fourth quarter 2016 - zonebourse.com · fourth quarter 2016 ... -solar grade polysilicon sales...
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1 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016PRESENTATION
2 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
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 Silicon ASA’s (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 REC Silicon 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 Silicon 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 Silicon ASA makes no representations or warranties, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither REC Silicon 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 the fourth quarter 2016 results on February 16, 2017. Information contained herein will not be updated. The following slides should be read and considered in connection with the information given orally during thepresentation.
REC Silicon 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 requirementsof the Act.
Disclaimer
February 16, 2017
The IHS reports and information referenced herein (the "IHS Materials") are the copyrighted property of IHS Inc. (“IHS”) and represent data, research, opinions or viewpoints published by IHS, and are not representations of fact. The IHS Materials speak as of the original publication date thereof (and not as of the date of this offering document). The information and opinions expressed in the IHS Materials are subject to change without notice and IHS has no duty or responsibility to update the IHS Materials. Moreover, while the IHS Materials reproduced herein are from sources considered reliable, the accuracy and completeness thereof are not warranted, nor are the opinions and analyses which are based upon it. To the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on the IHS Materials or any statement contained herein, or resulting from any omission.
No portion of the IHS Materials may be reproduced, reused, or otherwise distributed in any form without the prior written consent of IHS. Content reproduced or redistributed with IHS’ permission must display IHS’ legal notices and attributions of authorship. IHS and the IHS globe design are trademarks of IHS. Other trademarks appearing in the IHS Materials are the property of IHS or their respective owners.”
3 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Agenda
REC Silicon Q4 Financial Results T. Torvund, CEO
Financial Overview J.A. May II, CFO
Market Outlook T. Torvund
U.S. / China Trade Dispute Update T. Torvund
Near Term Strategy T. Torvund
Yulin JV Update T. Torvund
Guidance T. Torvund
Q & A
February 16, 2017
4 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Highlights
Revenues: $80.4M
EBITDA: $ 4.9M
FBR Cash Cost of $11.2/kg- Includes Impact of Cost Cutting Initiatives Announced on November 2, 2016- Demonstrates Low Cost Capability at Reduced Production Rates
Solar Grade Polysilicon Market Recovery- Solar Grade Polysilicon Sales Volumes Increased by 106% vs. Q3 2016- Q4 Exit Average Price Indices Increased by 12.7% Compared to Q3 Exit
Strong Silicon Gas Sales Volumes- Increased Volumes by 6.5% Compared to Q3 2016- Stable Silane Gas Prices vs. Q3 2016
December 31, 2016 Cash Balance of $65.8M- Increased Working Capital Investment as Expected- Expect to Remain Near Cash Neutral in 2017- No Debt Maturities in 2017
Yulin JV on Track for Start-Up in Second Half of 2017February 16, 2017
5 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Key Metrics
February 16, 2017
FBR Production
Actual 2,308MT
Guidance* 2,260MT
Deviation 2.1%
FBR Cash Cost
Actual $11.2/kg
Guidance* $12.4/kg
Deviation -9.6%
Silicon Gases Sales Vol.
Actual 822MT
Guidance* 800MT
Deviation 2.8%
Total Polysilicon Production
Actual 3,218MT
Guidance* 3,280MT
Deviation -1.9%
Polysilicon Sales Volume **
Total 3,801MT
Inventory Decrease 585MT
** Guidance Presented November 2, 2016** Excludes Fines and Powders
Semiconductor Production
Actual 587MT
Guidance* 680MT
Deviation -13.7%
