Solar — Interim / Quarterly Report 2014

Apr 25, 2014

FIRST QUARTER 2014

REPORT

"We are experiencing good demand in our main markets in Europe and Japan. Together with our partners, we are continuously working to improve our product offering and improve our market presence. Our expansion of 300 MW module capacity through two new module lines will facilitate introduction of new technologies and broaden our product offering to our client base. This is an important step for us to strengthen our position in the "high end" market segment."

Øyvind Hasaas CEO

PRICING REMAINED FIRM WITH CONTINUED STRONG DEMAND IN EUROPE AND JAPAN

HIGHLIGHTS:

• Revenues of USD 175.4 million, down 3.9% from Q4 2013 *
• EBITDA of USD 16.2 million, down 11.0% from Q4 2013 *
• Closing cash balance of USD 86.5 million
• REC's selling price for solar panels in Q1 2014 were in line with Q4 2013
• Solar panel cash cost up USD 3 cents/W from Q4 2013
• The increase is due to phase in of new equipment, furnace upgrade and the fire at the cell plant in March 2014
• Target cost reduction for full year 2014 remains unchanged. However, more likely to be in the lower range
• 216 MW of module production, down 5.3% from Q4 2013
• Capacity expansion approved, module capacity expected to increase to 1.3 GW by 2H 2015

^* Figures for Q4 2013 re-presented, assuming that the acquisition of the solar entities previously owned by REC Silicon ASA occurred on 1 October 2013 and represent 3 months of operations until 31 December 2013. The re-presented figures exclude the amortization of customer relationships and the one-off negative goodwill from the business combination recorded in Q4 2013. The re-presented figures for Q4 2013 are not prepared in compliance with IAS 34 Interim Financial Reporting ("IAS 34") and are unaudited.

FINANCIAL HIGHLIGHTS

REC has only one reportable segment. Although the System business is not significant enough to constitute a separate operating segment, the following table separates the ordinary Module business from the System business in order to give the reader a clear understanding of the different performance levels between the two operations.

(USD IN MILLION)	Q1 2014	Q4 2013 1)
Module Business	169.8	181.0
System Business	5.6	1.4
Total Revenues	175.4	182.4
Module Business	15.9	21.1
System Business	0.3	(2.9)
Total EBITDA	16.2	18.2
Depreciation and amortization	(5.5)	(4.5)
EBIT	10.7	13.7
Profit before tax	11.2	10.9
Profit after tax	11.0	10.8
EBITDA Margin
Module Business	9.4%	11.7%
System Business	5.0%	-205 %
Total	9.2%	10.0%

1) Q4 2013 depreciation and interest expense have been adjusted as if the acquisition of Solar entities previously owned by REC Silicon ASA occurred on 1 October 2013. The represented figures exclude the amortization of customer relationships and the oneoff negative goodwill from the business combination recorded in Q4 2013.

In Q1 2014, REC revenues were USD 175.4 million, down from USD 182.4 million in Q4 2013. The reduction in Module business revenue was in part offset by an increase in System business revenue.

The module selling price for the Module business was in line with Q4 2013. The reduction in revenue was mainly a result of 5.2% lower sales volume. Total solar panel production was 216 MW in Q1 2014, down 5.6% from the previous quarter.

The System business earned revenues of USD 5.6 million in Q1 2014, up from USD 1.4 million in the previous quarter. The increase in revenues is primarily due to the sale of a REC System project in the UK.

In Q1 2014, REC's EBITDA was USD 16.2 million, down from USD 18.2 million in Q4 2013. The reduction in Module business EBITDA was in part offset by an improvement in the System business.

The Module business Q1 2014 EBITDA was USD 5.2 million lower than for Q4 2013. This is in part due to lower sales volumes but primarily due to an increase in costs. This increase in costs is due to higher volume and price of external silicon blocks (related to the furnace upgrade in the wafer production line), associated costs related to the fire at the cell building in Tuas, Singapore, in March 2014 and lower production volumes associated with the module debottlenecking of production lines. The fire resulted in a temporary close down of two (out of eight) cell lines for 6 weeks. There was no impact on REC module shipments since our reduced cell production has been compensated by increased external sourcing.

The System business' EBITDA profit was USD 0.3 million in Q1 2014,

compared to a loss of USD 2.9 million in Q4 2013. The profit in Q1 is a result of the sale of the System project in the UK and lower costs following the restructuring of the business in Q4 2013.

DEPRECIATION AND AMORTIZATION 2)

Depreciation and amortization amounts to USD 5.5 million in Q1 2014, compared to USD 4.5 million in Q4 2013. The increase is due to the amortisation of customer relationships.

NET FINANCIAL ITEMS 2)

Net financial items amount to a gain of USD 0.7 million in Q1 2014 compared to a loss of USD 2.6 million in Q4 2013. This is mainly due to unrealized currency gains from revaluation of net monetary assets which are denominated in foreign currencies.

TAX

Income tax expense for Q1 2014 amounted to USD 0.2 million compared to USD 0.1 million in Q4 2013. REC's operations in Singapore have been granted an income tax free period (pioneer status) and therefore the corporate tax charge for the period is insignificant.

TECHNOLOGY, DEVELOPMENT AND R&D

The Group incurred R&D expenses of USD 3.0 million in Q1 2014, compared to USD 3.5 million in Q4 2013.

REC has research and development activities for solar grade silicon wafers, solar cells and solar panels, which are carried out in close collaboration with the production organization in Singapore. In addition, there are field test programs to evaluate performance of panels under real-life conditions.

In the wafer area, one major technology development program targets further improvements in directional solidification of silicon. The program aims to increase both productivity and cell efficiency. The other major wafer project focuses on wafer sawing processes. Tests carried out with production equipment showed that wafer saw productivity can be significantly improved, and high volume production tests are scheduled.

