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RENEWABLE ENERGY CORPORATION

Project Financing Approaches for UtilityScale Renewable Energy


ADB Asia Clean Energy Forum, Manila June 7, 2012 Matt Daly General Manager, REC Solar Asia Pacific

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 ASA and REC ASAs (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as 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 RECs 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 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 ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither REC ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.
This presentation was prepared for Clean Power Asia 2012 held on May 15, 2012. 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 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.

2011 REC All rights reserved. Confidential

About REC
Founded in Norway in 1996, REC is a leading

vertically integrated solar energy company and employs more than 3,200 people worldwide
REC produces polysilicon, wafers, cells and

modules for the solar industry, and silicon materials for the electronics industry
REC is also engaged in project development

activities in selected PV segments


REC had revenues close to USD 2.4 billion in

2011
REC is listed on the Oslo Stock Exchange

under the ticker: REC

2011 REC All rights reserved. Confidential

REC an integrated company


Polysilicon Wafer Cells Modules Systems

Chemical process Operations in USA

Casting and cutting Operations in Singapore

Surface treatment Operations in Singapore

Assembly Operations in Singapore

Installation, additional components

Industry pioneer with commitment to PV Presence throughout the entire value chain World-class manufacturing facilities
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2011 REC All rights reserved. Confidential

Strong focus on operational excellence Increased market presence through

partners

Global manufacturing and sales footprint

Oslo, Norway Moses Lake, WA, USA Foster City, CA, USA (R&D) San Luis Obispo, CA, USA Munich, Germany Milan, Italy Tokyo, Japan Shanghai, China Taipei, Taiwan

Butte, MT, USA

Paris, France
Barcelona, Spain

Houston, TX, USA

Singapore

REC headquarters REC production facilities REC R&D units REC sales offices REC representative office / sales support
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2011 REC All rights reserved. Confidential

Agenda

Maximizing The Income Stream Reducing Capital Expenditure Risk Mitigation For The Revenue Stream Loan Guarantor GIEK

2011 REC All rights reserved. Confidential

Large scale projects require critical competence


Development or tendering Finance / Legal / Sale Engineering and Construction Own + Operate

Identify and secure local development partner / bid to tender


Secure all permits, building, environmental, grid connection, etc. Secure economics of projects, e.g., FIT, PPA, subsidies, etc Perform due diligence on the above
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2011 REC All rights reserved. Confidential

Assess financial attractiveness incl. yield analysis

Design layout,

Perform cost calculation for BOS and installation


Perform yield analysis and technical planning

Manage closing procedure of projects installed + sold

Set up SPV and develop debt and equity , tax and insurance structure
Identify equity sponsors and start sales process Build streamlined financing processes

Ensure sufficient financing for further development


Contract management concerning warranties and bank-guarantees Monitor and Operate

Organize tender process for EPC sub contractors and negotiate contracts
Manage project , supervise site and commission project

Organize /outsource long-term services

Major contributing factors to PV project returns


REDUCE COSTS MAXIMISE REVENUE STREAM - Reduce

- High yielding equipment - Optimised design - Ongoing maintenance - Minimising degradation rates

IRR

capital expenditure of equipment - Maximise performance ratio via equipment and design - Efficient systems to limit operating expenditure - Incentives and subsidies

COST OF FINANCE

MITIGATION OF RISK

- Interest rate - Term of loan - Loan guarantor - Timing of repayments

- Securing PPA
- Technology selection - System durability - Service and support

2011 REC All rights reserved. Confidential

Major contributing factors to PV project returns


REDUCE COSTS MAXIMISE REVENUE STREAM - Reduce

- High yielding equipment - Optimised design - Ongoing maintenance - Minimising degradation rates

IRR

capital expenditure of equipment - Maximise performance ratio via equipment and design - Efficient systems to limit operating expenditure - Incentives and subsidies

COST OF FINANCE

MITIGATION OF RISK

- Interest rate - Term of loan - Loan guarantor - Timing of repayments

- Securing PPA
- Technology selection - System durability - Service and support

2011 REC All rights reserved. Confidential

Maximizing The Income Stream

RIGHT HERE IN ALICANTE


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2011 REC All rights reserved. Confidential

REC panels installed in a power plant in Alicante, Spain. System size of 8 MW, powering 4 896 households

How yield impacts project return


Increases in yield can accelerate the project IRR in a non-linear fashion PV modules are not a commodity! Project developers are prepared to pay a premium

for higher yielding modules


There are inherent technical features of REC modules that enable higher yield

generation throughout the modules life

15% 10%

IRR 11% 8%

5% 0% 0% 0% -3% -5% -7% -10% -10% Al-BSF + Al -15%

5% 6% 5% Yield

8%

-10%

-5%

10%

Change In Yield Linear Reference

Assumptions: Site location in Perth, Australia with a Base yield of 1650kWh/m2/yr, Debt:Equity ratio of 70/30, WACC of 11%, FiT of US$0.11/kWh and a CAPEX of US$2.70/W
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2011 REC All rights reserved. Confidential

