REC Silicon ASA

Ole Enger - President & CEO Tore Torvund - EVP Bjørn Brenna - EVP & CFO Mikkel Tørud - VP & IRO

Einar Kilde Evensen - DnB NOR Markets Anders Rosenlund - ABG Sundal Collier Preben Rasch-Olsen - Carnegie

Good morning everybody and welcome to the second quarter presentation for REC. Today we have an agenda.

As we can see here from the slide, start with an market update and operational review. Thereafter, we have Tore Torvund here, who as you know, most of you, is in-charge of our silicon business in the U.S.

An important part, very important part of the overall REC business, after having invested about $2 billion over there. He will update us on the development in Moses Lake as well as in Butte.

Thereafter, Bjørn, as normal will take us through the financials, and we will finish off by some remarks regarding how we see the outlook for the company. Let us then start with the highlights.

And let me start by stating that I think the second quarter was a relatively positive quarter for REC. I say, relatively positive, meaning that in absolute terms the results of course are far from satisfactory, but compared to the results of the last quarters, I do still think that the second quarter was quite positive.

It was positive because we do now see that operations are improving in all units. We see the results of the efforts and endeavors we have made over some time to improve operation by our operational excellence.

We are definitely working hard to change the industrial culture of the company, striving for continuous improvement by much more systemic methodology throughout the organization. We do see this now starting to pay off.

In the second quarter, of course we also have been helped by a strong market, a very strong market. So demand for modules and the other products in the solar value chain have been quite strong through the quarter.

In terms of numbers, we had revenues about NOK 2.758 billion, which is up 17% from the first quarter. And as far as the EBITDA is concerned, we ended up with NOK 455 million, which is up 10% from the first quarter.

It's also to be noticed that we started up in the second quarter our new silane plant in Moses Lake, which Tore will elaborate on further, later during the presentation. And as we all know, we completed the NOK 4 billion rights issue also during this quarter.

So these are the overall highlights. And as I said, overall, relatively positive compared to what we have experienced in the past.

Let's then go through the start with some more remarks related to the market. The demand for solar products have been, I would say, very strong in the second quarter, and continues to be very strong into the third quarter and hopefully for the rest of the year.

And you will recall that the world looked quite pessimistic in the first half of 2009; second half turned out to be much better than anticipated. We realized that in the beginning of 2010, and now we see how it's continuing into 2010, clearly demonstrating how strong the underlying forces in the market are.

I think very few had anticipated this development of demand in the solar market. Demand is very strong in Germany, but we also see very, very high growth in Italy, the Czech Republic, and other markets.

The prices have been fairly stable. I mean, we had anticipated lower prices throughout the year, prices to decline quarter by quarter; this has not been the case.

They have been much more stable than we had anticipated. So for 2010, from a demand point of view, I don't think there is much more we could expect, and this is of course very important for REC, since we also in the third and fourth quarter, second as well, are ramping up Singapore to full speed.

And of course many people, I presume was quite nervous about whether we would be able to place all the products into the market to find customers for the four, five times higher volumes we were going to produce in 2010 compared to 2009. Now with the demand we see in the market we are quite relaxed about that part.

So the strong demand couldn't have come at a better time. So far, regarding 2010, if we should dare to go a bit further into 2011, of course not only we but all analysts in the solar market has been so wrong in the past, so one should be very careful about making statements going forward.

I do still think that one has to be somewhat cautious for 2011, and especially in the first half of 2011. I mean, if you take Germany for example, to grow by 50% to 60-70% when the overall market is 2 gigawatt is something, but to grow with the same percentage when the market is 5 gigawatt is another thing.

And of course the same applies to some other markets. Italy is becoming very, very strong as well.

So in order to keep the growth at the same pace going forward, we need new very strong markets. And one thing is absolutely for certain; supplies are going to increase year by year very steadily.

And what we have seen this year is that we are back in a situation where silicon and also inverters, in fact are limiting the growth of the market. And for 2011, we foresee an increase in silicon availability of about 30% to 40%, could be more.

So in order to keep the balance into 2011, demand has to develop at the same pace. And I think that's going to be very hard, and we prefer to be conservative, cautious, and be prepared for a more imbalanced market in 2011.

And with more supply than demand, obviously, we will get back to a situation where we will have more pressure on prices. But we have to add, we have been wronged so many times before, so we'll never know so far about the market.