The solar cell development projects focus on technologies for further improvements of the cell efficiency by reducing losses in the front part of the cell and implementation of rear surface passivation. REC has started collaborations with leading research groups both at Fraunhofer ISE and at the University of New South Wales on n-type solar cells and advanced hydrogenation technology.

The solar panel technology is industry-leading for panels using multicrystalline silicon cells both with respect to measured solar panel efficiency and production of electricity in actual installations. The technology development projects target improved performance by reducing electrical losses and improving efficiency.

REC leverages its integrated production capability (wafer to modules) in order to be cost efficient, to increase solar panel power output, and to maintain solar panel reliability and quality.

NET CASH FLOW

At 31 March 2014, REC's cash balance was USD 86.5 million. This compares to the cash balance on 31 December 2013 of USD 67.2 million. The increase is mainly due to positive cash flow from operating activities and proceeds from government grants.

The capital expenditures in Q1 2014 were USD 4.6 million for property, plant and equipment. The main expenditures are related to the debottlenecking of the existing module production lines.

ORGANIZATIONAL DEVELOPMENT

CEO Øyvind Hasaas has resigned and has a contract for his assignment in Singapore until 30 June 2014. The company is assessing both internal and external candidates and expects to have a new CEO in place during the summer of 2014. The chairman of the board, Mr. Ole Enger, will during any interim period until a new CEO is in place take increased responsibility for the company's operations, in close cooperation with the local management in Singapore.

OUTLOOK 2014

All targets are subject to changes in market conditions and operational performance.

MARKET OUTLOOK

Industry analysts are estimating global PV demand in 2014 to be in the range of 46-49 GW, up from about 39 GW in 2013. China and Japan are expected to represent 49% of the solar panel market, Europe 21%, the Americas 19% while the rest of the world is expected to represent about 11% of the solar market in 2014.

The demand growth in Europe is expected to be primarily related to the roof top market segment. Demand in Japan is expected to increase substantially over the next few years with most of the growth coming from the commercial market segment.

The EU Commission has, according to industry consensus, recently reduced the minimum import price ("MIP") for crystalline solar modules offered by Chinese module suppliers from EUR 0.56 cents/W to EUR 0.53 cents/W. The decision is understood to have been made effective as of 1 April 2014. The commission is assumed to have lowered the maximum volume of annual imports to Europe from Chinese module suppliers from 7.0 GW to 5.8 GW. The revised MIP is assumed to be more aligned with current solar industry price levels for large EU projects. REC is expected to continue to receive a price premium for solar panels vs. the industry.

MANUFACTURING

Based on the current operational forecast, REC expects to produce ~225 MW of solar panels in Q2 2014 compared to 216 MW in Q1 2014. The Company has initiated a module debottlenecking project in Q1 2014 that will be implemented by Q3 2014 and is expected to raise annual module manufacturing capacity by 100 MW. Module production in 2014 is expected to be ~940 MW.

REC will increase module production capacity further by ~300 MW through installing two additional lines in the module factory. The module capacity will increase to 1.3 GW by 2H 2015. These new lines will facilitate introduction of new and proven technologies and broaden our product offering to REC's client base. REC is expected to improve its premium quality and realize next generation REC module with lower cost, higher power and improved reliability.

REC expects to produce ~800 MW of wafers and ~734 MW of cells in 2014. The production of cells in 2014 is negatively affected by the fire at the manufacturing facility on 14 March 2014. The fire resulted in a temporary close down of two (out of eight) cell lines for 6 weeks while repair of exhaust system is completed.

PRICING AND COST DEVELOPMENT

Solar module prices expected to be relatively stable in Q2 2014, but there are uncertainties related to political decisions amongst others the minimum price in Europe.

REC continues to target a reduction in solar panel cash costs with a total of 8 - 12% in 2014. However, the cost reduction is more likely to be in the lower part of the target range with main reduction achieved in Q3 and Q4 2014. Solar panel cash costs increased from USD 64 cents/W to USD 67 cents/W in Q1 2014. The increase is due to to lower production volumes due to module debottlenecking of existing production lines, increase in cost due to higher volume and price of external silicon blocks (related to the furnace upgrade) and the fire at the cell plant.

Key enablers for the expected cost improvement in 2014 are increased furnace and module output, qualification of new suppliers and cell efficiency improvements. The expected improvement in cell efficiency is due to rear surface passivation, and improved wafer quality and metallization.

CAPEX

2014 full year capex expenditures, based on currently approved investments are expected to be approximately USD 70 million. The main investments include:

• Additional production equipment for debottlenecking of the existing module production lines that is expected to increase manufacturing capacity by approximately 100 MW;
• Improved furnace configuration that will debottleneck the wafer production lines increasing ingot capacity by approximately 200 MW and reduce external ingot purchases;
• Other small projects relating to enhance technology, improve production flow and factory maintenance; and
• Investment in two additional module lines in the factory to increase module capacity by further 300 MW to approximately 1.3 GW by 2H 2015.

RISKS AND UNCERTAINTIES

The Company emphasizes that the information included herein contains certain forward-looking statements that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future. These statements are based on various assumptions made by the Company, many of which are beyond its control and all of which are subject to risks and uncertainties. The Company is subject to a large number of risk factors including but not limited to the development of global energy market prices, continued government subsidies and incentives, trade disputes, changes in governmental regulation, rapid technological change and the attractiveness of REC Solar's technology, competitive pressure in the industry and ability to continuously improve its manufacturing processes and product qualities.

For a further description of other relevant risk factors we refer to the prospectus for the REC Solar ASA share offering, dated 3 October 2013. As a result of these and other risk factors, actual events and actual results may differ materially from those indicated in or implied by such forward-looking statements.

