PARETO SECURITIES Power and Renewable Energy Conference January 17, 2019
Mr. Tore Torvund, REC Silicon CEO
INDUSTRY TRENDS
Renewables and Natural Gas are the Fastest Growing Energy Source on a Global Basis...
Electricity is the world's fastest growing form of end use energy consumption
Will grow 45% from 2015-2040
Source: International Energy Outlook 2017
Why is The Energy Transition Gathering Pace?
PV module prices fell 92% over the past 10 years, rapidly closing the cost gap to conventional fuels.
https://pv-magazine-usa.com/2018/11/09/lazards-lazards-lcoe-whos-the-cheapest-energy/
China Has Become the Largest PV Manufacturer and the Largest Market for PV Installations
China sees 3 benefits for investing in renewables
- › Economic opportunity
- Reduced import of oil and gas
- Leading in the fastest growing energy industry
- › Energy security
- Less dependent on the traditional energy market
- › Cleaner Air
- Reducing smog
PV-Tech : Solar Media Market Research May 2018 (Report 2018/9)
Source: GTM PV Pulse, December 2018
What is Preventing The Energy Transition From Gathering Pace? Lack of Storage Capabilities at Competitive Prices
Certain fuels remain competitive due to renewables' storage and energy density limitations.
Source: Bloomberg 2H 2018 US LCOE Update, Nov. 19, 2018
Renewable Energy Requires Low Cost Storage Capabilities
- › The Cost of Batteries follow the same trend as PV
- › EV is driving the manufacturing capacity
- Reducing cost
- › Further cost reduction due to:
- Higher efficiency (use of Silane)
- Increased market
Source: https://www.forbes.com/sites/energyinnovation/2018/05/30/chinas-all-in-onelectric-vehicles-heres-how-that-will-accelerate-sales-in-other-nations/#d9ef110e5c1e
China in the Lead Concerning the Battery Investment...
...but the US and the EU have also committed large funds to develop battery technology
China Leads the Race in an Ambitious Electrical Vehicle plan...
...but the US and EU also have ambitions to be a player in the transformation
REC SILICON'S TECHNOLOGY IS OFFERING HIGH QUALITY, LOW COST MATERIAL FOR THE RENEWABLE INDUSTRY
REC Silicon Has Manufacturing Capacity Both in the US and China, the Two Major Markets for Renewable Investments
PV market
Global leader in the silicon industry Two modern manufacturing plants and one JV
- › Two U.S. based plants in Moses Lake, Washington and Butte, Montana, capable of supplying ~22,000 MT highperformance polysilicon
- › Present in China through a JV with Chinese partner since 2014
- › Listed on the Oslo Stock Exchange under the ticker REC
Moses Lake, Washington (USA)
› The largest granular polysilicon production plant in the world
› Constructed in 1984
Products ✓ Polysilicon Fluidized Bed Reactor ("FBR")
REC Silicon is serving the Semiconductor and Renewable Energy market
The Semiconductor Market is Stable...
...but the PV (Solar) Market is Challenging Due to the China/US Trade War
(USD
million) |
Q3
2018 |
|
Q2
2018 |
|
YTD
2018 |
|
|
Revenues |
EBITDA |
Revenues |
EBITDA |
Revenues |
EBITDA |
Solar
Materials
(Moses
Lake) |
6
2 |
(9
9) |
20
4 |
(15
9) |
59
3 |
(17
4) |
Semicond
Materials
(B
utte)
uctor |
37
6 |
9
3 |
38
6 |
14
4 |
113
9 |
41
2 |
| Other |
- |
(5
4) |
- |
(8
1) |
- |
(24
4) |
| Eliminations |
- |
- |
(0
0) |
(0
0) |
(0
9) |
(0
5) |
REC
Silicon
Group |
43
7 |
(6
1) |
58
9 |
(9
6) |
172
3 |
(1
1) |
REC's COMPETITIVE ADVANTAGES
Contracts With the Top 4 Semiconductor Companies
- Quality requirement create barriers for new suppliers/entrants
- Long-term supply relationship
- REC produces the highest purity polysilicon for the FZ industry
REC Silicon Semiconductor Polysilicon Sales
Sources: Market Analysis Data
Increased Silicon Gas Sales with Very Competitive Cash Cost
Batteries: Attractive Opportunity for the Silicon Gas Market
- › Increased battery capacity and improved recharging speed by adding Silicon gas in the Anodes
- › Market could exceed 100,000 MT within the next 5-10 years
- › Strong focus in China, the US and EU to build a battery industry
REC's FBR Technology ~50% Energy Reduction Over Competitors Technology
FBR: Lowest Cost Polysilicon Production in the Industry
- › Polysilicon ASP below cash cost for the industry
- › Curtailment and postponement of new capacity
- › REC to sell below market price due to trade war
UPSIDE FOR REC SILICON
China / US Trade Discussions Finalized on March 1, 2019
Polysilicon Industry Arguments
- › Polysilicon is strategically 2018 Wafer Capacity Inside/Outside China important for US Semi, PV and LiBs, market
- Creates security risk for US if China dominates
- › Access to the Chinese market will create ~1,900 high paying manufacturing jobs in the US and reduce the trade deficit
- › US polysilicon industry (Wacker, Hemlock and REC Silicon), in close dialog with USTR
Source: I.H.S. PV Market Supply China Tracker Q2 2018 Issued July 9, 2018 Includes: Mono, Multi, Semi
Yulin JV Represents REC's Investment in China
› 2014 Yulin JV Agreement:
- Received \$198M for Technology Transfer
› 2018 Framework Agreement:
- Yulin JV Shareholding:
- SNF ~85%, REC Silicon ~15%
- 2021 REC has the option to:
- Buy back ~34% Equity Interest from SNF
Yulin JV Signing Ceremony February 2014
- ~3000 MT Granular Polysilicon Produced
- Solar Grade Quality
- › Siemens Reactor Status:
- Siemens Reactors Operational
- Commercial CZ Production Per Plan
- FZ Production Trials Underway
WHY INVEST IN REC SILICON
Potential Triggers for REC Silicon ASA
- › Trade War resolution
-
Substantial increase in revenue with 100% FBR utilization, higher ASP and lower cash cost
-
Substantial increase in demand for silane
-
› Increased ownership in Yulin JV
- From 15% to 49%
- Will be in a good negotiation position
Thank You!