Very quickly through each of the divisions starting with silicon: developing quite well according to plans. We had a production of 2,854 tons, and this is in line with the previous quarter, in spite of the fact that we have had maintenance shutdowns considerably -- considerable maintenance shutdowns in the second quarter.

We are, as we also have stated before, we are steadily improving the yield, the quality yield for the FBR quality. So that's also running according to plan.

And we also have had a very good development in the second quarter in silane gas which more than doubled compared to previous year. This I have explained earlier.

This has to do with inventory adjustments. And last but not least, we started up the silane gas plant at the end of the quarter, and Tore will elaborate further on that later.

So this covers broadly the development in silicon. Turning to wafer, we see a similar pattern with regard to the production.

Production increased to 303 megawatt, of which 41 is in Singapore. So Singapore is now starting up and becoming more and more important, not only for solar modules but also for wafers.

And I can assure you that the wafer -- I have commented on the solar module development in Singapore previously. As you will recall, wafer started a bit later but the development there is as positive as we see it in cell and modules.

Very impressive numbers so far. We are also making progress in Norway, where we have had some startup issues as you will recall.

We are doing better and better, quarter-by-quarter. The mono plant in Glomfjord has over the last time been a headache for us.

We are improving there as well, and over the last period we have strengthened the organization, and we have the best of our people now up there. So we are at least doing as much as we can to improve fast the operations in the mono plant in Glomfjord, which is very much needed.

And last, regarding wafer, I would like to make some comments related to some technology improvements we are making. You will recall that we have Herøya I and II, the first generation, as well as the Glomfjord plant, which was started up some years ago.

Later, we have developed new plants both in Herøya and in Singapore. And we have been able to produce ingot furnaces that are yielding better cell efficiency, compared to the first generation furnaces.

We have therefore worked quite hard to see whether we could retrofit the first generation furnaces to make the same cell efficiency, as we do in the next generation. We have been running tests for some time together with our furnace supplier, and these tests have turned out to be very positive.

So this third and fourth quarter, we will invest in retrofitting the first generation furnaces to get them up to a quality similar to the next or to the latest generation, which is very important in a situation where cell efficiency is becoming more and more important. These first generation furnaces were excellent, when it comes to efficiency and cost efficiency.

But we needed some better temperature control, and by this new technology development, we are able to introduce that in a very good way. So that should represent a good step forward with regard to meeting the demand from the market.

So far about wafer; turning to solar. Again, we see a remarkable growth, 111 megawatt of module production compared to 48 megawatt in the previous quarter.

So we do notice now that Singapore is really running, and we are now approaching 70% efficiency of the plant. The Singapore operation is continuing very positive, both with regard to costs, yield and quality.

So the trend is definitely continuing. We are also making quite good progress in Scandinavia.

And both the operation, in spite of the fact that we still have 30% more to be started up in Singapore, we are already positive EBITDA. And that was also the case for Narvik in the second quarter.

So of course we are transferring now the knowledge within the company in a very efficient way, helping all parties. It started by transferring knowledge from Norway to Singapore.

Now we have a lot of information transferred from Singapore, back to Norway and other units. So also what we do see very clearly is that having wafer and cell and modules on the same site working very closely together is definitely helping the improvement in operation and in technology development.

So that concludes my comments related to the solar and then we are ready to dig further into the silicon operations. So I hand it over now to Tore Torvund.

Thank you, Ole, and good morning, everybody. Some of you had the opportunity to go to Moses Lake four months ago on March 16, and I am glad to be here again to give you some update on our progress over in Moses Lake and in Butte.

And just to repeat, Moses Lake is the hub where we mainly concentration now on polysilicon for the solar or the PV industry, while Butte has been transferred and transformed to mainly deliver polysilicon, the high-quality silicon for the electronic industry, the semiconductor industry and emerging high-end polysilicon to be used for electrical vehicles, new energy, et cetera. Just to put into the portfolio, which we do have now in silicon, as you will see, approximately 40% of our sales of polysilicon is to external REC customers.

So we have customers outside REC, approximately 40%, and the polysilicon solar to disk, 19% is silane, that's also completely external customers, while 40% is delivered to REC wafer, both here in Norway, but also now more and more in Singapore. If we look to the product mix, 55% is delivered to the PV market, 19% is on the high-end polysilicon float zone and semiconductor grade, 19% of the sub is about the silane, and we do have done 7% what we call other.

