Solar — Interim / Quarterly Report 2015

May 29, 2015

FIRST QUARTER 2015

REPORT

FIRST QUARTER 2015 REPORT THE US ESTABLISHED AS THE LARGEST MARKET FOR REC

HIGHLIGHTS:

• Ї Closing of the sale of the business of REC Solar ASA to Bluestar Elkem Investment Co. Ltd. in May 2015
• Ї Module revenues of USD 148.3 million, down 16.0 % from Q4 2014 mainly due to lower sales volumes to Europe
• Ї EBITDA of USD 15.3 million, down 8.4 % from Q4 2014
• Ї 263 MW of module production, up 2.0 % from Q4 2014
• Ї Solar panel cash cost at USD ~58 cents/Wp in Q1 2015, down ~2 cents/Wp from Q4 2014

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 better understanding of the different performance levels between the two operations.

KEY FINANCIALS (USD IN MILLION)	Q1 2015	Q4 2014	1 JAN 2014 TO 31 DEC 2014
Module Business	148.3	176.6	659.7
System Business	1.5	3.4	20.5
Total Revenues	149.8	180.0	680.2
Module Business	15.7	16.2	68.8
System Business	(0.4)	0.5	0.1
Total EBITDA	15.3	16.7	68.9
Depreciation and amortization	(4.4)	(4.2)	(19.6)
EBIT	10.9	12.5	49.4
Profit before tax	31.2	23.1	75.4
Profit after tax	31.4	24.1	73.9
EBITDA Margin
Module Business	10.6 %	9.2 %	10.4 %
System Business	–25.1 %	14.8 %	0.6 %
Total	10.2 %	9.3 %	10.1 %
Earnings per share (In USD)
– basic	0.78	0.60	1.85
– diluted	0.78	0.60	1.85

In Q1 2015, REC revenues were USD 149.8 million, down from USD 180.0 million in Q4 2014.

The Module business earned revenues of USD 148.3 million in Q1 2015, down from USD 176.6 million in the previous quarter. The decrease in module revenue is mainly due to lower sales volumes to Europe. The average module selling price for the Module business was down by 4.2 % compared to Q4 2014 while the sales volume was down 12.4 %. Total solar panel production was 263 MW in Q1 2015, up 2.0 % from the previous quarter.

The System business earned revenue of USD 1.5 million in Q1 2015, down from USD 3.4 million in the previous quarter. The revenue is primarily from the sale of green certificates from the Mizil project in Romania and DEWA project in the Middle East.

The finished solar panel inventory value at the end of Q1 2015 was approximately USD 67.5 million (excluding inventory for System business), increasing by 29.1 % from Q4 2014. The increase in solar panel inventory reflects the lower sales volume in Q1 2015.

In Q1 2015, REC's EBITDA was USD 15.3 million, down from USD 16.7 million in Q4 2014 and EBITDA margin was 10.2 % compared to 9.3 % in Q4 2014.

The Module business Q1 2015 EBITDA was USD 15.7 million, down from USD 16.2 million in Q4 2014. The decrease was mainly due to lower sales volume in Europe and lower average selling price. A lower amount of transaction costs, related to the sale of REC Solar Holdings AS and its subsidiaries to Bluestar Elkem, was incurred in Q1 2015 relative to Q4 2014.

The System business' EBITDA was a loss USD 0.4 million in Q1 2015, compared to a profit of USD 0.5 million in Q4 2014.

MARKET DEVELOPMENT

Average global solar panel prices fell by approximately 2.7 % from Q4 2014 to Q1 2015 while the average selling price ("ASP") for REC's solar panels fell by approximately 4.2 % from Q4 2014 to Q1 2015. The decline in REC's ASP, measured in USD, was partly due to a weakening of the EUR and JPY currency rates.

The global solar module installations are expected to have been 12.7 GW in Q1 2015, down 17 % from Q4 2014, but up 41 % from Q1 2014 according to IHS.

