rec webinar - engineering modules for financial return

RENEWABLE ENERGY CORPORATION

Engineering Modules For Financial Return

Nick Rose, APAC Technical Manager

REC Webinar

September 18, 2012

2 © 2012 REC All rights reserved.

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 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’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 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 in May 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.

Disclaimer


About REC

Founded in Norway in 1996, REC is a leading vertically integrated solar energy company and employs more than 3,100 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 (EUR 1.7 billion) in 2011

REC is listed on the Oslo Stock Exchange under the ticker: REC

Over 200 patents pending or granted


Agenda

Maximizing The Income Stream

Reducing Capital Expenditure

Risk Mitigation For The Revenue Stream


Major contributing factors to PV project returns

IRR

COST OF FINANCE

- Interest rate

- Term of loan

- Loan guarantor

- Timing of repayments

MAXIMISE REVENUE STREAM

- High yielding equipment

- Optimised design

- Ongoing maintenance

- Minimising degradation rates

REDUCE COSTS

- Reduce capital expenditure of equipment

- Maximise performance ratio via equipment and design

- Efficient systems to limit operating expenditure

- Incentives and subsidies

MITIGATION OF RISK

- Securing PPA

- Technology selection

- System durability

- Service & support


Commercial rooftop with REC AE modulesRIGHT HERE IN GERMANY

Maximizing The Income Stream


How yield impacts project return

Al-BSF + Al

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

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

-10%

-7%

-3%

0%

5%

8%

11%

-15%

-10%

-5%

0%

5%

10%

15%

-10% -5% 0% 5% 10%

Δ IRR

Δ Yield

Change In Yield

Linear Reference

↑8%

→6%


Why watts don’t equate to yield

ParameterStandard Test

ConditionsRelevance

Sunlight Irradiance

1000W/m2Close to maximum possible irradiance; not representative of average expected sunlight levels

Module Temperature

25OCNormally modules sit around 25 degrees above ambient, far greater temperatures than 25OC

Light Spectrum Air Mass1.5The light spectrum cannot be fixed as it changes from time of day/year and many localised effects

Angle of Measurement

Normal Incidence

For non-tracking systems the sun is not at normal incidences to the array for most of the energy production hours

Watts are a measure of power (W), which is an instantaneous measure of performance

Developers and investors are interested in energy (Wh), which is the unit electricity is sold and the indicator which ultimately determines a projects value


Module part load efficiency is extremely important

Al-BSF + Al

Every module will have a different efficiency curve

REC maintains high performance through all levels of irradiance

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

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

102%

0 100 200 300 400 500 600 700 800 900 1000

Relative Efficiency (%)

Irradiance (W/m2)

REC Tier 1 -Si Poor Si


Average irradiance levels highlight the STC deficiency

Al-BSF + Al

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

0

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80%

82%

84%

86%

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102%

0 100 200 300 400 500 600 700 800 900 1000 1100

Hours/Year

Relative Efficiency (%)

Irradiance (W/m2)

Irradiation Frequency REC

Tier 1 -Si Poor Si

Source: Global Horizontal Irradiance of Bangkok. Meteonorm file extracted from Pvsyst v5.55


Average irradiance levels in Europe and APAC

Napoli 399 W/m2

Munich 264 W/m2

Madrid 383 W/m2 Tokyo 320 W/m2

Jakarta 370 W/m2

Sydney 408 W/m2

Manila 346 W/m2Bangkok 403 W/m2

Delhi 500 W/m2

Beijing 320 W/m2

London 220 W/m2

The majority of Asia and Europe have 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


The excess energy gain from anti-reflection coatings

85%

87%

89%

91%

93%

95%

97%

99%

0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90

Light Transmission

Angle of Incidence

REC Reflection Profile

Module Without AR Glass

Under STC conditions module power is measured at normal incidence, but…

The energy yield advantages of the anti-reflection coating are measured at 30+ degrees

Source: REC reflection characteristics as measured by Solar Energy Research Institute of Singapore. Standard glass reflection profile as generated by Pvsyst using the ASHRAE model using a b0 value of 0.05


Sunlight falls from all different angles

85%

87%

89%

91%

93%

95%

97%

99%

0

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100

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300

350

0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90

Light Transmission

Energy (kWh/kWp/yr)

Angle of Incidence

Energy/Year

REC Reflection Profile

Module Without AR Glass

1.2% moreenergy captured

The angle of light is rarely normal to the surface of the module

In Bangkok the energy captured at 0-10 degrees represents only 4% of annual total

Source: Bangkok angle of incidences generated using vector analysis for sun positioning based on the Meteonorm climate file for Bangkok extracted from Pvsyst v5.55. Assumes an array facing due South tilted at 10 degrees


Changes in light spectrum affect real-world performance

The universal spectrum used to classify module power at Standard Test Conditions is called the Air Mass 1.5 spectrum

Modules efficiency will vary depending on the consistency of the light spectrum they are exposed to.