Oslo, April 24, 2014 Board of Directors

RE-PRESENTED STATEMENT OF INCOME REC

(USD IN MILLION)	Q1 2014	Q4 2013 1)
Revenues	175.4	182.4
Cost of materials	-96.9	-102.0
Changes in inventories and write downs	-8.0	-3.9
Employee benefit expenses	-21.6	-21.5
Other operating expenses	-32.3	-35.4
Other income and expenses	-0.4	-1.4
EBITDA	16.2	18.2
Depreciation	-4.4	-4.2
Amortization	-1.1	-0.3
Total depreciation and amortization	-5.5	-4.5
EBIT	10.7	13.7
Share of profit/loss of equity accounted investments	-0.2	-0.2
Financial income	-	0.1
Net financial expenses	-0.3	-0.4
Net currency gains/losses	1.0	-2.2
Net financial items	0.7	-2.6
Profit before tax	11.2	10.9
Income tax expense	-0.2	-0.1
Profit	11.0	10.8

1) Q4 2013 depreciation and interest expense have been adjusted as if the acquisition of Solar entities previously owned by REC Silicon ASA occurred on 1 October 2013. The represented figures exclude the amortization of customer relationships and the one-off negative goodwill from the business combination recorded in Q4 2013.

CONSOLIDATED FINANCIAL STATEMENTS IN COMPLIANCE WITH IAS 34

REC Solar ASA was incorporated on 15 July 2013. From this date until 25 October 2013, the Company had no trading activity. It was listed on Oslo Stock Exchange on 25 October 2013, the same day that it acquired the solar entities previously owned by REC Silicon ASA. REC's first annual report will be prepared for the period from 15 July 2013 to 31 December 2014.

The following pages from 7 to 17 present the consolidated financial statements in compliance with IAS 34 (non-audited).

CONSOLIDATED BALANCE SHEET REC

(USD IN MILLION)	NOTES	31 MAR 2014	31 DEC 2013
ASSETS
Non-current assets
Other intangible assets	2	18.7	19.7
Intangible assets	2	18.7	19.7
Land and buildings	2	32.1	33.3
Machinery and production equipment	2	38.9	40.6
Other tangible assets	2	3.2	3.3
Assets under construction	2	3.6	0.9
Property, plant and equipment	2	77.8	78.1
Prepaid lease, non-current		13.2	13.3
Prepaid capex		1.5	0.2
Equity accounted investments		8.5	13.2
Investments in shares (available for sale)	11	4.6	-
Other non-current receivables	9	1.7	3.1
Financial assets		14.8	16.3
Deferred tax assets		1.6	1.6
Total non-current assets		127.5	129.2
Current assets
Inventories	3	96.3	105.1
Prepaid lease		0.6	0.6
Prepayments		3.9	2.6
Trade and other receivables	9	116.9	143.9
Current tax assets		0.8	0.9
Restricted bank accounts		1.5	0.1
Cash and cash equivalents		86.5	67.2
Total current assets		306.5	320.5
Total assets		433.9	449.7

CONSOLIDATED BALANCE SHEET REC

(USD IN MILLION)	NOTES	31 MAR 2014	31 DEC 2013
EQUITY AND LIABILITIES
Shareholders' equity
Share capital		6.7	6.7
Other paid-in capital		124.6	124.6
Paid-in capital		131.4	131.4
Other equity and retained earnings		109.3	0.1
Other comprehensive income for the period		-0.6	2.9
Profit and loss for the period		11.0	106.2
Total shareholders' equity		251.0	240.6
Non-current liabilities
Provisions	4	95.7	95.0
Total non-current liabilities		95.7	95.0
Current liabilities
Trade payables and other liabilities		83.5	109.9
Provisions	4	3.3	3.6
Current tax liabilities		0.4	0.5
Total current liabilities		87.2	114.1
Total liabilities		183.0	209.1
Total equity and liabilities		433.9	449.7

CONSOLIDATED STATEMENT OF INCOME REC

(USD IN MILLION)	NOTES	Q1 2014	Q4 2013
Revenues		175.4	123.1
Cost of materials		-96.9	-65.9
Changes in inventories and write downs		-8.0	-6.1
Employee benefit expenses		-21.6	-13.9
Other operating expenses		-32.3	-22.4
Other expenses	6	-0.4	-1.2
EBITDA excluding other income from negative goodwill		16.2	13.6
Other income from negative goodwill	6	-	98.9
EBITDA		16.2	112.5
Depreciation	2	-4.4	-2.9
Amortization	2	-1.1	-0.8
Total depreciation and amortization		-5.5	-3.7
EBIT		10.7	108.8
EBIT excluding other income from negative goodwill		10.7	9.9
Share of loss of equity accounted investments		-0.2	-0.3
Financial income		-	0.1
Net financial expenses		-0.3	-0.3
Net currency gains/losses		1.0	-1.1
Net financial items		0.7	-1.4
Profit before tax		11.2	107.0
Income tax expense		-0.2	-0.1
Profit		11.0	106.9
Profit excluding other income from negative goodwill		11.0	8.0
Attributable to:
Owners of REC Solar ASA		11.0	106.9
Earnings per share (In USD)
From total operations
-basic		0.28	3.59
-diluted		0.28	3.59

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME REC

(USD IN MILLION)	Q1 2014	Q4 2013	31 DEC 2013
Profit for the period	11.0	106.9	106.2
Other comprehensive income, net of tax:
currency translation differences of foreign operations taken to equity	-0.6	3.0	3.0
Sum of items that may be reclassified subsequently to profit or loss	-0.6	3.0	3.0
Total other comprehensive income for the period	-0.6	3.0	3.0
Total comprehensive income for the period	10.4	109.9	109.2
Total comprehensive income for the period attributable to
Owners of REC Solar ASA	10.4	109.9	109.2

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY REC

	ATTRIBUTABLE TO EQUITY HOLDERS OF REC SOLAR ASA
(USD IN MILLION)	SHARE CAPITAL	OTHER PAID-IN CAPITAL	TOTAL PAID-IN CAPITAL	OTHER EQUITY	COMPREHENSIVE INCOME	TOTAL EQUITY
Year 2014
At 1 January 2014	6.7	124.6	131.4	0.1	109.2	240.6
Total comprehensive income for the period	-	-	-	-	10.4	10.4
At 31 March 2014	6.7	124.6	131.4	0.1	119.6	251.0

On 31 March 2014, the Annual General Meeting gave proxy to the Board of Directors to issue 4 million shares and proxy to repurchase up to 4 million own shares.