And I just would like to update you on that we have made some changes to the way we count the volume of polysilicon from our production. From the FBR, the Fluidized Bed Reactor, there will be different qualities.

There will be prime quality, secondary quality of what we call the off-spec, and there is some powder and fines where there is small particles which is produced. We have decided to subtract those volumes from the reported volume.

It's about 15%. And of main stats, we also have restated the volume in Q1.

It was reported 3,057 metric tons of production. We have subtracted 534 to comply with the new definition.

If we put those together, we've produced overall 5,911 metric tons of polysilicon in Q1 and Q2. And so as said by Ole, 2,854 metric tons of polysilicon and then subtracted the powder and fines.

The reason behind this is, is that the powder and fines is definitely not the polysilicon. It is a product which is not directly used in the PV industry.

So we have decided to subtract it. Still it has a value.

And as you will see, 7% of our revenues was associated with this in Q1 and Q2. Let me then move over to how we see the market.

And in general, I might that the market has definitely improved from Q1 to Q2. If we look for the polysilicon side, basically as I think Ole mentioned, it seems that all polysilicon produced today is having a market out there and possibly the increase in the PV industry is now limited by the quantity of polysilicon available.

That will be the case for 2010. And then there was still a huge uncertainty concerning the demand in 2011.

What we generally see is start to ramp of new capacity is taking more time. It's not only REC which has been struggling, but almost all players in this industry has been struggling in terms of getting more capacity into the market.

So there is still some uncertainty about what will be the volume available in 2011 and onwards, but basically at least for the 2010. There is some strong market for our polysilicon.

We obtained in Q2 an average price of our polysilicon of $51.70 per kilo. It's about 10% higher than we observed in Q1, a 10% increase.

The reason behind the 10% increase is not only to the market, but also the fact that we produced higher-quality polysilicon in Q2 than what we did in Q1; so partly due to the product mix, partly due to the strong market. Looking forward, we believe that the market will remain in that area.

We see that the stock market now is picking up, but the prices have stabilized. But there is some increases, but basically we believe that the market for the Q3 and Q4 will remain stable.

Concerning our granular, it has been a strong demand in granular. It has been very well received in the marketplace.

This is a new material, polysilicon material to be introduced into the market. In terms of our silane market, basically we'll see that there is still some growth in the silane market, but the growth is more limited than what we believe some time ago.

The reason behind is, is that silane has not been having any major share in the PV industry and what's still driving the growth in the silane market is then the display part or what we call the TFT market. For REC, we delivered last year 2,200 metric tons into this market.

Our share of the global market is between 60% and 70%. We believe that we will be able to deliver approximately the same level, the same amount this year, and we then guide a reduction in our delivery to the market from 2,400 metric tons down to 2,200 metric tons.

The reason behind is, is that one, there is some inventory still in the market mainly because we delivered a huge amount of silane in Q4 last year, but there is also some new players coming into the market which we take growth in the market. So our delivery to the market will be flat from 2009 through 2010.

Let me then move to an operational update. And just for those of you who have not had the opportunity to go to Moses Lake, polysilicon is in REC based upon silane production.

And then we have reactors making polysilicon, either that could be what we call Siemens technology or a new development FBR technology. In fact, REC is the only company based upon silane in polysilicon production.

All our competitors are using what we call tricholorosilane. Silane has definitely some advantages.

It is a pure feedstock to make polysilicon, and that’s why for example in Butte, when we make float zone, it's well recognized in the market that the purest polysilicon is made upon silane and is made by REC. The disadvantage is that it’s relatively costly to produce silane.

Fluorosilane is cheaper to produce but there is some treatment to be taken care of when you start wanting to make polysilicon. But basically we have (inaudible) a lot what is the most cost efficient way to produce polysilicon.

I said we have invested some $2 billion; I think the right number should be around $1.8 billion in building one of the largest polysilicon plant globally in Moses Lake. Silicon III, which started up last year, consists of silane production plus the fluidized bed.

Silicon IV, which was then starting up, 24th of June this year, is a copy of Silicon III in terms of silane production, but there is no FBR connected to it. It’s only a loading station.

But as you will see from my graph, it is all connected now. That means that all our three silane plants in Moses Lake are connected to pipelines to either our Siemens reactors or our FBR reactor or the loading facility.

And we also have been able to ship silane back and forth between Butte and Moses Lake. And that means that we have a highly flexible system which has been now moved or constructed in Moses Lake and Butte.