REC's sales in Europe in Q1 2015 measured in MW, decreased by 35.6 % from Q4 2014. Approximately 39 % of REC's modules were sold in Europe in Q1 2015. The UK market was the most important market for REC in Europe.

REC's sales in the US in Q1 2015, measured in MW, increased 62.7 % from Q4 2014. The US market, with approximately 39 % of REC's modules sold, represented the largest market for REC in Q1 2015.

REC's sales in Japan in Q1 2015 measured in MW, decreased by 36.4 % from Q4 2014. The reduction was mainly due to lower volumes to a major client.

Currency movements are impacting the relative attractiveness of our key markets. The strengthening of the USD currency versus other currencies has increased the importance of the US market.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization amounts to USD 4.4 million in Q1 2015 compared to USD 4.2 million in Q4 2014.

NET FINANCIAL ITEMS

Net financial items amount to a gain of USD 16.0 million in Q1 2015 compared to a gain of USD 11.7 million in Q4 2014. The increase is mainly due to gains resulting from mark-to-market valuation of forward currency exchange contracts and unrealized currency gains from revaluation of net assets.

TAX

Income tax income for Q1 2015 amounted to USD 0.2 million compared to an Income tax income of USD 1.0 million in Q4 2014.

TECHNOLOGY AND R&D

The Group incurred R&D expenses of USD 3.6 million in Q1 2015, compared to USD 4.1 million in Q4 2014.

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, technology developments in Q1 2015 have been concentrating on improving the REC high performance multi-crystalline wafer. Optimization of the furnace recipe related to stirring, temperature control, and crucible coating lead to less dislocation density in the ingot and higher wafer yield and higher cell efficiency. To improve the cell efficiency, REC is developing an improved nucleation recipe expected to lead to an even lower density of dislocations throughout the ingot. REC is optimizing the filling recipe of the ingot and has increased the ingot casting volume per run by 7 % compared to Q4 2014.

In the solar cell area, REC has progressed to fan out the PERC technology on multi-crystalline wafers and converted three production lines. Process optimization has continued and the cell efficiency improvements have been driven by improvements of the emitter recipe and back side dielectric passivation stack. The cell technology team development work has been concentrating on improving the rear side wet chemical polish and optimization of the front side cell layout.

Solar panel development has been focused on ramping up the capacity of REC's unique TwinPeak product. The module technology team is developing a high performance module design which is expected to be implemented in Q2 2015 and which will strengthen the reliability of REC solar panels.

NET CASH FLOW

At 31 March 2015, REC's cash balance was USD 62.1 million. This compares to the cash balance on 31 December 2014 of USD 89.9 million. The decrease is mainly due to an increase in inventory and payment to suppliers, offset by receipt from customers.

OUTLOOK

All targets are subject to changes in market and operating condition.

REC Solar ASA completed the disposal of REC Solar ASA's business on 13 May 2015 and received cash proceeds of approximately NOK 4.298 billion, equivalent to NOK 107.45 per share.

A general meeting will be held on 29 May 2015 to, among other business, commence a solvent liquidation of the Company for the purposes of returning cash to shareholders. The result of such liquidation will be that the net proceeds (being the purchase price for the business plus existing cash held in REC Solar ASA less transaction costs and costs arising in REC Solar's ordinary course of business until the date of the liquidation) will be distributed to the Company's shareholders. Shareholders are expected to receive a cash payment of approximately NOK 107 per share on or around August 2015.

Under Norwegian tax laws, shareholders' receipt of funds following the liquidation of a public limited company shall be treated as realization of shares for tax purposes, i. e. in the same way as an ordinary sale of shares.

For Norwegian tax resident corporate shareholders, liquidation proceeds shall be covered by the tax exemption method. Gain realized by individual Norwegian tax resident shareholders will be taxable at a rate of 27 %, based on the consideration received less the shareholder's tax base on the shares.