CONSOLIDATED STATEMENT OF CASH FLOWS REC

	YEAR TO DATE 31	PERIOD TO DATE 15 JUL 2013 TO
(USD IN MILLION)	MAR 2014	31 DEC 2013 1)
Profit before tax for the period	11.2	106.4
Adjustments for:
Negative goodwill	-	-98.9
Depreciation and amortization	5.4	3.7
Loss on sales of property, plant and equipment	0.3	-
Share of loss of equity accounted investments	0.2	0.3
Changes in trade and other receivables	13.0	-4.6
Changes in inventories	8.8	9.3
Changes in trade and other payables	-26.4	7.8
Changes in provisions	0.5	1.0
Tax paid	-	-0.1
Net cash flow from operating activities	13.0	25.0
Cash flows from investing activities
Acquisition of subsidiaries and associates, net of cash acquired	-	-88.7
Acquisition of property, plant and equipment and intangible assets	-4.6	-3.9
Proceeds from government grants	11.6	-
Net cash used in investing activities	7.0	-92.6
Cash flows from financing activities
Proceeds from issue of share capital	-	134.7
Payments for transaction costs related to issue of share capital	-	-3.3
Net cash flow from financing activities	-	131.4
Net increase in cash and cash equivalents	20.0	63.8
Effect of exchange rate fluctuations	-0.7	3.4
Cash and cash equivalents at the beginning of the period	67.2	-
Cash and cash equivalents at the end of the period	86.5	67.2

1) REC does not have material cash flows for the period 15 July 2013 to 30 September 2013 as the acquisition of the Solar group occurred on 25 October 2013.

NOTES

GENERAL 1

BASIS OF PREPARATION

The financial statements are prepared in USD, rounded to the nearest 0.1 million, 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.

STATEMENT

These consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by European Union ("EU"), supplemented by other relevant financial information solely for comparability purposes. They do not include all information required for full annual financial statements of the Group. REC had been a reporting segment of REC Silicon ASA, which is a limited liability company incorporated and domiciled in Norway. REC's prior quarters report and financial statements for 2012 can be obtained from http://www.recsilicon.com. However, as the legal structure of REC reported under REC Silicon ASA reporting segment is not 100% identical to REC, meaningful comparison may not be possible.

BUSINESS COMBINATION

On 25 October 2013, REC Solar ASA acquired 100% of the shares of the former Solar division from REC Silicon Group at a transaction price of USD 134.7 million (NOK 800 million).

In the two months to 31 of December 2013, the Solar division contributed revenue of USD 123.1 million and profit of USD 106.9 million to REC results. If the acquisition had occurred on 1 January 2013, management estimates that consolidated revenue would have been USD 648 million and consolidated profit after tax for the year would have been USD 5.1 million. In determining these amounts, management has assumed that REC did not account for any interest bearing debt and consequently did not have any interest expenses due to capital increase of USD 134.7 million happening on 1 January 2013.

This transaction is considered a business combination according to IFRS 3. Acquisition method is applied by netting the acquisition costs with the fair value of the acquired assets, liabilities and contingent liabilities assumed at the acquisition date. The acquisition costs of a purchase is equal to the fair value of the assets transferred, the equity instruments issued and the liabilities incurred or assumed at the acquisition date. The fair values of assets and liabilities under contingent consideration agreements are likewise included.

REC's management was required to allocate values in excess/deficit of the carrying amount of equity to assets acquired and liabilities assumed (preliminary purchase price allocation). The acquisition costs of USD 134.7 million are less than the proportional share of the acquired companies' net assets measured at fair value, therefore a provisional bargain purchase of USD 98.9 million resulted from the preliminary purchase price allocation.

ACCOUNTING POLICIES

Details of the accounting policies can be obtained in the Appendix of this report.

2 PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

(USD IN MILLION)	LAND AND BUILDINGS	MACHINERY AND EQUIPMENT	OTHER TANGIBLE FIXED ASSETS	ASSETS UNDER CONSTRUCTION	TOTAL PROPERTY, PLANT AND EQUIPMENT	TOTAL INTANGIBLE ASSETS	TOTAL
Carrying value at 1 January 2014	33.3	40.6	3.3	0.9	78.1	19.7	97.8
Exchange differences	-	-	-	-	-0.1	-	-0.1
Net additions 1)	-	1.7	0.2	2.7	4.6	-	4.6
Disposals	-0.3	-	-	-	-0.3	-	-0.3
Depreciation and amortization	-1.0	-3.3	-0.2	-	-4.5	-1.0	-5.5
Carrying value at 31 March 2014	32.0	38.9	3.2	3.6	77.8	18.8	96.6
At 31 March 2014
Cost price	33.6	44.5	3.5	3.8	85.4	20.5	106.0
Accumulated depreciation/amortization/impairment	-1.6	-5.6	-0.3	-0.2	-7.6	-1.7	-9.3
Carrying value at 31 March 2014	32.0	38.9	3.2	3.6	77.8	18.8	96.6

1) Net additions include transfers from assets under construction

IMPAIRMENT REVIEWS

In recognising the recently completed fair value assessment of the Group's property, plant and equipment and intangible assets acquired on 25 October 2013, REC assessed that there is no impairment loss required on the Group's property, plant and equipment and intangible assets.