6 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Strong Silicon Gas Sales
February 16, 2017
›Silicon Gas Sales Volumes 822MT- 6.5% Volume Increase vs. Q3’16- Silane Gas Price Unchanged vs. Q3’16
›Strong Underlying Growth in Silane and Silicon Gas Market- Silane- MCS- DCS- Disilane
709
531 610
772 822
0
100
200
300
400
500
600
700
800
900
Q4 Q1 Q2 Q3 Q4
2015 2016
Sal
es V
olum
es (
MT)
Silicon Gases (MT)
7 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
FINANCIAL REVIEW
8 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Key Financial Results – Return to Positive EBITDA
Revenues - $80.4M› 58.0% Increase vs. Q3’16
› Polysilicon Sales Volumes 3,801 MT(Excluding Fines & Powders)- 114.2% Sales Volume Increase vs. Q3’16- (18.3%) Solar Grade Price Decrease vs. Q3’16
› Silicon Gas Sales Volumes 822 MT- 6.5% Sales Volume Increase vs. Q3’16- Silane Price Unchanged vs. Q3’16
EBITDA of $4.9M› Reflects:
- Impact of Cost Cutting Initiatives- Increased Semiconductor Sales Volumes
(682MT)- Continued Strong Silicon Gas Sales (882 MT)
February 16, 2017
Margin: -40% -20% -20% -16% 6%
74.9 68.8 71.1
50.9
80.4
(29.6)
(13.4) (14.3)
(7.9)
4.9
-40
-20
0
20
40
60
80
100
Q4 Q1 Q2 Q3 Q4
2015 2016
US
D m
illio
n
Revenues EBITDA
9 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Trade War Results in Production Curtailments
February 16, 2017
2015 Inventory Increases Due to:› Trade War (Limited Access to China)› Excess Polysilicon Supply
2016 Inventory Levels› 1st Half Capacity Curtailment in
Moses Lake› Additional Production Curtailment
Required due to Market Deterioration in Q3
› Market Recovery Leads to Lower Inventories at Year End
› 585MT Decrease in Q4’16 0 MT
1,000 MT
2,000 MT
3,000 MT
4,000 MT
5,000 MT
6,000 MT
7,000 MT
8,000 MT
9,000 MT
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
Polysilicon Inventory
10 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Cash Flows
Cash Outflows From Operating Activities ($12.7M)
› EBITDA of $4.9M
› Working Capital Increase ($18.2M)- Increased Accounts Receivable ($19.3M)- Decreased Accounts Payable ($7.6M)- Decreased Inventories $8.8M
› Interest payments ($1.8M)
Cash Outflows From Investing Activities ($3.9M)
› ($4.2M) CapEx› $0.3M Release of Restricted Cash
Currency Loss of ($4.4M)› Stronger USD Relative to NOK
February 16, 2017
$87
$66
$66
5
1 1
(18) (2)
(4)
(4)
$30
$40
$50
$60
$70
$80
$90
$100
US
D m
illion
11 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Liquidity Outlook at December 31, 2016
Nominal Debt - $186M› Decreased by ($5.4M) in Q4’16
- Due to Stronger USD Relative to NOK
Nominal Net Debt - $120M› Increased by $15.7M in Q4’16
- Decrease in Cash of $21.0M- Decrease in Nominal Debt of ($5.4M)
Indemnity Loan (Included in Net Debt)› Callable Beginning in February 2016› Has not Been Called› Due Date is Uncertain
JV Equity Contribution› Agreements Permit Company to Forego Making
Remaining Contribution if Unable to Pay
February 16, 2017
NOK Bond
$53M
USD Convertible Bond
$110M
JV Equity Contribution
$169M
Indemnity Loan
$23M
$66M
Cash Dec'16
May2018
September2018 2017 - ? After 2018
To Be Determined
USD Million
12 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
MARKET OUTLOOK
13 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Steady Growth in PV, Notably in New Markets
February 16, 2017
Source: I.H.S. PV Demand Market Tracker - Q4 2016
7.3 7.5 8.9 10.2 11.02.3 3.5
5.6 6.7 8.117.6 17.1
18.922.9
24.7
30.5 25.320.9
21.121.2
5.89.9 10.9
12.4
14.18.7 8.4 7.5
6.7
6.0
5.1 7.5 9.5
10.6
12.1
77.3 79.382.1
90.5
97.3
0
10
20
30
40
50
60
70
80
90
100
2016 2017 2018 2019 2020
GW
PV Installations by Region
Europe Africa and Middle East Americas China India Japan ROW
› China Still Most Important Market, but Reduced Installations in Coming Years
› India and Other Emerging Markets Will Continue to Grow
› Long Term Market Outlook is Increasingly Geographically Diversified
14 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
20162016 – 2018 Analysts’ Installation Views
February 16, 2017