For non-Norwegian shareholders, whether corporate or individual, no withholding tax will be triggered on distribution of liquidation proceeds. Non-Norwegian shareholders should consult their own advisors for guidance on the tax treatment of liquidation proceeds in their tax jurisdiction.

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 regulations and tax rules, 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 REC Solar ASA's annual report for 2014. 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.

CONSOLIDATED BALANCE SHEET REC

(USD IN MILLION)	NOTES	31 MAR 2015	31 MAR 2014#	31 DEC 2014
ASSETS
Non-current assets
Other intangible assets	2	11.8	18.7	14.1
Intangible assets	2	11.8	18.7	14.1
Land and buildings	2	27.3	32.1	31.1
Machinery and production equipment	2	40.8	38.9	39.1
Other tangible assets	2	2.8	3.2	3.3
Assets under construction	2	20.7	2.6	27.8
Property, plant and equipment	2	91.6	76.8	101.3
Prepaid lease, non-current		9.9	13.2	11.3
Prepaid capex		–	1.5	–
Equity accounted investments	13	2.2	8.5	2.5
Investments in shares (available for sale)	13	3.4	4.5	3.6
Other non-current receivables	10	4.7	1.7	4.0
Financial assets		10.3	14.7	10.1
Deferred tax assets		0.5	1.6	0.2
Total non-current assets		124.2	126.4	137.0
Current assets
Inventories	4	131.8	97.4	107.8
Prepaid lease		0.5	0.6	0.5
Prepayments		6.1	3.9	1.4
Trade and other receivables	10	110.6	112.2	143.1
Current tax assets		0.4	0.8	0.8
Current derivatives	3	17.9	–	7.8
Restricted bank accounts		0.2	1.5	4.0
Cash and cash equivalents		62.1	86.5	89.9
Total current assets		329.6	302.9	355.2
Total assets		453.7	429.3	492.2

(#) Restated, please see note 11 for additional information

CONSOLIDATED BALANCE SHEET REC

(USD IN MILLION)	NOTES	31 MAR 2015	31 MAR 2014#	31 DEC 2014
EQUITY AND LIABILITIES
Shareholders' equity
Share capital		6.7	6.7	6.7
Other paid-in capital		124.6	124.6	124.6
Paid-in capital		131.4	131.4	131.4
Total comprehensive income		141.7	113.6	137.3
Total shareholders' equity		273.1	244.9	268.7
Non-current liabilities
Provisions	5	83.7	95.7	89.7
Total non-current liabilities		83.7	95.7	89.7
Current liabilities
Trade payables and other liabilities		95.1	84.5	129.8
Provisions	5	1.7	3.7	2.1
Current tax liabilities		0.2	0.4	1.7
Other derivatives	3	–	–	0.2
Total current liabilities		97.0	88.6	133.9
Total liabilities		180.7	184.4	223.5
Total equity and liabilities		453.7	429.3	492.2
(#) Restated, please see note 11 for additional information

CONSOLIDATED STATEMENT OF INCOME

REC

Revenues 149.8 175.4 180.0 Cost of materials –96.4 –96.9 –99.6 Changes in inventories and write downs 14.1 –8.0 –6.9 Employee benefit expenses –19.9 –21.6 –21.3 Other operating expenses –32.1 –32.3 –38.0 Other income and expenses 7 – –0.4 2.6 EBITDA 15.3 16.2 16.7 Depreciation 2 –3.4 –4.4 –3.1 Amortization 2 –1.0 –1.1 –1.1 Total depreciation and amortization –4.4 –5.5 –4.2 EBIT 11.0 10.7 12.5 Share of gain/(loss) of equity accounted 4.3 –0.2 –1.0 investments Financial income – – – Net financial expenses –0.1 –0.3 –0.8 Net currency gains/losses 5.3 1.0 12.5 Net gains/losses other fin instruments 10.7 – – Net financial items 16.0 0.7 11.7 Profit before tax 31.2 11.2 23.1 Income tax expense 0.2 –0.2 1.0 Profit 31.4 11.0 24.1 Attributable to: Owners of REC Solar ASA 31.4 11.0 24.1 Earnings per share (In USD) From total operations – basic 0.78 0.28 0.60 – diluted 0.78 0.28 0.60	(USD IN MILLION)	NOTES	Q1 2015	Q1 2014	Q4 2014	1 JAN 2014 TO 31 DEC 2014
						680.2
						–407.8
						7.7
						–86.0
						–130.3
						5.3
						68.9
						–15.0
						–4.5
						–19.6
						49.4
						2.7
						0.1
						–1.5
						16.4
						8.3
						23.3
						75.4
						–1.5
						73.9
						73.9
						1.85
						1.85

