which owns REC Silicon Inc. that is the holding company of the USA operations. In addition, REC Silicon AS owns all the shares in REC Silicon Pte Ltd.
In 2020 REC Silicon AS impaired the value of the shares in REC Silicon Pte Ltd with USD 12.9 million. As a consequence of the impairment loss in REC Silicon AS, REC Silicon ASA impaired their shares in REC Silicon AS.
REC Silicon AS shares in REC Silicon Inc, were impaired to zero in 2016.
| (USD IN THOUSAND) | 2021 | 2020 |
|---|---|---|
| Par value at January 1 | 1,001,928 | 1,001,928 |
| Accumulated impairment at January 1 | -782,528 | -724,480 |
| Carrying value at January 1 | 219,400 | 277,448 |
| Addition | 0 | 0 |
| Impairment | -25,700 | -58,048 |
| Carrying value at December 31 | 193,700 | 219,400 |
| Par value at December 31 | 1,001,928 | 1,001,928 |
| Accumulated impairment at December 31 | -808,228 | -782,528 |
The impairment loss in 2021 represents the book value in excess of the fair value of loans to REC Silicon ASA's US subsidiaries.
Estimates of the value of US operations were calculated using the fair values of financial assets and liabilities held by the US entities and the net present value of cash flows of operations in the United States.
| 0 |
|---|
| 0 |
| 0 |
| 5,208 |
| 0 |
| 5,208 |
| 5,208 |
| 0 |
The Company has impaired the receivables/loan to REC Silicon Pte. Ltd due to the subsidiary's financial situation and obligations.
REC Silicon ASA did not conduct any activities associated with research and development during 2021 and 2020.
At December 31, 2021 bank guarantees amounted to USD 1,137 thousand (USD 1,137 thousand at December 31, 2020). These guarantees were cosigned by REC Solar.
The Company and some of its subsidiaries are jointly and severally liable for certain loans established by the Company.
Related parties' transactions for the Company are primarily interest income (see the income statement and note K) and loans to its subsidiaries (see note D and M). These loans are included in non-current receivables from subsidiaries (see the balance sheet). Group Management and Board of Directors' compensation, ownership of shares and options, loan agreements and guarantees are shown in note 16 to the consolidated financial statements.
On September 30, 2020, REC Silicon was informed by the Norwegian Tax Administration through legal counsel that issues raised to deny deductions taken by REC Silicon during tax years 2009 through 2011 had been dropped. In addition, the Norwegian Tax Administration informed that after a thorough examination, also considering the elapsed time, they did not find a reason to move forward with other issues raised in the draft decision including the classification of capital inflows as equity deposits. As a result, the tax benefit of USD 22.5 million for 2020 represents the reversal of estimated tax expense previously reported by the Company as a result of this examination. In addition, accrued interest of USD 4.7 million was reversed in 2020.
On January 19, 2022 the Company successfully completed a private placement of Equity with a gross proceeds of NOK 964million (48,213,001 shares at NOK 20). The new share capital of the Company is NOK 420,625,659, divided into 420,625,659 shares, each with a par value of NOK 1.
| KPMG AS Sørkedalsveien 6 Postboks 7000 Majorstuen 0306 Oslo |
Telephone +47 45 40 40 63 Internet www.kpmg.no Enterprise 935 174 627 MVA |
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| To the General Meeting of REC Silicon ASA | |||
| Independent Auditor's Report | |||
| Report on the Audit of the Financial Statements | |||
| Opinion | |||
| We have audited the financial statements of REC Silicon ASA, which comprise: | |||
| • | cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and |
The financial statements of the parent company REC Silicon ASA (the Company), which comprise the balance sheet as at 31 December 2021, the income statement and statement of |
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| • | consolidated statement of income, consolidated statement of comprehensive income, significant accounting policies. |
The consolidated financial statements of REC Silicon ASA and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of |
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| In our opinion: | |||
| • | the financial statements comply with applicable statutory requirements, | ||
| • accepted in Norway. |
the financial statements give a true and fair view of the financial position of the Company as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with Norwegian Accounting Act and accounting standards and practices generally |
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| • EU. |
the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the |
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| Our opinion is consistent with our additional report to the Audit Committee. | |||
| Basis for Opinion | |||
| We conducted our audit in accordance with International Standards on Auditing (ISAs). Our Group as required by laws and regulations and the International Ethics Standards Board for and appropriate to provide a basis for our opinion. |
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient |
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| Regulation (537/2014) Article 5.1 have been provided. | To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit | ||
| shareholders on 14 May 2001 for the accounting year 2001. | We have been the auditor of the Company for 21 years from the election by the general meeting of the | ||
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Refer to the section "Risk Factors" in the Board of Director's report, the accounting policies in note 2.8, the critical accounting judgments and key sources of estimation uncertainty described in Note 4, and Note 8 in the consolidated financial statements and parent company financial statements note M.
