Solar — Investor Presentation 2015

Feb 25, 2015

FOURTH QUARTER AND PRELIMINARYFULL YEAR 2014

PRESENTATION

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for REC Solar ASA and REC Solar ASA's (including subsidiaries and affiliates) lines of business These expectations estimates and projections are gener business. expectations, generally identifiable by statements containing words such as statements words "expects, "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for REC Solar ASA's businesses, energy prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although REC Solar ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. REC Solar ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither REC Solar ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

The presentation was prepared for fourth quarter 2014 result pr presentation esentation on February 25, 2015. Information contained within will not be updated. The following slides should be read and considered in connection with the information given orally during the presentation.

The REC Solar ASA shares have not been registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Act Act.

• Announcement of agreement of sale of the business to Bluestar Elkem
• Financial performance
• Module revenues of USD 176.6m
• EBITDA of USD 16.7m
• SSStrong sales in Europe and the U
• Sales price for solar panels down 7.2% from Q3 2014 due to unfavourable currency development and increased sales EBITDA (USD m) development to the utility segment
• Solar panel cash cost at USD 60 cents, down USD 2 cents/Wp from Q3 2014 21
• Dec 2014 cash cost at USD 59 cents/Wp
• 258 MW module production, up 3.8%
• Appointment of Steve O'Neil, as CEO, effective from 25 March 2015

Revenues (USD m)

4

E G M l a p p r o a v	F l f i l l d u e -
A i- l G t t t n r s a p p r o a e r m a n u v y	F l f i l l d u e -
f S i A l l t p p r o v a o n g a p o r e r e g u a o r y h i i t t a u o r e s	F l f i l l d e u -
i f i i A d d l t u e n a n c a s	G f d i d b i d d i i l d b i d d b t t t r o u p a u e a r g e n a n c a s e x p e c e o e p r o v e y - b i i f M h e g n n n g o a r c
C A l f h i l t p p r o v a o n e s e r e g u a o r y h i i t t a u o r e s	I n p r o c e s s -

• The time schedule previously communicated, assuming payment of proceeds to shareholders in May 2015, is not expected to be met awaiting Chinese regulatory approvals
• Distribution of liquidation proceeds to investors is expected 14 – 16 weeks after final closing conditions h b f lfill d (i Chi l l ) have been fulfille(i.e. Chinese regulatory approvals)

T i b l f f l f i l f h d i i l i i d d d l i R E C S l A S A t t t t t t t m e a e o r m e n o e c o n o n s o q a e a n e s o a r u u
W k 1 e e	f f f f F i l l i d i i l l i i l l l l d d t n a c o s n g c o n o n s u e e
W k 2 e e	C l i f h l B l E l k t t t o s n g o e s a e o u e s a r e m
W k 5 5 6 6 e e -	E G M f l i i i i d i l i f R E C S l C d i i i d t t t t t t t o r r e s o u o n o n a e a s s o u o n o o a r. r e o r n o c e p p e r o G i i i d f E M t t t n a e a e r
W k 6 7 e e -	F i l f d d i i f l i i d i t t t t t t e a r e r n s o r a a n c e a a s s e s s m e n n p r e p a r a o n o r q a o n x u v x u
W k 1 4 1 5 e e –	C f l i d d t t t o m p e o n o a v a n c e a x a s s e s s m e n
W k 1 5 1 6 e e -	D i i b i f f d h h l d t t t s r o n o n s o s a r e o e r s u u
W W k 1 1 1 1 8 8 7 7 e e -	G C S E M f f R E l f i l l i i d i b b l l h d h f i l l l i i i i d d i i t t t t t o o o a r a a p p p p r r o o e e s s n a q a o n a a a a n n c c e e s e e a n e n a q q a a o o n n v v u u u C O S f h l i i d l i i f h l k E h t t t t t o e o m p a n r e s n g n e s n g r o m e s o o c c a n g e y, u x -