INVENTORIES 3

(USD IN MILLION)	31 MAR 2014	31 DEC 2013
Stock of materials, merchandise, production supplies	30.2	17.9
Spare parts	12.9	12.0
Work in progress	4.7	9.8
Finished goods	48.5	65.4
Total	96.3	105.1

On 1 January 2014, REC has amalgamated four entities (including the three production entities) into only one legal entity. With the amalgamation, the classification has changed. Semi finished goods such as Wafer and Cells (previously classify as finished goods) are now classified as stock of materials, merchandise and production supplies.

PROVISIONS 4

	RESTRUCTURING & EMPLOYEE TERMINATION		ASSET RETIREMENT	ONEROUS
(USD IN MILLION)	BENEFITS	WARRANTIES	OBLIGATIONS	CONTRACTS	TOTAL
At 1 January 2014	1.5	61.2	35.1	0.8	98.6
Additional provisions	0.4	1.4	-	-	1.7
Unsed amounts reversed	-0.2	-	-	-	-0.2
Exchange differences	-	-0.3	0.1	-	-0.2
Increase in provisions due to interest	-	-	0.1	-	0.1
Used during the year	-0.2	-0.2	-0.6	-	-1.0
At 31 March 2014	1.4	62.0	34.8	0.8	99.0

Warranties are primarily product and power output warranties related to the sale of solar panels. Asset retirement obligations are related to REC's obligation to restore the land on which the Singapore manufacturing plant is currently operating.

BORROWINGS 5

REC has no borrowings from third parties as at 31 March 2014.

OTHER INCOME AND EXPENSES 6

(USD IN MILLION)	Q1 2014	Q4 2013
Restructuring cost and employee termination benefits	-0.1	-1.2
Other income	-	98.9
Gain/loss on disposal of non-current assets	-0.3	-
Total other income and expenses	-0.4	97.7

Restructuring costs as well as employee termination benefit costs in Q4 2013 and Q1 2014 relate mainly to the restructuring of the Systems business. The bargain purchase of USD 98.9 million from preliminary purchase price allocation in Q4 2013 is reflected as other income from negative goodwill (reference to Q4 2013 Report on Business Combination in Note 2).

COMMITMENTS, GUARANTEES 7

Contractual purchase obligations and minimum operating lease payments at 31 March 2014

(USD IN MILLION)	TOTAL FUTURE PAYMENTS	2014	2015	2016	2017	2018	2019	AFTER 2019
Purchase of goods and services
Total purchase of goods and services	166.0	128.6	30.1	7.3	-	-	-	-
Minimum operating lease payments
Total minimum operating lease payments	5.6	1.3	1.3	1.2	0.8	0.6	0.4	-
Capex
Total capex	14.4	14.1	0.3	-	-	-	-	-

The purchase obligation amounts consist of items for which REC is contractually obligated to purchase from a third party as at 31 March 2014. Operating lease payments show contractual minimum future payments. Only significant contracts are included.

REC Silicon Group has provided bank guarantees and parent company guarantees primarily related to the performance of solar panels and systems. It is stipulated in the sale agreement between REC Silicon and REC Solar ASA, that for guarantees under which a formal substitution of REC Silicon as a guarantor or counter-guarantor is not possible, REC Solar ASA should indemnify REC Silicon for all losses incurred. The bank guarantees amount to USD 6.8 million (NOK 41 million) and run through April 2015. The parent company guarantees are valid for the relevant warranty periods and are limited by warranties provided on solar panels and systems. It also includes a guarantee provided by REC Solar AS in 2011 in connection with the sale of the previous subsidiary REC ScanModule AB.

CONTINGENT LIABILITIES / DISPUTES 8

REC Americas LLC. is a defendant in a lawsuit initiated in California (USA) by a potential customer claiming approximately USD 6.4 million in damages after REC Americas LLC had terminated ongoing contract discussions. REC Americas LLC has not recognized any provisions related to this case as of 31 March 2014.

In June 2012, REC Wafer Norway AS sold all its shares in REC Wafer Pte. Ltd. for SGD 1 to REC Solar AS. In August 2012, REC Wafer Norway AS went bankrupt. In March 2014, the bankruptcy trustee filed a writ of summons against REC Solar AS ("Solar AS") and REC Solar Holdings AS ("Solar Holdings") jointly and severally. The estate is claiming for (a) any enrichment Solar AS and Solar Holdings have had from the purchase of the shares and/or (b) compensation for the loss incurred by the estate. The amount of any restitution of enrichment or payment of damages is subject to assessment by the court. REC is of the opinion that the price for the shares was justified and does not provide for any liability in this quarterly report.

TRADE AND OTHER RECEIVABLES 9

Specification of provision for loss on trade and other receivables

(USD IN MILLION)	2014
At 1 January 2014	-
Change in provision for loss on receivables	-
Provisions for loss on trade receivables	-0.1
Exchange difference	-
At 31 March 2014	-0.1
Realized loss on trade receivables first quarter 2014	-0.1
Change in provision for loss on receivables	-
Loss on trade receivables in the statement of income first quarter 2014	-0.1

Analysis of aging of trade and other receivables at 31 March 2014

	TOTAL CARRYING		AGING OF RECEIVABLES THAT ARE NOT IMPAIRED PAST DUE
(USD IN MILLION)	AMOUNT	NOT DUE	< 30 DAYS	>30<90 DAYS	>90<365 DAYS	>365 DAYS	IMPAIRED
Trade receivables and accrued revenues	84.1	66.7	10.1	4.9	1.2	1.2	-
Provision for loss on trade recivables	-0.1	-	-	-	-0.1	-	-
Other non-current and current receivables	34.6	33.6	-	0.9	-	-	-
Total	118.6	100.3	10.1	5.8	1.2	1.2	-

RISK FACTORS 10

ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with International Financial Reporting Standards ("IFRS") 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 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 REC'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. A "critical accounting estimate" is one which is both important to the portrayal of the company's financial condition and results and requires management to make estimates about the effect of matters that are inherently uncertain, and which are subjective or complex. Management evaluates such estimates on an ongoing basis, based upon historical results and experience, as well as forecasts as to how these might change in the future.