The overall capacity, I will come back to the numbers for 2010. We already have said in Moses Lake that we aim for a total production of polysilicon in 2011 of 15,000 Metric Tons, and in 2012, 17,000 Metric Tons in total of polysilicon from our facilities in both Butte and Moses Lake.

Just to give you an update on the latest development. Silicon III, silane production increased from Q1 to Q2 by 16%.

The reason behind that is, we reported a lower production of polysilicon in Q2 compared to Q1, is the fact, as Ole said that we had a maintenance shutdown in Silicon I as well. So we used the Silicon III to produce polysilicon both from Silicon I and Silicon III.

But the silane production for Silicon III has improved. We also see that our FBR is doing better.

We are now able to have longer run lengths through our FBR reactor than we did in Q1. And we also see that the quality of our production has improved considerably.

Silicon IV, we started as we said, up, Silicon IV, 24th of June. We have already tested Silicon IV and been close to nameplate capacity.

Definitely there will be some issues going forward. We have to take it down again to make some modifications.

But to start up, Silicon IV has been very smooth compared to what we observed in Silicon III. But I think we have to expect that there will be issues around Silicon IV also going forward.

Let me then just move a little bit towards our technology. Basically, all our competitors use Siemens reactors to produce their polysilicon.

Definitely there is advantage by using the Seimens reactors. They are making very pure polisilicon, and it is a well-proven technology as such.

The disadvantage by Seimens is that it’s highly power-intensive, uses lots of electricity to produce the polysilicon. It’s a batch process.

So that means that you have to bring down your assets regularly, normally every 10 days just to harvest the polysilicon. And chunk which is produced, you have to work with it.

You have to finish the product before you can use it for making ingots, which could be used for wafer later on. The FBR is a new technology; it is two companies, which today use the FBR.

We have MEMC, and we have developed our own technology within REC. The big advantage of the FBR is that it's a very energy efficient way to produce polysilicon, typically 25% of energy consumption compared to the Siemens.

So we save about 75% of electricity per kilo produced. It is a continuous production, so that means that we can produce polysilicon continuously.

And by this it has achieved a lower cost. And also the fact that it is not chunked, but is granular, makes it much easier to handle.

So, there is no doubt that FBR could be a very, very interesting way to produce polysilicon for the solar industry. We have been able to improve our quality.

You will see that the yield, which is defined under solar weight divided by the total polysilicon produced, increased from some 60%, 62% in Q1 to 77% in Q2. And we have done an ambition to be around to be around between 77% and 80% of yield in Q3 and Q4.

The recent why we have been able to do this is that we now achieve much longer production runs. The average in Q2 was 35 days.

We have been able to run reactors up to 70 days in Q2. And that definitely improved the yield, improved both the quantity and the quality of our polysilicon.

We have been able to increase the production rates and the main reason for this is that we have improved our process control. Looking today, the advantage by using granular compared to the Siemens junk.

What we see our customers are doing now, this is not only IC wafer. But we have been testing the material and among 20 different customers, and what they say is that to blend it with Siemens, you see the Siemens is then illustrated by the chunk.

And the FBR is then the granular, which then make it more a dense blend into the furnace. That increased the packing density.

It might increase the heat transfer into the furnace. It might enable recharging and this definitely easier to handle.

As I said, we have used time now to qualify in the product. We have delivered some samples to 20 different customers.

They are testing it out. We have had very positive feedback.

But definitely, to take full advantage of the FBR, also the wafer it produces have to adjust their processes and to do so, they will then need more commitment from our side. But we will be able to deliver granular in sufficient volumes.

So they will adjust their processes. But so far, we see that the FBR has been very well received in the market.

And as said, the average price we obtained was above $50 a kilo in Q2. We have been looking to the cost efficiency of IC compared to our main competitors.

In Q1, with the new definition where we take out powder and the fines, we had a cash cost of $24 per kilo in cash cost and we have a depreciation of around $12 per kilo. You will see that even with those numbers, we are among the most efficient producer in terms of cash costs.

The depreciation is somewhat higher, but when we now look into our ambition to improve and to increase the capacity, I think there is no doubt that our FBR technology will be among the most competitive way to produce polysilicon in this industry. That's the end of my presentation.

And I look for the rest of the remaining part of 2010. My focus will be to stabilize the operations between both Silicon III and Silicon IV.

We will have target of production of 13,000 metric tons for 2010. As I said, we produced somewhat 5,900 in Q1 and Q2.