Module part load efficiency is extremely important


Every module will have a different efficiency curve REC maintains high performance through all levels of irradiance

Relative Efficiency (%)


102% 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% 0 100 200 300 400 500

REC

Tier 1 -Si

Poor Si

Al-BSF + Al
600 700 800 900 1000

Irradiance (W/m2)
Source: REC efficiencies generated from TUV Rheinland test reports, Tier-1 and Poor-Si irradiation numbers have been recreated form electrical data using the one-diode model
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2011 REC All rights reserved. Confidential

Average irradiance levels highlight the STC deficiency


The STC nominal power rating is not the best indicator of expected performance To make an appropriate assessment of a product special attention must be given to the

efficiency level at the prevailing irradiance levels. Bangkok irradiance distribution shows the importance of the curve <600W/m2
Relative Efficiency (%)
102% 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% 0 100 200 300 400 500 600 700 800 900 1000 600 500 400 300 200 Irradiation Frequency Tier 1 -Si REC Poor Si

Hours/ Year
800 700

Al-BSF + Al

100 0 1100

Irradiance (W/m2)
Source: Global Horizontal Irradiance of Bangkok. Meteonorm file extracted from Pvsyst v5.55
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2011 REC All rights reserved. Confidential

Average irradiance levels in APAC 300-600W/m2


The majority of Asia has average irradiance levels under 600W/m2 between

sunrise and sunset


If you are not sure of the low-light efficiency levels of a module, ask the

manufacturer
A performance simulation used to underpin project finance should take this

factor into account


Beijing 320 W/m2 Tokyo 320 W/m2 Dehli 500 W/m2 Bangkok 403 W/m2 Manila 346 W/m2

Jakarta 370 W/m2

Al-BSF + Al

Sydney 408 W/m2

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2011 REC All rights reserved. Confidential

REC ranks as number 1 in yield


Photon test 2011: most recognized test comparing module brands under real

life conditions, over several years


Generated more electricity than all its 45 competitors,

6% more than test average


Average irradiance in this region is approx 230W/m2

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2011 REC All rights reserved. Confidential

Reducing Capital Expenditure

RIGHT HERE IN CALIFORNIA


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2011 REC All rights reserved. Confidential

Residential home with 61 REC solar panels installed in Monterey, California. Annual capacity: 19 435 kWh 13.1 tons of CO2 saved annually

How a module can reduce capital expenditure


Reducing system cost is more involved than simply

reducing the cost price of the module ($/W)


Modules can influence the developed cost in the

following ways:
Increasing efficiency reduces land and mounting structure costs Increased reverse current rating reduces the amount of fusing A high maximum system voltage that minimises the amount of strings and protection devices Cable length that minimises additional string cables Innovative frame design that allows for rapid installation rates Equipment accessories that streamline the installation process Packaging that reduces waste or simplifies transportation By-pass diodes used to minimise yield loss from shading Antireflection coatings to maximise sunlight transmission Availability to finance via ECA
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2011 REC All rights reserved. Confidential

REC is reducing module cost at a high rate


Singapore module cash cost Eurocents/watt

Q1 2012 costs;
March run rate at 90 Eurocents/Watt

-39% 127

2012 cost reductions;


Increased average cell efficiency Improved sourcing of materials
-27% 78 57

Improved operational performance,

debottlenecking and higher equipment availability


Reduced fixed costs and economies of

scale in support functions

Q310

Q112

Q412 target

Costs include SG&A, amortization, R&D, silicon at market price, cash production costs and excludes depreciation

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2011 REC All rights reserved. Confidential

Increasing yield performance reduces CAPEX


REC is known for its high performing yield throughout the world As simulated in PVsyst, in Asia Pacific the advantage still exists, which

translates to real value


REC Sanyo HIT Yingli SunTech JA Solar Trina 1,124 1,124 1,120 1,100 1,120 1,140 Annual Yield (kWh/kWp) Assumptions: Yield numbers generated in Pvsyst v5.51. Site location in Tokyo with a tilt of 28 degrees oriented due South. Sunny Tripower 10000TL inverters and module specific values for NOCT, mismatch and module quality loss.
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2011 REC All rights reserved. Confidential

1,191

1,191
1,154 1,154 1,143

Kyocera
Sharp 1,080

1,160

1,180

1,200

REC can command a $/W premium based on yield alone


Translating the yield numbers into a project IRR calculation, the premium REC can justify

against the major competitors is evident


This premium will change depending on climatic and financial factors, however the clear

pattern is that REC maintains a yield advantage that has translated to higher ASPs
Warranty, bankability and quality advantages will further extend the premium
Sanyo HIT REC $0.00 $0.05