For a further description of relevant estimation uncertainty and critical accounting estimates (impairment, depreciation and amortization, income taxes and provisions, we refer to the prospectus for REC share offering, dated 3 October 2013 (www.recgroup.com).

RELATED PARTIES 11

INVESTMENTS IN ASSOCIATES

On 29 January 2014, Mainstream Energy Corporation ("Mainstream"), which is an associate of REC, has spun off its residential business from its commercial/industrial business and merged it into Sunrun Inc. ("Sunrun"). Sunrun is a Delaware corporation operating in the solar financing sector.

The fair value of Mainstream as per spin-off date was attributed in whole to the residential business. As a consideration, REC received a minority interest in Sunrun. REC's ownership interest/voting rights in the remaining Mainstream business remained 20 percent.

Sella Invest di ESB srl. & Co. sas (Sella) is an associate of REC which was founded to develop solar rooftop projects in the north and middle Italy. REC System has a 20 percent ownership right and 33.3 percent interest in profit or loss.

INVESTMENTS IN SHARES (AVAILABLE FOR SALE)

Following Mainstream's spin-off of its residential business and merger (as described above) with Sunrun, REC owns a minority interest in Sunrun. The investment is accounted for as an available-for-sale asset. As the fair value of this unquoted investment is unavailable, as there is no quoted market price in an active market and other methods of determining fair value do not result in a reasonable estimate, the investment is measured at cost less impairment.

INVESTMENTS IN JOINT VENTURES

REC has an ownership interest in two joint venture entities in the USA of which one is active in project development in California. According to IFRS 11 Joint Arrangements, the Solar Group's interest in jointly controlled entities is accounted for according to the equity method for total operations. It is disclosed in the Income statement in the line item "share of profit/loss of equity accounted investments" shown between EBIT and Net financial items.

APPENDIX 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these combined financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

1.1 BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE

The financial statements are presented in USD, rounded to the nearest one hundred thousand, 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. The interim consolidated financial statements of REC have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements have been prepared under the historical cost convention.

1.2 CONSOLIDATION FOR THE COMBINED FINANCIAL STATEMENTS

(A) Subsidiaries

Subsidiaries are all entities over which REC has the power to govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which control is transferred to REC. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by REC. The consideration transferred of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the consideration transferred over the fair value of REC Group's share of the identifiable net assets acquired is recorded as goodwill. If the consideration transferred is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income. Step acquisitions: an increase in ownership of a jointly controlled entity or an associate that becomes a subsidiary is controlled entity or an associate that becomes a subsidiary is accounted for using the acquisition method as at the date of control. An increase in ownership in a subsidiary is accounted for in accordance with the requirements of IAS 27 Consolidated and Separate Financial Statements as a transaction with equity holders with no change in the carrying amounts of assets or liabilities. At the time control is lost, a gain or loss is calculated.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized gains have been present on intercompany sales of intermediate products.

B) Jointly controlled entities

REC's interests in jointly controlled entities are accounted for by the equity method of accounting. Investments in jointly controlled entities are recognised initially at cost. REC's share of the jointly controlled entities' profits and losses are recorded on its consolidated Profit and Loss Statement as "Share of profit/loss of equity accounted investments. An increase in ownership of a shareholding that becomes a jointly controlled entity is accounted for in accordance with the requirements of IFRS 3 Business Combinations with goodwill being recognized at each step of the acquisition when applicable. For the periods presented, REC had interests in two jointly controlled entities in the PV systems area.

(C) Associates

Associates are entities over which REC has significant influence but not control or joint control, generally encompassing a shareholding of between 20 percent and 50 percent of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost. REC's share of its associates' post-investment profits or losses and amortization and impairment of fair value adjustments are recognized in the statement of income. The cumulative post-investment movements are adjusted against the carrying amount of the investment. When REC's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, REC does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between REC and its associates are eliminated to the extent of REC's interest in the associates. Mainstream Energy Inc. and Sella Invest di ESB srl. & Co sas (Sella) have been treated as associates.

1.3 SEGMENTS

It has been evaluated that REC has only one operating and reportable segment, which is REC as a whole

1.4 FOREIGN CURRENCY TRANSLATION

(A) Functional and presentation currency

Items included in the financial statements of each of REC's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in USD.

(B) Transactions and balances

Foreign currency transactions 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 reporting date exchange rates. 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 cash flow hedges, qualifying net investment hedges or as a part of a net investment.

(C) Group companies

The results and financial position of all REC entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities for each statement of financial position presented are translated at the closing rate;

(ii) Income and expenses for each statement of income are translated at average exchange rates for the year (based on monthly average rates); and (iii) All resulting exchange differences from translation are recognized as a separate component of other comprehensive income (OCI). On consolidation, exchange differences arising from the translation of the net investment in foreign entities, including monetary items that are regarded as a part of the net investment, and of borrowings and other currency instruments designated as hedges of such investments, are included in OCI. When a foreign operation is disposed, such exchange differences are recognized in the statement of income as part of the gain or loss on sale.