That means that we will ramp up towards 7,000 metric tons by the two next quarters. And by this, with a stable market, we then assume, plan for that the EBITDA will grow then in the second half of 2010.

Thank you very much for your attention, and then I leave the floor to Bjorn Brenna.

Thank you. I will go through some of the financials for the group and also little bit on the segments.

Just to repeat key figures, revenue growth of 70% from first quarter to 2.758 and an EBITDA of NOK 455. We had negative group elimination this quarter of 105, and the main reason for this is a buildup of inventory of silicon in the wafer division.

That's the main reason why the elimination on group level is negative. And the EBIT is minus 146 and is reflecting a higher depreciation in the quarter as new assets has been taken into use.

Condensed Income: Just want to highlight financials here, which is positive, more than NOK $1 billion, and there are four key issues here. First of all, of course the interest expenses is negative by 186.

We have currency gains in the quarter with $600 million and we also have gains on the embedded derivatives in all our bank derivatives with $275 million. And last, there is a fair value adjustment through the convertible bond, with more than $300 million in the quarter.

So all in all, that gives us a positive net financials of more than NOK $1 billion and also a profit before tax of NOK 866. Briefly, through the segments, we have gone through the Silicon now, but we have seen a 10% increase in prices in the second quarter compared to the first.

And two main drivers, of course, better yield, but also stronger market in this quarter. The volume is down, but the silane gas sales are up from the first quarter as we also guided on after the first quarter.

The margins are 50% in this quarter, up a couple of percentage points from last quarter. In the wafer division, prices are down by 4%, as we guided in the first quarter, mainly due to mix effects but we were able to capture that by improving the operations in (inaudible) mainly in this quarter.

So the results on EBITDA is positive for wafer in this quarter. On Solar, we have seen huge improvements during several quarters now.

We have had quite big negative contributions from Solar. We see positive EBITDA contribution from the Singapore operation, but also, all over, better capacity utilization and lower unit costs also in the Scandinavian operation in this quarter.

Of course the revenues here are affected by huge volume increase compared to the first quarter. Briefly, on the balance sheet, we have equity ratio of 60%, and that includes the convertible bond as debt in this calculation.

And if we take that as equity, it's about 65%. As we have heard many times, we have successfully completed all our refinancing in the second quarter, and the net debt is reduced down to $8.8 billion in this quarter.

The net proceed was 3.9, and we had CapEx cash paid out of $1.3 billion in the quarter and we had positive cash flow from operation of about $200 million in the second quarter. And overall, now to give you a little bit more flavor [ph] of the buildup of our debt side after the second quarter, we entered into this bank facility of $10 billion but we also signed along with the Eksportfinans in the second quarter, $1.3 billion, and that is guaranteed by GIEK with 870 and the bank group is guarantying the rest.

The $10.6 billion in interest-bearing liabilities is built up by these leases. We have the convertible bond, and we have drawn $6.2 billion on the bank facilities, which leaves us with a NOK 4.5 billion in headroom, which is not drawn.

In addition, we had NOK 1.8 billion in cash at the end of second quarter. The remaining CapEx which is approved is about NOK 2 billion.

And that leaves us with sufficient funding going forward. Lastly, last quarter we went through the currency exposure on REC, and we have seen a huge fluctuation in the currencies during the last quarter.

Overall, and to repeat, on the sales revenue, euro is dominating currency for REC. We are fairly balanced on the dollar, both in flow and sales.

Here, the effect is more translation effect, on translating the silicon results to Norwegian Kroner, Singapore represents a cost element for REC. Of course we are hedging, and you can see the huge gains on the financial items this quarter, but that is just to postpone some of the issues going forward through a constant reduction in currency, also will affect REC.

To the right here, we have given you some ideas on how the EBITDA will be affected in the second half with changes in the currency from today's level. On the debt side, during the restructuring of the debt, we have also rebalanced our debt side to better reflect the expected cash flow going forward.

And as you can see, euro is here the dominating currency on the debt side. But we also have U.S.

dollar debt and we have swapped the Singapore dollar debt to U.S. dollar, and we have some Norwegian Kroner.

So we are fairly balanced going forward, but of course euro is an important currency for us. I think that leaves you with some more financial highlights.

In this quarterly report there are fairly detailed description of also the maturity schedule etcetera on the financials, due to the second quarter reporting.