Source: IHS Markit Technology, Global PV Installations by Region, December 9, 2016, GTM Research, PV Pulse: January 2017 , Photon Consulting, Installation Volume Outlook February 8, 2016
› Analysts’ Views Differ, but Market Expected to Remain Stable 2016-2018
› H2 2017 Uncertain Due to FIT Cuts in China
› Additional Uncertainty in the US Due to Political Policy Changes
12.2 14.7 15.9
2.3 3.5 5.67.2
6.87.4
6.7
8.9
8.6
14.614.1
12.3 12.013.5
11.2 13.4
10.7
10.8
30.528.3
32.3
25.4
17.0
22.5 20.9
16.8
16.6
8.7
9.5
8.2
8.4
8.0
3.67.5
6.3
1.7
1414.9
15.5
22.6
23.4
20.36
25.9
30.5 24.4
77.3
73.7
80.5 79.3
68.6
72.4
82.1
72.9
69.4
0
10
20
30
40
50
60
70
80
90
I.H.S. GTM Photon I.H.S. GTM Photon I.H.S. GTM Photon
2016E 2017E 2018
GW
2016-2018 Installation ForecastEurope/MENA ME&A Europe U.S. China Japan RoW
15 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Quarterly Module Installations by Region
› Global Installations in Q2 will be Strong Due to 2016 China FIT - Grace Period Expires June
2017
› Balanced H2 2017 Still Expected Due to Increased Installations in the Americas and India
› I.H.S. Expects a 2017 Total Installment of 79.3 GW- Increase of ~2 GW from 2016
February 16, 2017
1.6 1.7 1.8 2.00.6 0.7 0.9 1.1
3.6 3.64.7
5.2
4.0
10.66.3 4.52.2
2.1
2.02.13.7
1.5
1.8 2.91.2
1.3
1.7 1.8
0
5
10
15
20
25
Q1'17 Q2'17 Q3'17 Q4'17
GW
IHS 2017F Quarterly InstallationsEurope ME&A Americas China Japan India RoA
Source: I.H.S. PV Demand Market Tracker - Q4 2016
16 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Limited New Polysilicon Capacity Expansion 2017-2019
Other China
Other China
Other China
China Top 3China Top 3
China Top 3
ROW
ROW ROW
Yulin
Yulin
0
5
10
15
20
25
30
35
40
45
50
2017 2018 2019
Po
lysilic
on
(kM
T)
New Polysilicon Capacity
Source: January 2017 Competitor releases, industry analysts, REC Market Intelligence
0
100,000
200,000
300,000
400,000
500,000
600,000
2015 2016 2017 2018 2019
Po
lysilic
on
(kM
T)
Supply 2015-2019China Korea USA Europe ROW Semi Idle
February 16, 2017
17 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016China Still Dependent on Polysilicon Imports
February 16, 2017
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2010 2011 2012 2013 2014 2015 2016
Poly
silic
on K
MT
China Polysilicon Annual Import Totals
Source: China customs Source: REC estimates
83% of Polysilicon is Used in China
18 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016China’s Solar Supply Chain Dominance and Widening Price Difference
February 16, 2017
44%
77%75%
82%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Polysilicon Wafer Cell Module
Chinese Solar Manufactures' Capacity as a Share Global Total (H1’16)
Source: HSBC Global Research January 24, 2017Copyright © 2017 PVinsights.com All rights reserved
$17.71
$14.14
$10.00
$11.00
$12.00
$13.00
$14.00
$15.00
$16.00
$17.00
$18.00
$19.00
10/8/2016 11/8/2016 12/8/2016 1/8/2017 2/8/2017
Polysilicon PricesInside China Avg. Outside China Avg.
19 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Polysilicon ASP Approaches Cash Cost of Marginal Producers
0
4
8
12
16
20
24
28
32
36
0 42,100 84,200 126,300 168,400 210,500 252,600 294,700 336,800 378,900 421,000
Un
it C
os
t ($
/kg
)
Capacity (MT/yr) Does Not Include Idle Capacity
Outside Average Market Sales Price $14.14
February 16, 2017
2017
Demand Range
Inside Average Market Sales Price $17.71
20 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Polysilicon Prices Increase, While Prices Stabilize Across the Supply Chain
Copyright © 2017 PVinsights.com All rights reserved
$17.71
$14.14
$10.00$11.00$12.00$13.00$14.00$15.00$16.00$17.00$18.00$19.00
PolysiliconInside China Avg.
Outside China Avg.
$0.62
$0.79
$0.40 $0.45 $0.50 $0.55 $0.60 $0.65 $0.70 $0.75 $0.80 $0.85
WaferMulti Wafer Avg.
Mono Wafer Avg.
$0.95
$1.14
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
CellMulti Solar Cell Avg.
Mono Wafer Avg.
$0.35
$0.41
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
Module Multi Module Avg.
Mono Module Avg.