For the periods presented, REC did not hold any borrowings or other currency instruments accounted for as net investment hedges.

1.5 CURRENT/NON-CURRENT

An asset/liability is classified as current when it is expected/due to be realized or settled within twelve months after the reporting date.

1.6 PROPERTY, PLANT AND EQUIPMENT

Land and buildings consist primarily of operating plants and offices. All property, plant and equipment are stated at historical cost less accumulated depreciation and un-reversed impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition, construction or installation of the items. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to REC and the cost of the item can be measured reliably. All other costs are charged to the statement of income during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method, to their residual values over their estimated useful lives. The assets' residual values, if any, depreciation method and useful lives are reviewed at least annually and related depreciation rates are adjusted prospectively. Depreciation commences when the assets are ready for their intended use.

1.7 INTANGIBLE ASSETS

(A) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of REC's share of the net identifiable assets of the acquired subsidiary/associate/jointly controlled entity at the date of acquisition. Goodwill related to associates is included in the carrying value of investments in associates. Goodwill is carried at cost less accumulated impairment losses. If the acquisition costs are less than the proportional share of the acquired company's net assets measured at fair value (negative goodwill), the matter is first reviewed again and any remaining difference is recognized directly in the consolidated statement of comprehensive income (bargain purchase).

(B) Other intangible assets

Other intangible assets that have a finite useful life are carried at historical cost less accumulated amortization and un-reversed impairment losses. Amortization is calculated using the straight-line method to allocate the cost of other intangible assets over their estimated useful lives. Amortization commences when the assets are ready for their intended use. REC has no intangible assets with indefinite useful lives. The assets' residual values, if any, amortization method and useful lives are reviewed at least annually and related amortization rates are adjusted prospectively.

(C) Research and development

Research expenditures are recognized as an expense as incurred. Costs incurred on development projects (relating to the design, construction and testing of a chosen alternative for new or improved materials, devices, products, processes or systems) are capitalized as intangible assets when it is probable that the project will be successful considering its commercial and technological feasibility, and costs can be measured reliably. Other

development expenditures are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in subsequent periods. Development costs with a finite useful life that have been capitalized are amortized from the time the assets are ready for their intended use, which normally is at commencement of the commercial use.

1.8 IMPAIRMENT AND DERECOGNITION OF NON-FINANCIAL ASSETS

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortization and are tested at least annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in a separate line item as a part of earnings before interest and taxes (EBIT) 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 and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level that based on judgment generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Goodwill is allocated to individual or groups of cash-generating units for the purpose of impairment testing. Generally, any indicated impairment for a specific cash-generating unit is first allocated to goodwill, then proportionately to other non-current assets in the cashgenerating unit, but not lower than the individual or group of assets' recoverable amount, if determinable. Assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Losses on de-recognition include assets that are disposed of and assets with no foreseeable future economic benefits. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are reported as a part of the statement of income. When applicable, gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the disposed entity. Losses due to assets assessed as having no future economic benefits are reported as an impairment loss.

1.9 FINANCIAL ASSETS

REC classifies its financial assets primarily as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The category loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are carried at amortized cost which for current receivables approximates to historical cost. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and REC has transferred substantially all risks and rewards of ownership.

1.10 ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

REC had no derivative financial instruments or hedging activities for the periods presented.

1.11 TRADE RECEIVABLES

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost, less provisions for impairment. A provision for impairment of trade receivables is recognized in the statement of income and is established when there is objective evidence that REC will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments, are considered indicators that the trade receivable is impaired.

1.12 CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, demand deposits at banks and money market funds with term less than three months.

1.13 PAID-IN EQUITY CAPITAL

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.

1.14 BORROWINGS

Borrowings are recognized initially at fair value, net of transaction costs incurred unless it is at fair value through profit or loss. Borrowings are 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 the bank credit facilities are recognized as part of interest expenses as incurred. A financial liability (or a part of a financial liability) is removed from the statement of financial position when, and only when, it is extinguished—i.e. when the obligation specified in the contract is discharged or cancelled or expires.

An exchange between REC and an existing lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognized in profit or loss.

1.15 INVENTORIES AND CONSTRUCTION CONTRACT COSTS

Inventories are stated at the lower of cost or net realizable value. Cost for inventory with different nature or use is determined using the first-in, firstout (FIFO) or average cost method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). Net realizable value is the estimated selling price in the ordinary course of business, less the estimated variable and incremental costs to complete and sell the asset. REC is integrated in the value chain, and REC entities sell goods to other REC entities. Consequently, finished goods for one REC entity become raw materials or work in progress for another REC entity. The classification by the separate entities is also used in the classification in REC's consolidated financial statements. Eligible costs relating to building of PV systems for sale in the ordinary course of business in REC Systems has been accounted for as inventories or construction contract costs, as applicable.

1.16 INCOME TAX

Income tax expense represents the total of the tax currently payable (current tax) and the change in deferred tax allocated to the statement of income. The current tax is based on taxable profit (and in some instances loss) for the year. Taxable profit/loss differs from profit/loss before tax as reported in the statement of income because it excludes items of income or expense that are taxable or deductible in other years (temporary differences) and it further excludes items that are never taxable or deductible (permanent differences). Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Recognition of any deferred tax assets is based on REC on a stand-alone basis. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not recognized. For REC this is relevant primarily for some buildings in Singapore. Current and deferred tax is determined using tax rates and laws that have been enacted or substantially enacted at the reporting date and are expected to apply when the related tax asset is realized or the tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and REC intends to settle its current tax assets and current tax liabilities on a net basis. Deferred tax is provided on undistributed earnings in subsidiaries, associates and jointly controlled entities to the extent that the future dividend is taxable, except where the timing of any dividend is controlled by REC and it is probable that the dividend will not be distributed in the foreseeable future. For the periods presented, no deferred tax has been recognized.