What is the spectrum most appropriate to the project site? Depends on altitude, cloud cover, humidity, pollution and more

A cell with backside passivation will generate more current due to reflection of light at the backside of the cell. Backside passivation increases the sensitivity of the cell to red light in the wavelength range between 1000 to1180 nm

The blue line is the Air Mass 1.5 standard spectrum. The red line indicates the wavelengths of light that can contribute to electricity generation in a silicon solar cell

Source: Entropy Production

REC’s New Peak Energy Plus Module

CONVENTIONAL CELL CELL WITH BACKSIDE PASSIVATION

Light is absorbed Reflected light will generate additional current

http://photos1.blogger.com/blogger/9/1241/1600/am1_5graph.0.png


Spectrums change from location to location

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50

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Energy (kWh/kWp/yr)

Air Mass

Bangkok, Thailand

Munich, Germany

Equatorial regions, such as most of Asia, generally have lower Air Mass levels due to higher sun altitudes

However, differences in atmospheric particulates and humidity make the spectrums between locations highly variable


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


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

Sharp

Kyocera

Trina

JA Solar

SunTech

Yingli

Sanyo HIT

REC

1,080 1,100 1,120 1,140 1,160 1,180 1,200

1,120

1,124

1,124

1,143

1,154

1,154

1,191

1,191

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.


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

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

Sharp

Kyocera

Trina

JA Solar

SunTech

Yingli

REC

Sanyo HIT

-$0.12 -$0.10 -$0.08 -$0.06 -$0.04 -$0.02 $0.00 $0.02 $0.04 $0.06

-$0.11

-$0.11

-$0.11

-$0.09

-$0.07

-$0.07

$0.00

$0.05


Powerplant with REC Peak Energy modulesRIGHT HERE IN ITALY

Reducing Capital Expenditure


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


REC is reducing module cost at a high rate

Q1 2012 costs;

March run rate at 90 Eurocents/Watt

2012 cost reductions;

Increased average cell efficiency

Improved sourcing of materials

Improved operational performance, debottlenecking and higher equipment availability

Reduced fixed costs and economies of scale in support functions

-27%

Q4’12

57

Q1’12

78

-39%

Q3’10

127

Singapore module cash cost

Eurocents/watt

target

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


REC production plant, Tuas, SingaporeRIGHT HERE AT REC

Risk Mitigation for the Revenue Stream


Durability tests to ensure long-term performance

Most PV modules are warranted for a period of 25 years but few have been in the field for that time. Those that have are a vastly constitution than they were.

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)– Combined cycle testing

TCT 200 cycles 400 cycles

DHT 1000 hrs 2000 hrs

HF 10 cycles 40 cycles

Combined cycle - (DH, TC, HF) X2


Extended Qualification Testing: 2X IEC Standards%

Pow

er lo

ss

REC Extended Qualification Test Results

Even at 2x IEC test REC modules are still performing within the standards

IEC Pass Criteria

TC400 DH2000 HF40 2X more than required

REC module test laboratory


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%


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

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

50

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49

79

35

72

98

33

110

5779

90

34

97

Claim PPM Acc PPM 2011 TargetPPM


REC has a strong track record of proven performance

Pandit Deendayal Petroleum University in Gujarat, India

(7.61% Above Expectations)



100kW REC Factory Rooftop, Tuas, Singapore

Section 3

Section 2

Section 1

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

7.3%

4.3%

4.7%

Energy Yield Compared to PVsyst Prediction

Predicted



81,980,5

85,791,8

83,784,0

Freiburg 582kW

Italy 5.7MW

France 5MW

Yield report

Actual

REC Systems’ Performance Ratio* Examples (%)

* 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.



0

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1,000

La Pomarède572 kWp

St Paulet572 kWp

Puginier572 kWp

Les Clottes572 kWp

Peyrohitto572 kWp

Barats269 kWp

120

100

80

60

40

20

0Pouzols572 kWp

Larnier572 kWp

Fontanelles602 kWp

Expected Solar ProductionActual Solar Production% of Expected Yield

MWh %

LUXEL Project with 9 different locations in France (Jan-Dec 2011)

(9% Above Expectations)


The 5 Unique Selling Points of REC Modules

Easy to installReduces installation time

More energy per ft²Provides more energy per square feet

Robust and durable designEnsures long lasting quality

Optimized for all sunlight conditionsProvides reliable power output and high performance

Energy payback time of one yearMade with an industry leading carbon footprint and EPBT


RENEWABLE ENERGY CORPORATION

THANK YOU

REC is the exclusive owner or licensee of the content, material, and information in this presentation. Any reproduction, publication or reprint, in whole or in part, is strictly prohibited. The information in this presentation may not be accurate, complete or up to date, and is provided without warranties or representations of any kind, either express or implied. REC, as well as its directors, officers and employees, shall not be responsible for and disclaims any liability for any loss or damages, including without limitation, direct, indirect, incidental, consequential and special damages, alleged to have been caused by or in connection with using and/or relying on the information contained in this presentation.

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