February 16, 2017
21 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Polysilicon Price Can Increase Without Demand Destruction
February 16, 2017
› Polysilicon ASP is Relatively Small Compared to Total Module Costs
› Near Term Wafer, Cell, and Module Improvements Can Absorb Price Increases
Source: REC Internal Modeling, PV Insights, ITRPV 7th Edition 2016
$0.07 Poly$0.08 Poly
$0.03$0.08
$0.27Wafer, Cell,
Module $0.23 Wafer, Cell, Module
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
Multi Module ASPJan 2017
Polysilicon $16/kg- $22/kg
Wafer CostReduction (thinner
wafers, DWSlicing, etc.) &
Increasedeffeciency
Near Term ModuleCost with $22/kg
Poly
$/W
p
Polysilicon vs. Multi Module Price Bridge $/Wp
$0.35
$0.30
U.S./ CHINA TRADE DISPUTE UPDATE
23 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016US / China Solar Trade Dispute Continues
› Record Imports of Polysilicon into China - High Duties on US Polysilicon Have
Prevented US Companies From Taking Advantage
- Korea and Germany Have Increased Imports as a Result
› ~$3/kg Higher Prices Inside China Continue
› China Investigation of Korean Polysilicon On-going
› US Panel Prices Down Due to Imports of Tariff Free Non-Chinese Panels
› Current Transition Process for New USG Necessarily slows Resolution Progress
› New USG Rhetoric Suggests That it Values US Polysilicon Manufacturing Capacity & Jobs
February 16, 2017
Duties
~ 21- 90%
Duty:
~57%
NEAR TERM STRATEGY
25 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Competitive Cash Cost in Moses Lake
February 16, 2017
› Successful Implementation of Cost Reduction Initiatives
› Competitive at Reduced FBR Production Rates
› FBR Production Matches Market Demand
*Removes Accrual Adjustments
$10.7 $11.0
$13.8
$16.5
$24.8
$31.3
*$10.8 $11.2 $11.0
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1E
2015 2016 2017
Production Cash Cost
26 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Initiatives to Maintain Competitive Cash Cost
› Headcount Reduced to 540
› Company Wide Initiatives to Reduce Fixed Costs
› Cash Cost of $11.2/kg Compared to Guided $12.4/kg
0
100
200
300
400
500
600
700
800
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
REC Silicon ASA HeadcountQ1 2015-Q4 2016
~190
February 16, 2017
27 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
2,863
2,321
1,175 1,026
3,354
2,308
0 MT
1,000 MT
2,000 MT
3,000 MT
4,000 MT
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2016 2017
FBR Production
FBR Production Aligned with Market Demand
February 16, 2017
ROW3,194
ROW1,790
ROW2,918
ROW3,043
ROW1,144
ROW1,926
China402
China132
China102
China96
China443
0 MT
1,000 MT
2,000 MT
3,000 MT
4,000 MT
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2016 2017
FBR Sales
Note: Excludes Fines & Powder
28 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
Q
February 16, 2017
YULIN JV UPDATE
29 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Yulin JV – On Track for H2 2017 Start-up
Yulin Plant Production Capacity:› 19,000 MT Granular Polysilicon
- FBR-B: Next Generation Technology› 300 MT Siemens Polysilicon
- Semiconductor Grade› 500 MT Silane Gas Loading
Capital Contributions › Negotiations Underway to Defer
Remaining Contributions Until After 2018
› Agreements Permit Company to Forego Making Remaining Contribution if Unable to Pay
February 16, 2017
30 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Yulin JV – Successful Cooperation To Date
› JV Executive Leadership Combination of REC and JV Partner
- Leverages JV Partner’s Substantial Experience and Expertise in China
› Extensive Training Completed at Moses Lake and Butte
- 6-12 Months of Operator and Field Training by REC Experienced Personnel in US
- ~50 JV Employees from China Now Have Hands-on Experience
› Detailed Engineering Complete
› Construction Progressing Well- Over 4.5 Million Man Hours Worked- Zero Safety Incidents Reported
February 16, 2017
31 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
GUIDANCE
32 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
20162016 Results vs. Guidance
FBR Production
2016 7,863MT
Guidance* 7,815MT
Deviation 0.6%
Semiconductor Production
2016 1,324MT
Guidance* 1,418MT
Deviation -6.6%
Silicon Gas Sales
2016 2,734MTGuidance* 2,712MTDeviation 0.8%
FBR Cash Cost
2016 $15.3/kg
Guidance* $15.7/kg
Deviation -2.5%
Total Polysilicon Production
2016 10,729MT
Guidance* 10,791MT
Deviation -0.6%
February 16, 2017
2016 CapEx **
Maintenance $11MExpansion $ 1MTotal $12M
** Guidance Presented November 2, 2016** Additions to Property Plant and Equipment
33 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016Q1 and 2017 Guidance
FBR Production
Q1 2,320MT
2017 9,420MT
Semiconductor Production
Q1 350MT
2017 1,170MT
Silicon Gas Sales
Q1 750MT2017 3,200MT
FBR Cash Cost
Q1 $11.0/kg
2017 $11.0/kg
Total Polysilicon Production
Q1 3,080MT
2017 12,500MT
February 16, 2017
CapEx *
Maintenance $10MExpansion $ 0M2017 Total $10M
** Additions to Property, Plant and Equipment
34 © REC Silicon ASA. All rights reserved. Confidential
FOURTH QUARTER
2016
Q1 2017 ReportingMay 3, 2017