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME REC

(USD IN MILLION)	Q1 2015	Q1 2014	1 JAN 2014 TO 31 DEC 2014
Profit for the period	31.4	11.0	11.0
Other comprehensive income, net of tax:
currency translation differences of foreign operations taken to equity	–27.0	–0.6	–39.8
Sum of items that may be reclassified subsequently to profit or loss	–27.0	–0.6	–39.8
Total other comprehensive income for the period	–27.0	–0.6	–39.8
Total comprehensive income for the period	4.4	10.4	34.1
Total comprehensive income for the period attributable to
Owners of REC Solar ASA	4.4	10.4	34.1

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

REC

			ATTRIBUTABLE TO EQUITY HOLDERS OF REC SOLAR ASA
		OTHER PAID-IN	TOTAL PAID-IN		COMPREHENSIVE
(USD IN MILLION)	SHARE CAPITAL	CAPITAL	CAPITAL	OTHER EQUITY	INCOME	TOTAL EQUITY
Year 2015
At 1 January 2015	6.7	124.6	131.4	0.1	137.3	268.7
equity share option plan	–	–	–	–	–	–
Total comprehensive income for the period	–	–	–	–	4.4	4.4
At 31 March 2015	6.7	124.6	131.4	0.1	141.7	273.1

CONSOLIDATED STATEMENT OF CASH FLOWS REC

(USD IN MILLION)	Q1 2015	Q1 2014	Q4 2014	1 JAN 2014 TO 31 DEC 2014
Profit before tax for the period	31.2	11.2	23.1	75.4
Adjustments for:
Depreciation and amortization	4.4	5.4	4.2	19.6
Loss on sales of property, plant and equipment	–	0.3	–0.1	0.2
Change in fair value of derivatives	–7.9	–	–	–7.8
Share of gain/loss of equity accounted investments	–4.3	0.2	1.1	–2.7
Gain/loss on disposal of subsidiaries	0.8	–	–	–
Changes in trade and other receivables	20.5	13.0	–26.0	–49.5
Changes in inventories	–35.7	8.8	–4.6	–14.4
Changes in trade and other payables	–31.3	–26.4	39.5	27.2
Changes in provisions	3.1	0.5	1.3	4.5
Tax paid	–0.2	–	–	–
Net cash flow from operating activities	–19.4	13.0	38.5	52.5
Cash flows from investing activities
Proceed from equity accounted investments	4.0	–	–	12.1
Acquisition of property, plant and equipment and intangible assets	–4.7	–4.6	–26.0	–51.8
Proceeds from sales of property, plant and equipment	–	–	–	0.1
Proceeds from government grants	–	11.6	12.8	24.4
Net cash used in investing activities	–0.7	7.0	–13.2	–15.2
Cash flows from financing activities
Proceeds from issue of share capital	–	–	–	–
Payments for transaction costs related to issue of share capital	–	–	–	–
Net cash flow from financing activities	–	–	–	–
Net increase in cash and cash equivalents	–20.1	20.0	25.3	37.3
Effect of exchange rate fluctuations	–7.7	–0.7	–8.6	–14.6
Cash and cash equivalents at the beginning of the period	89.9	67.2	73.2	67.2
Cash and cash equivalents at the end of the period	62.1	86.5	89.9	89.9

NOTES

1. GENERAL

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 condensed consolidated interim financial statements, combined with other relevant financial information in this report, have been prepared in accordance with IAS 34. These condensed consolidated interim financial statements have not been audited or subject to a review by the auditor. They do not include all of the information required for full annual financial statements of the Group and should be read in conjunction with the consolidated financial statements for 2014. The consolidated financial statements for 2014 are available www.recgroup. com.