Please note that the indicative timeline has been prepared based only on REC Solar's current expectations. The indicative timeline is dependent on several factors outside the control of REC Solar, and there can be no guarantee that the process will actually follow the indicative timeline

Global solar module demand expected to increase by 15 – 20% in 2015

Annual Module Installations (GW)

Source: IHS Integrated Market Tracker Q4 2014

• Japan and China are forecasted to in 2014

• Annual global module installations are expected to reach around 53GW in 2015, an increase of 17% from 2014

• Average global solar panel spot prices fell by 0.9% from Q3 to Q4 2014

• Trade cases and forei gn currenc y g movements increasingly influencing pricing and supplier landscape

Source: PV Insight

Geographical sales split (MW)

• Asia was the largest PV region for the solar industry in 2014. The Americas are expected to become the 2nd largest PV market in 2015
• The ongoing trade case* between US and China is impacting the supply landscape
• Currency movements are impacting the relative attractiveness of REC's main markets

Source: IHS Integrated Market Tracker Q4 2014, REC *Determination of the anti-dumping and countervailing (AD/CVD) investigation in certain crystalline silicon PV products from China and Taiwan

Annual installations in the US market is set to grow by ~50% the next two years

* Includes figures for "off grid" Residential: < 10 kW, Commercial: 10 kW – 5MW , Utility: > 5MW

• The US market is expected to grow by ~50% from 2014 to year 2016
• A reduction in the investment tax credit in 2017 is expected to eventually reduce installations in the utility segment

REC sales development in US (MW)

* Binding supply agreements in place as of 31.12.2014 Source: IHS Integrated Market Tracker Q4 2014, REC

• REC has strengthened its position in the US and had supply agreements* of 622 MW for delivery in 2015 and 2016
• REC started shipping its REC Peak Energy Z-link panels in late Q4 2014

High activity in the UK market combined with a seasonally strong quarter led to higher activity in Europe in Q4 2014

* Includes figures for "off grid" Residential: < 10 kW, Commercial: 10 kW – 5MW , Utility: > 5MW

REC sales development in Europe (MW)

• Overall demand in the European market be
• UK expected to maintain its position as the largest market in Europe in 2015

• ROC scheme in UK end on 1st April 2015 scheme 1st April (for projects > 5 MW). Some UK projects experienced permitting issues in Q4 2014

• Strong increase in sales due to seasonal effects and high activity level in the UK market

• REC will seek to penetrate new markets within EMEA region

Annual Module Production (MW)

• REC expects to produce 1200 MW of modules, 950 MW of wafers and 770 MW of cells in 2015
• 2015 capacity expansion on track
• Second phase of furnace upgrade to increase f it t 950 MW b 2H 2015 t kwafer capacity to by 2015 on trac
• Expansion of module plant with two new lines to increase module production capacity to 1.3

REC cell efficiency and module power continue to improve

* Based on 60 cells multi-crystalline modules, excluding 72 cell modules

• • REC Solar panel cash costs reduced by 6% in the last 12 months
• Despite change in product mix with higher raw material cost, REC achieves Q4 2014 solar panel cash cost of USD 60 cents/Wp down ~USD 2 cents/Wp (excl cents/Wp, (excl. exceptional items)
• Dec 2014 cash cost USD 59 cents/Wp
• REC ill d h t f th i 2015 REC will re duce cash cost further in through;
  • Reduced silicon feed stock and external block costs
  • –Increased furnace and module output
  • –Cell efficiency improvements
  • – Continued OMC reductions and operational improvements
  • –Reduced electricity prices

