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REC Silicon ASA - Yulin JV Financing Update

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REC Silicon Pte. Ltd (REC Silicon) and Shaanxi Non-Ferrous Tian Hong New Energy Co. Ltd. (SNF) have entered into an agreement concerning the outstanding capital contribution from REC Silicon to the Yulin JV, in connection with the 20,000 MT polysilicon plant developed by REC Silicon and SNF in the city of Yulin, Shaanxi province, People's Republic of China.

The Framework Agreement provides that SNF will make REC Silicon's outstanding capital contribution of $169,020,000 to the Yulin JV and the shareholding percentage of the two shareholders in the Yulin JV will be subsequently adjusted to SNF holding 84.94% and REC Silicon holding 15.06%. Pursuant to the Framework Agreement, REC Silicon will make the following payments: (i) an interest payment of $652,500 to the Yulin JV within 30 days of the signing of the Framework Agreement; and (ii) a total late payment penalty of $10,394,730 to SNF in three installments over a two-year period. The late payment penalty will be paid by REC Silicon as follows: (i) the first installment of $2,078,946 will be due 30 days after the signing of the Framework Agreement; (ii) the second installment of $3,118,419 will be due within 30 days of the first anniversary of the Framework Agreement; and (iii) the final installment of $5,197,365 will be due within 30 days of the second anniversary of the Framework Agreement.

Within 6 months after the expiration of a three-year period after SNF makes REC Silicon's outstanding capital contribution (Repurchase Period), REC Silicon will have the option to either buy back the 33.94% equity interest from SNF pursuant to a valuation and public bidding process as required by PRC state-owned asset disposal regulations, or continue to maintain solely a 15.06% equity interest in the Yulin JV. Prior to the expiration of the Repurchase Period, REC may appoint an appraiser acceptable to both parties to appraise the value of the 33.94% equity interest in the Yulin JV (the Pre-valuation). If the Pre-valuation is higher than the valuation REC expects, or if the valuation determined by the state-owned asset disposal regulation is higher than the Pre-valuation, REC has the right to choose not to buy back the 33.94% equity interest, but instead may choose to sell its remaining 15.06% equity interest in the Yulin JV.

The corporate governance of the Yulin JV will be adjusted according to the new equity interest structure. The Board of Directors of the Yulin JV will be adjusted to five directors, of which four will be appointed by SNF and one will be appointed by REC. With respect to management, REC will nominate the Chief Technology Officer while the remaining executive management of the Yulin JV will be nominated by SNF. Upon a buy-back by REC of the 33.94% equity interest, the corporate governance structure will be restored to the terms of the original Yulin JV contract.

REC Silicon ASA's President & CEO Tore Torvund commented: "This agreement between REC Silicon and SNF allows the two companies to continue a very good cooperative relationship developed over the last four years in establishing a world class FBR polysilicon plant in Yulin, and at the same time, preserves REC Silicon's opportunity to hold a 49% equity interest in the Yulin JV in the future".


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