ACCOUNTING POLICIES

The consolidated financial statements for 2014 were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Norwegian Accounting Act. The accounting policies adopted are consistent with those of the previous financial year.

2. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

2 FIXED ASSETS

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 2015	31.1	39.2	3.3	27.7	101.3	14.1	115.4
Exchange differences	–3.3	–4.5	–0.3	–2.8	–11.0	–1.5	–12.5
Net additions1)	0.1	8.7	–	–4.1	4.6	–	4.7
Government grant	–	–	–	–	–	–	–
Disposals	–	–	–	–	–	–	–
Depreciation and amortization2)	–0.6	–2.7	–0.2	–	–3.4	–0.8	–4.2
Carrying value at 31 March 2015	27.3	40.8	2.8	20.8	91.6	11.8	103.4
At 1 January 2015
Cost price	30.2	55.0	3.7	20.8	109.6	16.5	126.1
Accumulated depreciation/ amortization/impairment	–2.9	–14.2	–0.9	–	–18.0	–4.6	–22.7
Carrying value at 31 March 2015	27.3	40.8	2.8	20.8	91.6	11.8	103.4

1) Net additions include transfers from assets under construction

2) Amortization for Total Intangible Assets does not include amortization of prepaid lease

IMPAIRMENT REVIEWS

Based on a review of market and operating conditions and the market capitalisation, REC has concluded that there are no impairment loss indicators on the Group's property, plant and equipment and intangible assets.

3. DERIVATIVES

REC is exposed to foreign currency exchange rate risks, especially with regards to the EURO, Singapore Dollar and US Dollar. In order to minimize the total risk to currency volatility, REC entered into currency forward contracts for a part of its future cash flows. The Foreign Exchange forward contracts are not designated as hedging instruments and are entered into with maturity dates ranging from one month to 12 months, where changes in fair value are recognized through the profit and loss statement.

FAIR VALUES AND CARRYING AMOUNTS

		31 MAR 2015		31 MAR 2014		31 DEC 2014
(USD IN MILLION)	ASSETS	LIABILITIES	ASSETS	LIABILITIES	ASSETS	LIABILITIES
Foreign exchange forward contracts	17.9	–	–	–	7.8	–0.2

DISTRIBUTION OF DERIVATIVES

	31 MAR 2015			31 MAR 2014		31 DEC 2014
(USD IN MILLION)	ASSETS	LIABILITIES	ASSETS	LIABILITIES	ASSETS	LIABILITIES
Total non-current derivatives	–	–	–	–	–	–
Total current derivatives	17.9	–	–	–	7.8	–0.2
Total derivatives	17.9	–	–	–	7.8	–0.2

The fair value hierarchy of the derivatives is level 2. Market values are calculated using mid-rates (excluding margins) as determined by the bank where the derivatives contracts are entered based on available market rates at present.

CONTRACTUAL CASH FLOWS IN FOREIGN EXCHANGE FORWARD CONTRACTS AS AT 31 MAR 2015

(CURRENCY IN MILLION)		FLEXI FX FORWARD 2015/2016
Bought currency	SGD/EUR	114.4
	USD/EUR	52.6
Sold currency	AUD/USD	12.5
	JPY/USD	1,350.0

The table above shows contractual currency amounts by year of maturity. Positive (negative) amounts are the principal amount of the first currency mentioned bought (sold) forward with payment (receipt) of the second currency.

The table below shows the same contracts, but summarizes the future currency exposure in total for contractual cash flows in foreign exchange forward contracts as at 31 March 2015.