| The Key Audit Matter | How the matter was addressed in our audit |
|---|---|
| The impairment assessment of the Solar Materials CGU with a total carrying value of USD 19,2 million is considered a risk area due to decreases in the market capitalization of the Company, recurring net operating losses, and changes in the timing of the anticipated restart of FBR production at the Moses Lake production facility. The recoverable amount is determined based on value in use calculations which rely on external factors, managements' assumptions, and estimated future performance. Key assumptions applied in management's assumptions are future revenues (sales prices and sales volume), cost of major inputs, conversion costs and efficiency (production volume), and maintenance capital expenditures, in addition to the timing of restart of the Moses Lake production facility. Significant professional judgement is required when evaluating whether management's assessment are reasonable and supportable. In the parent company financial statements, the abovementioned impairment assessment resulted in an impairment of loans to subsidiaries of USD 25,7 million. In the consolidated financial statements, no additional impairment or reversal of impairment was recognized. |
Our audit procedures in this area included: - We evaluated the historical accuracy of management's budgets and forecasts and challenged management on the current year cash flow forecasts as well as the timing of future cash flows; - We evaluated the growth assumptions and management's future business plan assumptions; - We engaged our own valuation specialists to assess the mathematical and methodological integrity of management's impairment models and the discount rates applied with reference to market data; - We evaluated management's sensitivity analysis to determine the impact of reasonably possible changes and by comparing to our own sensitivity analysis; - We considered the impairment disclosures in light of the requirements and if information regarding key assumptions and sensitivities adequately reflected the underlying assets impairment assessments; and - We compared the carrying value of loans to the subsidiaries with the calculated value of the assets, to assess if valuation of loans is consistent with the value of the assets. |
The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors' report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors' report nor the other information accompanying the financial statements.
In connection with our audit of the financial statements, our responsibility is to read the Board of Directors' report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors' report and the other
5
An Alternative Performance Measure (APM) is a measure of historic or future financial performance, financial position, or cash flows other than a financial measure defined or specified in the applicable financial reporting framework.
The Company has identified the following APMs used in reporting:
| EBIT | EBIT is an acronym for Earnings Before Tax and represents profit/loss excluding income tax expense/benefit, net financial items, and share of profit/loss from investments in associates. |
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| EBIT is reflected on the consolidated statement of income on the line titled EBIT. EBIT has been reported as a loss of USD 20.8 million for the year ended December 31, 2021 and a loss of USD 38.9 million for the year ended December 31, 2020. |
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| EBIT Margin | EBIT margin is calculated by dividing EBIT by revenues. EBIT and revenues are reflected on the Company's statement of income, in note 5 Segment Information, and in the financial highlight tables in this report in lines titled similarly. |
| EBIT margin has been calculated and is reported in the financial highlight tables for REC Silicon Group. | |
| EBIT margin has been calculated and is reported in the financial highlight tables for REC Silicon Group. | |
| EBITDA | EBITDA is an acronym for Earnings Before Tax, Depreciation, and Amortization. EBITDA is EBIT excluding depreciation, amortization and impairment. |
| EBITDA is reflected on the consolidated statement of income on the line titled EBITDA. EBITDA has been reported as a gain of USD 7.7 million for the year ended December 31, 2021 and a gain of USD 23.8 million for the year ended December 31, 2020. |
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| EBITDA Margin | EBITDA margin is calculated by dividing EBITDA by revenues. EBITDA and revenues are reflected on the Company's statement of income, in note 5 Segment Information, and in the financial highlight tables in this report in lines similarly titled. |
| EBITDA margin has been calculated and is reported in the financial highlight tables for REC Silicon Group, in the key financials table for each operating segment. |