-$0.07
-$0.07 -$0.09 -$0.11 -$0.11 -$0.11 -$0.12 -$0.10 -$0.08 -$0.06 -$0.04 -$0.02

Yingli SunTech JA Solar Trina Kyocera Sharp $0.00 $0.02 $0.04 $0.06

Assumptions: Debt:Equity ratio of 70/30, Cost of Debt 2%, cost of equity 9%, FiT of JPY38/kWh and a project lifetime of 25 years. System specific capital costs based on module efficiency and equivalent BoS costs
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2011 REC All rights reserved. Confidential

Risk Mitigation for the Revenue Stream

RIGHT HERE IN SINGAPORE


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2011 REC All rights reserved. Confidential

REC production plant, Tuas, Singapore

Durability tests to gain comfort in long-term performance


Most PV modules are warranted for a period of 25 years but few have

been in the field for that time. How REC guarantees the lifetime of its module:
Highly automated production facility Complete quality control (machine, man, method & material) ISO 9001, ISO14001 & OHSAS18001 Certified in Singapore Optional loading up to 5400Pa under IEC61215 (551kg/m2)

TUV Salt Mist Corrosion - Severity 6


TUV Ammonia Corrosion Extended qualification beyond IEC (DHT, TC, HF)

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2011 REC All rights reserved. Confidential

Industry leading linear warranty for REC modules

Module bankability is key criteria for solar REC holds a strong reputation with banks

in our active markets 25 year linear performance warranty 10 year product warranty Maximum degradation rate of 0.7%
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2011 REC All rights reserved. Confidential

Low customer claims provide evidence of quality


Reduced module power or plant downtime will adversely affect the financial

performance of a PV plant
Faults can occur at periodic times throughout the life of a plant. Remoteness

and lack of access to adequately trained personnel can cause systems to have downtimes of weeks or months.
One bad module can affect the performance of an entire string of sub-array
250 PPM 200 Claim PPM Acc PPM 2011 Target

150 110 100 49 50 35 33 34 98 79 72 79 57 90 97

0 Jan
24

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2011 REC All rights reserved. Confidential

REC has a strong track record of proven performance


Pandit Deendayal Petroleum University in Gujarat, India (7.61% Above Expectations)

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2011 REC All rights reserved. Confidential

REC has a strong track record of proven performance


100kW REC Factory Rooftop, Tuas, Singapore

Energy Yield Compared to PVsyst Prediction


Section 1
4.7%

Section 2

4.3%

Section 3

7.3%

0.0% Predicted 1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

REC modules exceed expectations by delivering between 4% to 7% more energy

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2011 REC All rights reserved. Confidential

REC has a strong track record of proven performance


REC Systems Performance Ratio* Examples (%)
85.7 80.5 84.0 81.9 83.7 91.8

Yield report Actual

France 5MW

Italy 5.7MW

Freiburg 582kW

* The performance ratio (PR) describes the relationship between the actual and theoretical energy outputs of the PV plant. Low conversion losses (glass reflection, temperature losses, transformer losses ...) are leading to a high PR.
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2011 REC All rights reserved. Confidential

The 5 Unique Selling Points of REC Modules

More Energy per M

Robust and Durable Design

Easy to Install

Optimized for all Sunlight Conditions

Energy Payback Time of One Year

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2011 REC All rights reserved. Confidential

Loan Guarantor
- Garanti-instituttet for eksportkreditt (GIEK)

RIGHT HERE IN ITALY


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2011 REC All rights reserved. Confidential

Powerplant with REC Peak Energy modules

Who is GIEK?
GIEK is the Norwegian ECA (Export Credit Agency) Guarantees for Norwegian exporters on behalf of the Norwegian

Government
Buyer credit (export credit)

Supplier credit guarantees Bond guarantees Investment guarantees


GIEKs general guarantee framework EUR 15.5 bn GIEK manages a portfolio of around EUR 10 bn (80% in the offshore

and maritime sectors)

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2011 REC All rights reserved. Confidential

What are Commercial and Political Risks


Commercial risk:
Loss due to debtor becoming insolvent / going bankrupt GIEK covers up to 70 90%

Political risk:
Loss due to conditions in the importing country: Confiscation, expropriation,

nationalization, war or other agitation


GIEK covers up to 95 100 %

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2011 REC All rights reserved. Confidential

GIEKs credit analysis


Pre-delivery risk Performance risk EPC contractor Credit evaluation debtor / sponsor Cash Flow

Technical risk
Operation and maintenance risk Legal due diligence of the underlying contracts, permits, licences, PPA

etc
Political risk Securities Environmental impact / CSR

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2011 REC All rights reserved. Confidential

Typical Financial Structure of a PV Installation

Courtesy of GIEK
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2011 REC All rights reserved. Confidential

RENEWABLE ENERGY CORPORATION

THANK YOU
Contact: Matt Daly General Manager matt.daly@recgroup.com

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