FUTURE CURRENCY EXPOSURE, BOUGHT CURRENCY (+), SOLD CURRENCY (–) PER YEAR AS AT 31 MAR 2015

(CURRENCY IN MILLION)	USD 2015/2016	EUR 2015/2016	SGD 2015/2016	AUD 2015	JPY 2015
EUR/USD	52.6	–40.0	–	–	–
EUR/SGD	–	–70.0	114.4	–	–
AUD/USD	9.7	–	–	–12.5	–
JPY/USD	11.5	–	–	–	–1,350.0
Total	73.8	–110.0	114.4	–12.5	–1,350.0

At 31 March 2015, REC estimated net positive external future cash flows in Euro, Australian Dollar and Japanese Yen and net negative cash flows in USD and SGD. REC is hedging parts of these cash flows by entering into derivative transactions for purchase of USD/EUR, SGD/ EUR, USD/AUD and USD/JPY.

FAIR VALUE OF FOREIGN EXCHANGE FORWARD CONTRACTS AS AT 31 MAR 2015

(USD IN MILLION)		FLEXI FX FORWARD 2015/2016
Bought currency	SGD/EUR	7.9
	USD/EUR	9.5
Sold currency	AUD/USD	0.2
	JPY/USD	0.2
Total		17.9

The table above shows a specification of fair values equaling carrying amounts, at 31 March 2015 of currency derivatives distributed by currency.

4. INVENTORIES

(USD IN MILLION)	31 MAR 2015	31 MAR 2014	31 DEC 2014
Stock of materials, merchandise, production supplies	48.4	30.2	38.2
Spare parts	10.8	12.9	12.6
Work in progress	3.1	4.7	2.1
Finished goods	69.5	49.5	54.8
Total	131.8	97.4	107.8

5. PROVISIONS

(USD IN MILLION)	RESTRUCTURING & EMPLOYEE TERMINATION BENEFITS	WARRANTIES	ASSET RETIREMENT OBLIGATIONS	ONEROUS CONTRACTS	LEGAL	TOTAL
At 1 January 2015	–	57.5	33.3	0.6	0.4	91.8
Additional provisions	–	1.2	–	–	–	1.2
Exchange differences	–	–6.2	–1.3	–0.1	–	–7.6
Increase in provisions due to interest	–	–	0.1	–	–	0.1
At 31 March 2015	–	52.5	32.1	0.5	0.4	85.5

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.

6. BORROWINGS

REC has no borrowings from third parties as at 31 March 2015.

7. OTHER INCOME AND EXPENSES

(USD IN MILLION)	Q1 2015	Q1 2014	Q4 2014	1 JAN 2014 TO 31 DEC 2014
Restructuring cost and employee termination benefits	–	–0.1	0.5	0.4
Onerous contracts	–	–	0.1	0.1
Other income	–	–	1.9	5.0
Gain/loss on disposal of non-current assets	–	–0.3	0.1	–0.2
Total other income and expenses	–	–0.4	2.6	5.3

Other income of USD 1.9 million in Q4 2014 relates to insurance reimbursement from the fire incident that occurred in Q1 2014.

8. COMMITMENTS, GUARANTEES

CONTRACTUAL PURCHASE OBLIGATIONS AND MINIMUM OPERATING LEASE PAYMENTS AT 31 MARCH 2015

	TOTAL FUTURE
(USD IN MILLION)	PAYMENTS	2015	2016	2017	2018	2019	2020	AFTER 2020
Purchase of goods and services
Total purchase of goods and services	115.1	106.3	8.4	0.4	–	–	–	–
Minimum operating lease payments
Total minimum operating lease payments	4.3	1.1	1.4	0.9	0.5	0.3	–	–
Capex
Total capex	12.0	11.8	0.2	–	–	–	–	–

The purchase obligation amounts consist of items for which REC is contractually obligated to purchase from a third party as at 31 March 2015. 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 2.1 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.