Well, based upon what I've said already this morning. I mean, if there is one thing one should have learnt being in the solar industry, it is to be very careful about making forward-looking statements.

It's very unpredictable, especially market situation. But still, let me make a few remarks related at least to our production part.

Summing up, as far as silicon is concerned, we are foreseeing a production this year of 13,000 tons, which is up about 1,000 tons from our previous estimates. Of course, a result of the performance that Tore has explained earlier.

As far as the wafer production is concerned, we are foreseeing a 70% higher production for all 2010 compared to 2009. This is in line, or based on upon the run rate we have entering into the third quarter.

When it comes to the solar part, we are estimating a fourfold production in 2010, compared to 2009. So again, based upon the current run rate.

As far as the market is concerned, I think this time, based upon the very strong demand we have seen, we can be somewhat more confident about the third quarter and also relatively confident related to the fourth quarter, whereas of course there are much, much more uncertainty going into 2011. At the presentation of the first quarter results, we did state that the second half was likely to be better than first half.

I am certainly able to reiterate that and I also do think that the third quarter will be better than the second quarter, and first quarter should be better than the third quarter. So this is about as far as I want to go at this stage.

Then let me finish off by some information regarding the opening of the REC Singapore plant and investor analyst trip. The Singapore plant will be formally opened November 3, by Prime Minister Lee of Singapore.

This coincides with the International Energy Week, fueling the smart energy economy organized by the Singaporean government. Investors, analysts are invited to REC seminar in conjunction with Clean Energy Expo and Conference Asia on November 2 and the grand opening of REC Singapore plant, November 3.

The draft program is, PV seminar, REC management presentations, including updated cost roadmap which had been in demand for some time from many people in this audience. And thereafter we have the plant opening ceremony, plant tour and Q&A.

And we will provide you with more information later during August. So this concludes then Mikkel, our presentation for the second quarter results, and we are open for Q&A.

We, as Ole said, open as usual for questions from the audience, and also, if there's questions from the web. I have some here.

So please raise your hand and state your name and company, and we will provide you with a microphone here. Einar from DnB is having questions.

If you state the question, Einar, I can repeat it.

(inaudible).

Okay, the question was related to our pricing power on wafer and to what extent we are selling wafer at market prices in second quarter.

Well, I can first of all assure you very clearly that we are not selling lower than spot prices. We do, however, make quarterly contracts, or quarterly adjustments, I would rather say.

And further, I would like to add that to adjust the prices upwards towards the old price level in the contracts has been very very difficult. So we are aiming for a certain margin compared to the spot market and that's also what we are achieving.

And then a second question if I may. You mentioned qualification of FBR material in the polysilicon business.

Can you say how many of the 20 customers that now have passed qualification and how many you are aiming to qualify by the third quarter?

What I said is that we have delivered our FBR to about 20 customers. And we are gradually getting feedback from those customers on their view on using the FBR.

Basically, so far we don't have, let's say, our quantity of FBR is not huge. Most of our FBR now is delivered to our REC wafer here in Norway and Singapore, and we do have limited quantities so far available.

But as we now ramp up our production from Silicon IV together Silicon III, there might be more volumes to be available. But we also have some bottlenecks to deal with in our facilities.

So probably we will not be able to deliver let's say necessary quantities in 2011 to all our customers.

We have another question on the side here.

Anders Rosenlund of ABG Sundal Collier. I've written guidance and a huge question mark on the back of the presentation here.

And the reason is, is a bit difficult to understand what you mean by the 13,000 tons. Could you please walk us through what that guidance actually includes, what are those 13,000 tons, compared to what you have produced year to date?

I think I have misunderstood something here.

Could you speak a bit up?

Do you want me to repeat it?

Yes.

When you are guiding for 13,000 tons of production for the full year in the slide package, it's on page 25. You say that you've produced 6,000 this far and you are intending to produce 7,000 in the second half.

But in your report, you state that you produced 4,900 year to date. What's the difference?

I would imagine that the difference is what I tried to explain, that say we have now excluded the powder and fines from our definition. So 13,000 metric tons is then what we call polysilicon granular, plus the Siemens production.

But we have restated as I said. The volumes produced in Q1, we have reduced that number by some 570.

The 13,000 ton, does that include powder and fines?

No, that excludes powder and fines.

But does the 5,900 include powder and fines?

No that excludes powder and fines.

Why does 5,900 differ from 4,900 on page 5 of your report?