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| EBITDA Contribution | EBITDA contribution is used to describe the contribution of each of the operating segments, other, and eliminations to the Company's total EBITDA. For the operating segments, EBITDA contributions represents revenues less cost of manufacturing excluding depreciation and amortization. For other, EBITDA contribution represents primarily operating costs. |
| A table reconciling the EBITDA contribution of each operating segment along with other and eliminations to the Company's total EBITDA can be found in note 5 Segment Information. |
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| EBIT Contribution | EBIT contribution is used to describe the contribution of each of the operating segments, other, and eliminations to the Company's total EBIT. For the operating segments, EBIT contributions represents revenues less cost of manufacturing including depreciation and amortization. For other, EBIT contribution represents primarily operating costs. |
| A table reconciling the EBIT contribution of each operating segment along with other and eliminations to the Company's total EBIT can be found in note 5 Segment Information. |
| Equity Ratio | The equity ratio is calculated by dividing total shareholders' equity by total assets. Total shareholders' equity and total assets are reflected on lines similarly titled on the Company's statement of financial position. |
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| At December 31, 2020, the equity ratio is 11.3 percent and is calculated by dividing USD 33.3 million total shareholders' equity by USD 294.9 million in total assets. |
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| At December 31, 2020, the equity ratio is 17.3 percent and is calculated by dividing USD 59.0 million total shareholders' equity by USD 341.4 million in total assets. |
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| Net Debt | Net debt is the carrying value of interest-bearing debt instruments less cash and cash equivalents. |
| The carrying value of debt can be found in note 17 Borrowings in the table under the caption carrying amount and cash can be found in the statement of financial position on the line titled cash and cash equivalents. |
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| At December 31, 2021, net debt was USD 86.4 million or USD 126.4 million total carrying value of the Company's debt (from note 17 Borrowings) plus 70.5 million current and non-current lease liabilities (from the statement of financial position) less USD 110.5 million in cash in cash equivalents. |
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| At December 31, 2020, net debt was USD 84.7 million or USD 147.8 million total carrying value of the Company's debt (from note 17 Borrowings) plus 71.8 million current and non-current lease liabilities (from the statement of financial position) less USD 134.9 million in cash in cash equivalents. |
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| Nominal Net Debt | Nominal Net debt is the contractual repayment values of interest-bearing debt instruments (excluding interest) less cash and cash equivalents. |
| The contractual repayment values of debt can be found in note 17 Borrowings in the table under the caption contractual repayments including interest and cash can be found in the statement of financial position on the line titled cash and cash equivalents. |
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| At December 31, 2020, nominal net debt was USD 87.1 million or USD 127.1 million contractual repayment values of the Company's debt plus 70.5 million current and non-current lease liabilities (from the statement of financial position) less USD 110.5 million in cash in cash equivalents. |
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| At December 31, 2020, nominal net debt was USD 85.7 million or USD 148.9 million contractual repayment values of the Company's debt plus 71.8 million current and non-current lease liabilities (from the statement of financial position) less USD 134.9 million in cash in cash equivalents. |
REC Silicon ASA Lysaker Torg 5, 3 etg. PO Box 63 1324 Lysaker Norway Phone +47 407 24 086
REC Silicon ASA is a leading producer of advanced silicon materials, supplying high-purity polysilicon and silicon gases to the solar and electronics industries worldwide. We combine over 30 years experience and best-in-class proprietary technology to deliver on customer expectations. Our two U.S. based plants have a capacity of more than 20,000 MT high-purity polysilicon. REC Silicon is headquartered in Lysaker, Norway and listed on the Oslo stock exchange under the ticker: RECSI.
For more information, go to: www.recsilicon.com
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