In addition, REC has entered into guarantees agreements with banks and financial institutions amounting to USD 66.4 million.

9. CONTINGENT LIABILITIES/DISPUTES

REC Solar France SAS and REC Solar Germany GmbH are defendants in a lawsuit initiated in France in April 2014 by a potential customer claiming approximately USD 1.2 million in damages after REC had terminated ongoing contract discussions. REC Solar Germany GmbH has made provisions related to this case as at 31 December 2014.

10. TRADE AND OTHER RECEIVABLES

SPECIFICATION OF PROVISION FOR LOSS ON TRADE AND OTHER RECEIVABLES

(USD IN MILLION)
At 1 January 2015	–0.2
Change in provision for loss on receivables	0.1
Provisions for loss on trade receivables	–
Exchange difference	–
At 31 March 2015	–0.1
Realized gain/(loss) on trade receivables in 2015	–
Change in provision for loss on receivables	0.1
Gain/(Loss) on trade receivables in the statement of income in 2015	0.1

	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	103.9	94.2	9.1	–	0.4	0.2	–
Provision for loss on trade recivables	–	–	–	–	–	–	–
Other non-current and current receivables	11.0	10.8	–	–	–	0.1	–
Finance receivables and short-term loans	0.5	0.5	–	–	–	–	–
Total	115.4	105.5	9.1	–	0.4	0.3	–

ANALYSIS OF AGING OF TRADE AND OTHER RECEIVABLES AT 31 MARCH 2015

11. BUSINESS COMBINATION

During Q4 2014, REC has finalized the purchase price allocation from the acquisition of 100 % of the shares of the former Solar Division from REC Silicon Group. The following changes to the balance sheet at the acquisition date have been effected as follows:

PRELIMINARY PPA	FINAL PPA	CHANGE
–98.9	–91.3	7.6
76.9	75.9	–1.0
114.5	115.1	0.6
142.1	137.7	–4.4
–65.9	–64.5	–1.4
–34.8	–38.6	3.8
–2.8	–3.2	0.4

The change in property, plant and equipment is caused by a re-evaluation of machinery and production equipment under construction.

Inventory has changed due to the re-assessment of the fair value of two System projects.

The fair value of Trade and other current receivables is mainly due to a re-assessment of government grant receivables and the settlement of claims in relation with the bankruptcy of REC Wafer Norway AS.

The decrease in Trade and other payables is linked to a mistake in the preliminary purchase price allocation that was discovered during the twelve month period.

The increase in other current liabilities and provisions is due to re-assessment of accruals in relation to legal disputes and bonuses payments.

Due to the finalization of the purchase price allocation explained above, REC Balance Sheet as at 31 March 2014 has been restated to incorporate the changes to the purchase price allocation.

12. RISK FACTORS

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, please refer to REC consolidated financial statements for 2014. The consolidated financial statements for 2014 are available at www.recgroup.com.

13. RELATED PARTIES

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 (USA) 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 (REC Solar Commercial Corporation) remained 20 percent. In February 2015, REC entered into an agreement to sell a majority of its shares in REC Solar Commercial Corporation to Duke Energy. After the sale, REC will hold 7.6 % of the shares in REC Solar Commercial Corporation. The remaining shares are subject to a put/call option.

Sella Invest di ESB srl. & Co. sas (Sella) is an associate of REC which was founded to develop solar rooftop projects in the northern and central 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, and 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 a joint venture entity in the US which is active in project development in California. According to IFRS 11 Joint Arrangements, the 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 gain/loss of equity accounted investments" shown between EBIT and Net financial items.

14. SUBSEQUENT EVENTS

REC Solar ASA has completed the disposal of REC Solar ASA's business on 13 May 2015 and received cash proceeds of approximately NOK 4.298 billion, equivalent to NOK 107.45 per share.

REC Solar ASA Karenslyst allé 51 0279 Oslo Norway