* Reclassification of historical SG&A and cash. conv. costs

Financial development EBITDA margins have "stabilized" around 10%

f ig Ke y ur es	1 Q 1 3	2 Q 1 3	3 Q 1 3	4 Q 1 3	1 Q 1 4	2 Q 1 4	3 Q 1 4	4 Q 1 4
( ) E B I T D A U S Dm	‐7	1 5	1 1	2 1	1 6	2 2	1 5	1 6
( ) E B I T D A in % m ar g	‐5 7 %	9. 4 %	7. 2 %	1 1. 7 %	9. 4 %	1 3. 1 %	1 0. 1 %	9. 2 %
( ) d. du io W M M t o p ro c n	1 0 7	1 9 9	2 2 3	2 2 8	2 1 6	2 3 2	2 4 8	2 6 5
/ ( ) Co W U S Dc ts t s p en	0. 6 9	0. 6 8	0. 6 5	0. 6 4	* 0. 6 4	* 0. 6 4	* 0. 6 2	0. 6 0
						6 % -

* Excluding exceptional cash cost items

CONSOLIDATED STATEMENT OF INCOMEREC

		1	Ja 2 0 1 4 3 1 to n	I i d l
( U S D I N M I L L I O N )	Q 4 2 0 1 4	Q 3 2 0 1 4	De 2 0 1 4 c	 n c r e a s e n m o e r e e n e s u v u
Re ve nu es	1 8 0. 0	1 4 9. 1	6 8 0. 2	i l d h i h l t m a n e o g e r s a e s y u
Mo du le Bu ine s ss re ve nu e	1 7 6. 6	1 4 9. 1	6 5 9. 7	S l E d U t o m e s o r o p e a n v u u
Sy Bu ine te s m s ss re ve nu e	3. 4	0. 0	2 0. 5
To l c f m ia ls ta t o te os a r	-1 0 6. 6	7 8. 2 -	4 0 0. 2 -	S l i f l l  a e s p r c e o r s o a r p a n e s
Op ing t er a e xp en se s	6. -5 7	9 5 5. -	2 1 1. 1 -	d f Q d 7 2 % 3 2 0 1 4 o w n r o m u e
E B I T D A	1 6. 7	1 5. 0	6 8. 9	f b l t o u n a v o u r a e c u r r e n c y
Mo du le Bu ine E B I T D A s ss	1 6. 2	1 1 5.	6 8. 8
Sy Bu ine E B I T D A te s m s ss	0. 5	0. 1 -	0. 1	d l d i d t e v e o p m e n a n n c r e a s e
De /a / im irm t. t p r m or p a en	-4 2	4. 8	1 9. 6	l h i l i t t t t t s a e s o e s e g m e n u y
E B I T	1 2. 5	- 1 0. 1	- 4 9. 4
S ha f p f i / los f e i t ty re o ro s o q u ac c.	-1 0	3. 8	2. 7	S T h B i t  e s e m s n e s s r e e n e y u v u
Ne f ina ia l i t te nc ms	1 1. 7	9. 8	2 3. 3	f i i l l d h l t t t s m a n r e a e o e s a e o
f / fo Pr i los be t ta o s re x	2 3. 1	2 3. 7	7 5. 4	y f f h I l i l i d t t t t e a a n r o o o p p o r o o a n
Inc / be f i ta t om e x ex p en se ne	1. 0	1. 2 -	1. 5 -	f f
f / Pr i los t o s	2 4. 1	2 2. 5	7 3. 9	l i i i h t t t s a e o g r e e n c e r c a e s n e
Ea in ha In U S D				R i j t o m a n a n p r o e c
( ) rn g s p er s re
Fr l o ion to ta t om p er a s
-b ic as	0. 6 0	0. 5 6	1. 8 5
-d i lu d te	0. 6 0	0. 5 6	1. 8 5

• Increase in module revenues volumes to Europe and US
• Sales price for solar panels down 7.2% from Q3 2014 due to unfavourable currency development and increased sales to the utility segment
• is mainly related to the sale of the Italian roof top portfolio and sale of green certificates in the

