Metallkraft AS

A business that has been taken over by

the Chinese.

15 March 2012

2 2

METALLKRAFT SERVES THE WAFER MANUFACTURERS

Silicon

metal Poly-

silicon Ingot Wafer Cell Module System

Metallkraft a SiC and PEG recycling company

Pictures: Jiangsu Shunda Group

There are two main markets: – The semiconductor market

– The solar cell market

Strategy for growth 2005 - 2008 –Semiconductor market

Revenue vs. EBITDA

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

7 000 000

8 000 000

2 005 2 006 2 007 2 008

EURO

Rev SiC Rev. Glykol EBITDA

Key budget figures

Burghausen

Freiberg

+ USA

+ Spain

+ Singapore

+ Deutsche Solar

CAPEX Freiberg:

Approx 2 MEuro

Silicon production

-Strong price and volume growth

Increasing silicon prices – Aggressive expansion plans to

increase silicon production

– More aggressive recycling

approaches

Strong growth in silicon

production – CAGR 26% 2006-2010

– Solar applications expected to

capture most of the increased

supply

The value of silicon is reflected

in the equity markets with the

four silicon players accounting

for 50% of the solar power

sector market capitalization

(MEMC, Wacker, REC and

Tokuyama)

Source: Photon International

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010

kt

Electronics sector Solar sector

Silicon production

36

44

52

65

85

110

Solar cell and module production

-Even higher expected growth rates

Cell and module production

expected to outgrow silicon

production – CAGR 52% 2006-2010

Supply of silicon from secondary

sources with sufficient quality for

PV cell production – 11% of total supply in 2005

Margin improvement in the solar

sector – outbidding electronics sector

Increased efficiency of silicone

use (40% 2006-2010)

Non-crystalline silicon

technologies are growing at high

rates

14

9,6

6,1

3,9

2,6

1,7

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010

GW

Source: Photon International

Cell/module production

7

Financial highlights –Focus on the PV sector

0

50

100

150

200

250

300

350

400

450

2006 2007 2008 2009 2010

Rev

enu

es (

NO

Km

)

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

50 %

EB

ITD

A m

arg

in (

%)

Kristiansand Meraker China 1 Norway 2 USA Europe EBITDA margin

China – 25%

2008-2012 BUSINESS PLAN

Capacity to be installed during 2008 – 2012: – 22 modules

– 6 locations (two in China, four Europe/elsewhere)

– 220,000 tons annual spent slurry capacity

Working closely with leading wafer producers in

order to meet their global growth requirements

Clear and profitable presence in China

Total investment 2008 – 2012 of NOK 1.6 billion – Excludes SolarSil investment of NOK 200-400 mill

– Excludes expected net operational cash inflow of NOK

1.2 billion during the same period

China

Two out of six

9

Company structure Metallkraft Holding AS

Metallkraft China AS

Metallkraft

China 1

Metallkraft Norway AS

Metallkraft

Meraker

Metallkraft

Kristiansand

Metallkraft

SOG- Si

ABG Sundal Collier

11

Metallkraft expansion

11

Kristiansand

6,000mt November 2008

Customer: NorSun

Yangzhou

20,000mt March 2009

Customer: Shunda/Rietech and GCL/Tayal

Singapore

40,000mt 2010

Customer: REC

12

Market in crisis?

Source: Solarbuzz, 2012

Source: EPIA, 2012 Source: EPIA and Digitimes, 2012

Development in wafer prices

60% drop in polysilicon

price from peak level to

current spot USD 31/kg

PV grade SiC dropped 20-

25% in 2011 – European prices F600

dropped from EUR 4 to

EUR 3 per kg

– Chinese prices GC1500

RMB 27,000 to RMB 21,000

PEG prices have remained

stable

Steel wire costs dropped

40-50%

Development in input factors

15

MK has a 6-7% share of the global spent slurry market

Slurry recycling is capital intensive and rely on long-term stable

relationship with wafer manufacturer

Highly unstable market with dramatic cost cutting, bankruptcies, and

market consolidation

Metallkraft has lost its Kristiansand customer NorSun

Metallkraft has sold its factory/business in China to a Chinese recycler

Metallkraft is reluctant to commit to a slurry recycling project with the

prevailing uncertainties

Current situation

Heavily favored and subsidized industry

Chinese PV industry started in 2005

In 2010 China produced: – 50-60 % of global PV

– 65-70 % of all wafers

– 40,000 mt polysilicon (+ imports of 40,000 mt)

Chinese wafer capacity > 20 GWp

2010 has been the ”Year of GCL” – 0 wafers in January 2010

– Celebrated 3.5 GWp capacity Nov 1st 2010 through acquistions/constructions

– Target 7-8 GWp by mid-2011

– Builds new wafer capacity in 10 weeks

Costs per watt dropped from USD 3.5 to USD 2.0 (43%) mid-2008 to mid-2010

(source: UNEP 2010)

Chinese PV manufacture

Chinese market, Jiangsu Province

18

GCL

GCL

GCL, Trina, EGing

GCL (Hareon/Konca) GCL

Comtec SST

ET Solar Solarfun Rietech

Huantai

Rietech

Shunda

CEEG

Wafer consolidation

2010/11

GCL:

• Konca

• Hareon

• Canadian Solar

• Trina expansion

Rietech (Suntech):

• Rietech Yangzhou

• Rietech Zhenjiang

Independent:

• Trina

• Shunda

• Comtec

• ReneSola

• ET Solar

• EGing

• SST Kunshan

• HTSTech

• JA Solar

• Hanwha

• CEEG

• Others

Hanwha

Total cost focus

No expenditure or investment that are

not yield or quality related

No technology leadership

Labor or space saving devices are

irrelevant

Maintain several suppliers

Short-term or no contracts

Chinese PV manufacture

As reported by a (Norwegian ) Metallkraft engineer visiting a Chinese customer’s plants in Nov 2010: ”It`s hard not to be impressed when you see the XXX plants in

Xxxxxx. The buildings are very simple and have only the bare

essentials of infrastructure. F.ex. no heating in the factory office

building.

They focus purely on core business, and accept very

simple functional standards for everything that does not directly

affect quality or yield.

They use only local architects and contractors because they

thought it was too expensive to use the larger companies from

Shanghai.

Most of the employees in the office building including the

management team worked in outdoor winter clothing due to low

indoor temperature.

The people who showed us the production seemed very

competent and precise answers came without hesitation and the

answers seem very likely.They never hesitated to give us

information and we were free to take the pictures we wanted.

The plants did not show 5S standard, but according to Vice GM

Mr. Xxx it was the best standard they could have for the money

they wanted to spend.”

Low prices and ”good enough” quality

Keep up with capacity expansion

Continuous product development

Local decision making - JV

Chinese marketing tools

It doesn’t help to be Norwegian after the Nobel Peace Price – We lost 10MRMB in grants

– We have not been able to have visitors from China in Norway

– We lost the Multiple Visa

– In front of 2008 we were treated like Kings……

Successful suppliers

21

22

Metallkraft end story…From Norway to Singapore…

22

Kristiansand

6,000mt November 2008

Customer: NorSun

Yangzhou

20,000mt March 2009

Customer: Shunda/Rietech and GCL/Tayal

Singapore

40,000mt 2010

Customer: REC

Sold to a Chinese Recycler

MK HQ in 2012