I could maybe try to explain. I mean, we have been reporting two sets of production numbers for silicon, the total production and the solar and electronic grade material.

And the lower of the two numbers you are refereeing to is the solar and electronic grade material. There is no change in reporting of that.

It's the total production that has been changed in terms of excluding these powder and fines volumes from the total production volumes. And the 13,000 is referring to the total production, not the electronic and solar grade material.

Another question up here.

Preben Rasch-Olsen, Carnegie. A question to Bjørn, could give any indications on how much of the module production in the second half is already sold?

Given how we see the dynamics in the market now, I would that for this quarter, for the third quarter, pretty much everything has been allocated to customers in the sense that we have not only a frame agreement, but also purchase orders and to some extent shipment plans. Then what we would expect is that though the month of August we would finalize the shipments also for the fourth quarter.

But given the enquiries that we now receive for the fourth quarter, that is really the basis for communicating the comfort that Ole did in his comments. So, the dynamics is still that you would expect most of the POs to be signed and sealed so to say, approximately one month ahead of the start of the quarter.

And that hasn't changed, but the interest is certainly much more substantial now than when we communicated on this after our first quarter.

A couple more questions, if I may. On Silicon III, it has a nameplate capacity of 6,600 metric tons.

Do you see any need to adjust the possible or likely capacity of this facility as of now? Second one, you made some extended comments on silane gas markets, and you mentioned that the growth in demand is being captured by new entrants.

So are you expecting any growth at all in your silane gas sales going forward? And then thirdly, just a shot in the dark, you have about 17 percentage point improvement in REC Solar EBITDA margin from the first quarter to the second quarter and a large portion if not all is due to improvements at Singapore and utilizations there.

How can we transpose this to REC wafers since its utilization at Singapore is lagging? How should we think about margin improvements as utilization at this big plant improves and the cost targets of course?

Let me start with the silane part. As it showed we do expect that there is a growth in the market.

We see there is a growth in the market. The growth in the market is definitely less than what was anticipated by some year or two ago.

And the reason behind this is that so far we don’t see any major offtake of silane into the PV industry. Basically today, it is the display of part of a market, which drives the growth.

In terms of our market share, as you know, our market share is high in that area; we probably will have a market share of the global demand of some 60% to 65% this year. So we are a dominant player in the silane market.

We also do have a huge capacity. You have to remember that silane is just a byproduct from outside, it's the feedstock.

We have seen that some competitors have built their own silane plant. We definitely believe that we are very much more cost competitive compared to those which now enter into the market.

And that means that we don't foresee too much new capacity coming on by other players going forward. And that's why when I say, this inventory and those players who have already invested has taken their share of the market, we foresee a growth for REC going forward again.

In terms of the overall capacity on the polysilicon side, we have decided, and I think it's wise that we have given you the ambition for 2010. We also have said that we are going to produce some 4,000 metric tons more in 2012 than what we assume in 2010.

And I think that’s as long as I would like to go today. We don’t know exactly what is the overall capacity in our plant.

We identify different bottlenecks, and we are working systematically through those bottlenecks. So I would like to stay with 17,000 in 2012 as our ambition for our plant in Moses Lake.

Then to your third question and the effects of higher utilization in Singapore. Obviously, as we have stated repeatedly, we do expect unit costs to go down.

But keep in mind a couple of issues; first of all, the relative impact on solar is much higher than wafer for obvious reasons. We also have stated that we expect a more significant cost decrease in solar than in wafer.

And I think we have said that our view is currently that the most significant potential of cost reduction in the wafer side is actually on the Norwegian operation, not on the Singapore operation. And then also keep in mind, you used the word lagging just for the avoidance of doubts.

The wafer operation in Singapore started one quarter later than the other operations. So from that perspective it’s not lagging, it’s just that it started later.

Okay. I think we have a final question, I think that's a last question we have time for today.

Yes, it's Anders Rosenlund from ABG Sundal Collier again. In connection with the Q1 report, you stated that you expect Q2 to be weaker than Q1, and it came in on EBITDA 10% better.

What changed? Was this a surprise for you as the management team?

As I said during my presentation, it's mainly due to two factors. First, that the operations are doing better; we are making improvements in every unit.

And secondly, although prices were fixed earlier, we still had some positive effect of a stronger market in the second quarter. So those are the two factors.

Okay. I think we then would like to thank everyone for coming.

And we'll have a conference call this afternoon at 3 o'clock as you know. Thank you.