( S O ) U D I N M I L L I N	C 3 1 D E 2 0 1 4	S 3 0 E P 2 0 1 4 #
A S S E T S
F ixe d As ts se	1 0 1. 3	8 3. 6
In ta i b le As ts ng se	1 4. 1	1 5. 3
O he No Cu As t t t r n- rre n se	2 1. 5	2 2. 5
Ca h s	8 9. 9	7 3. 2
O Cu t he t As t r rre n se	2 6 5. 3	2 5 9. 4
T O T A L A S S E T S	4 9 2. 2	4 5 4. 0
E Q U I T Y A N D L I A B I L I T I E S
S ha ho l de ' e i ty re rs q u
Pa i d- in i l ta ca p	1 3 1. 4	1 3 1. 4
O he i Co he ive inc d ine d t ty ta r e q u m p re ns om e an re ,
ing ea rn s	6 3. 4	8 1. 6
Pr f i d los fo he io d t a t o n s r p er	3 9. 7	4 9 7.
	2 6 8. 7	2 6 2. 7
L ia b i l i ies t
Cu Pr is ion No t ov s n- rre n	8 9. 7	9 2. 4
Tr de Pa b les d O he L ia b i l i ies t t a y a a n r	1 2 9. 8	9 2. 0
O he Cu L ia b i l i ies t t t r rre n	4. 0	6. 9

223.5 191.3

T O T A L E Q U I T Y A N D L I A B I L I T I E S	4 9 2. 2	5 4 4. 0

restatement due to finalisation of Purchase Price Allocation

• Cash position of USD 90m
• Equity ratio of 55%, no interest qy , bearing debt

• Net working capital of USD 132m (vs USD 156m in Q3)

  • – Operating working capital of USD 111m
  • – Non operating working capital of USD 21m

• Current status:

• –REC has remaining ownership in one project in Romania and one fund participation in Italy
• –The project in Romania is expected to be sold within the next 12 months expected the 12
• Proceeds from already sold projects expected to return ~USD 3 - 5m in 2015

P j i t r o e c o v e r v e w	S i z e	S t t a u s
S U j t p r o e c	8 0 M W p	S Q l d i 1 2 0 1 3 R i d 8 0 % f d o n e c e e o p r o c e e s v
I l j 1 t t a y p r o e c	M W 4 5 p	S l d i Q R i d f d 2 2 0 1 4 7 5 % o n e c e v e o p r o c e e s
R i j t o m a n a p r o e c	8 3 M W p	S l d l d d l i d t t a e e a y e u e o r e g u a o r y s s u e s a n i i d i l t t t w o r s e n n g e c o n o m c s u e o r e r o a c v e y i d d t t m p o s e a x e s
I l j 2 t t a y p r o e c	f 2 0 % i 1 3 6 M W d n p u n s	N i i l d t t o m m n e n s a e e x p e c e

REC Solar share price performance last 12 months

* Peer group includes Canadian Solar, Hanwha, JA Solar, Jinko Solar, Renesola, Trina Solar, Yingli Solar, First Solar, Sunpower. Source: Factset as of 20 February 2015.

Note: Peers are equally weighted.

Market outlook

• Industry analysts are expecting a strong pick up in global demand in 2015,p y es ecially in the US and China
• REC expects attractive market conditions in the US in 2015
• Solar panel prices in Q1 2015 are expected to drift down, expected to be influenced by foreign currency development

Capex and outlook

• REC targets 7 - 9% reduction in solar panel cash costs from Q4 g 2014 to Q4 2015 (from 60 to USD 55 cents/Wp)
• REC has negotiated a new electricity contract reducing the costs of
• solar panel production by USD 1.5 cents/Wp effective Q2 2015 manufacturing Module production of ~260 MW in Q1 2015 and ~1200 MW in 2015
• Manufacturing capacity at year end 2015; Module capacity at ~1.3 GW, wafer capacity at ~ 980 MW and cell capacity at ~ 810 MW
• 2015 capex of USD ~ 50m whereof USD 35m is new capex, the balance is projects approved in 2014 that will be completed in 2015