1.17 PROVISIONS

Provisions for product warranties, onerous contracts, asset retirement obligations, restructuring costs and legal claims are recognized when: REC has a present legal 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 not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Assessment of fair value and likelihood is made at each reporting date. Provisions are measured at the management's best estimate of the expenditures expected to be required to settle the obligation at the reporting date, and are discounted to present value where the effect is material and the distribution in time can be reliably estimated.

1.18 PENSION/POST RETIREMENT OBLIGATIONS

REC has no defined benefit pension plans. For defined contribution plans, REC has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

1.19 REVENUE RECOGNITION

Revenues are primarily generated from sale of goods consisting of solar panels and PV systems (Photovoltaic systems or installations offering electricity for commercial, residential or large-scale application). Revenue comprises the fair value for the sale of goods and services, net of valueadded tax, rebates, discounts and expected returns. Revenues are normally reported gross with a separate recording of expenses to vendors of products or services. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred (transferred significant risks and rewards of ownership and control) or services have been rendered, the price is fixed or determinable, collectability is reasonably assured (probable that future economic benefits will be realized) and the costs can be measured reliably. Recognition of revenues from construction contracts are recognized according to percentage of completion. REC's opinion is that it has no significant difficulties in deciding when delivery has occurred, except to some extent for the PV systems projects. Delivery is normally according to terms in the relevant contracts. When REC products are sold with a right of return for damaged goods, experience is used to estimate and provide for such returns at the time of sale. For some of the PV systems projects, judgment is needed to decide if it is a construction contract or sale of goods and services, which affects when revenue shall be recognized. Sales of PV systems that are realized by sale of special purpose entities are also accounted for as mentioned above. When sub-contractors are used to perform parts of the production, e.g. wafer cutting or cell or solar panel production, revenues are not recognized on the delivery to these subcontractors. Instead a cost for the production service is recognized at the time the revenue for sale to the customer is recognized. Solar panels and to some extent PV systems are sold with product warranties. The expected warranty amounts are recognized as an expense at the time of sale, and are adjusted for subsequent changes in estimates or actual outcomes.

1.20 INTEREST AND DIVIDEND INCOME

Interest income is accrued on a time basis. Dividend income from investments is recognized when the shareholders' rights to receive payment have been established, normally on the declaration date.

1.21 LEASES

Leases are classified as finance leases whenever the terms of the lease substantially transfer all the risks and rewards of ownership to the lessee. Other leases are classified as operating leases. The evaluation is based on the substance of the transaction. The criteria that primarily has been the decisive factor for REC in concluding that a finance lease exists is when the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset at the inception of the lease. In determining minimum lease terms and payments it has been taken into consideration the possibility of termination of contracts. According to IFRIC 4 Determining whether an arrangement contains a lease REC may enter into an arrangement that does not take the legal form of a lease but conveys a right to use an asset in return for a payment or series of payments. Determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset; and (b) the arrangement conveys a right to use the asset. Assets held under finance leases are recognized as assets of REC at their estimated fair values at the inception of the lease or, if lower, at the present value of the minimum lease payments. The leased assets are depreciated over the shorter of the useful life of the asset or the lease term. The corresponding liability to the lessor is included in the statement of financial position as an interest bearing liability. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of income on a straight-line basis over the period of the lease. Significant prepayments made in an operating lease for REC as the lessee are amortized over the minimum lease term and included as a part of amortization in the statement of income.

1.22 GOVERNMENT GRANTS

Government grants are recognized at their fair values when there is reasonable assurance that the grants will be received and REC will comply with all 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 deducted in reporting the related expenses.

1.23 DISCONTINUED OPERATIONS

A discontinued operation is a component of REC that either has been disposed of, abandoned or is classified as held for sale, and represents a separate major line of business or geographical area of operations. There are no discontinued operations for the periods presented.

1.24 STATEMENT OF CASH FLOWS

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 and dividends received 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, up-front and waiver loan fees that are reported as part of financing activities. For the statement of cash flows, net currency gains or losses are split into items estimated to relate to borrowings (financing activities), non-current financial assets and investments (investing activities) and unrealized gains or losses on cash and cash equivalents held at the end of the periods. These amounts are included in the line item under operating activities "currency effects not cash flow or not related to operating activities" as an adjustment to the amount reported in the statement of income and reclassified as relevant. The remaining currency gains or Investing activities include cash flows related to non-current receivables and non-current prepayments (assets), even if these originated due to purchase or sale of goods and services.

1.25 ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

A number of new accounting standards, amendments to standards and interpretations are effective for year ending 31 December 2014. They are :

• Investment Entities (Amendments to IFRS 10, IFRS12 and IAS 27)
• Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)
• Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)
• IFRIC 21 Levies
• Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)

A number of new accounting standards, amendments to standards and interpretations are not yet effective, but available for early adoption. They are:

• Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)
• Annual Improvements to IFRSs 2010-2012 Cycle various standards
• Annual Improvements to IFRSs 2011-2013 Cycle various standards
• IFRS 14 Regulatory Deferral Accounts
• IFRS 9 Financial Instruments

REC did not early adopt any of the above. None of these are expected to have significant impact on the consolidated financial statements of REC.

REC Solar ASA Karenslyst allé 51 SKØYEN 0279 OSLO Norway

REC is a leading global provider of solar energy solutions. With more than 15 years of experience, we offer sustainable, high performing products, services and investments for the solar industry. Together with our partners, we create value by providing solutions that better meet the world's growing energy needs. REC is headquartered in Norway and listed on the Oslo Stock Exchange (ticker: RECSOL). Our 1,600 employees worldwide generated revenues of USD 647 million in 2013.

Find out more about REC at www.recgroup.com