REC Silicon Annual Report 2019

REC Silicon Annual Report 2019 14 The shutdown of the FBR facility is intended to retain the liquidity necessary to maintain operations at the semiconductor materials facility in Butte, Montana. In addition, general economic conditions and the effects of the trade war between China and the United States has had an adverse impact on markets served by the semiconductor materials facility in Butte, Montana. REC Silicon is also evaluating the potential impacts of the Phase I trade agreement on the overall economy and its impact on markets served by the Butte, Montana semiconductor materials facility. On January 15, 2020 the Phase I economic and trade agreement was signed by the Government of the United States and the Government of China. This agreement has the potential to re-open solar grade polysilicon markets in China. The Company is evaluating the potential impacts of the Phase I trade agreement. The impacts of this agreement on conditions in markets in which the Company participates remains uncertain. Recent world events indicate that the spread of COVID-19 (novel coronavirus) is having an adverse impact on the economy and is disrupting global supply chains. Specifically, there have been reports of underutilization of production capacity in industry segments served by REC Silicon. REC Silicon anticipates that its customers will experience a disruption of operations caused by the response to and the impact of the COVID-19 outbreak. The impacts of the COVID-19 outbreak are dependent upon the extent and duration of the outbreak. Liquidity Risk Impacts of tariffs imposed on US polysilicon imposed by China have effectively prevented REC Silicon from participating in key polysilicon markets and forced the Company to shut down the FBR facility in Moses Lake, Washington. In addition, general economic conditions and the effects of the trade war between China and the United States is having an adverse impact on markets served by the semiconductor materials facility in Butte, Montana and has increased the Company’s liquidity risk. Current market conditions and the shutdown of the FBR facility in Moses Lake place substantial risks on the Company’s liquidity and its ability to meet operating cash flow requirements. The spread of COVID-19 (novel coronavirus) is having an adverse impact on the economy and is disrupting global supply chains. Specifically, capital markets have been impacted and may adversely affect the Company’s ability to raise additional capital if required. The impacts of the COVID-19 outbreak are dependent upon the extent and duration of the outbreak. In addition, the minimum liquidity required by the covenants of the USD Senior Secured Bond is USD 15.0million (See note 17 to the consolidated financial statements). Accordingly, there is substantial risk associated with the Company’s liquidity in 2020 (see Going Concern above). Credit Risk Credit risk is primarily related to accounts receivable and guarantees provided for discontinued operations. In accounts receivable, sources of credit risk include geographic, industry and customer concentrations; and risks related to the collection. Policies and procedures are in place for managing credit risk, including obtaining securities where possible. Market and customer specific developments affect credit risk. Currency Risk The Company’s net cash flows fromcontinuing operations are primarily in USD. Debt is denominated in USD andNOK. Accordingly, the Group’s currency risk on a consolidated basis relates primarily to the sufficiency of net positive cash flows in USD tomeet liabilities in NOK. The Group does not currently hold any hedging instruments to offset the risk of changes in exchange rates between the USD andNOK. CORPORATE GOVERNANCE Good corporate governance is essential to ensure that our business is run in a way that protects the long-term interest of all stakeholders. The Board of Directors has approved and implemented corporate governance principles endorsing and complying with the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance. The Group’s compliance with the Code of Practice is described in the report on Corporate Governance for 2019 which is included in this Annual Report. Social and Environmental Responsibility Sustainability is at the core of RECSilicon’s businessmodel. The Company acknowledges its responsibilities toward the environment, society, and the local communities inwhich it operates. It is a Board responsibility to secure acceptable sustainability performance. To ensure compliancewith policies, RECSilicon’s management monitors performance through specific Key Performance Indicators (KPIs), reports resultsmonthly and quarterly, and executes audits on all levels in the organization. The Environment REC Silicon’s environment and climate policy commits the Company to maximize the positive contribution from its products and to minimize negative environmental impacts and reduce its carbon footprint. To achieve these goals, REC Silicon includes environmental considerations in the design, manufacture, and delivery of its products. The Company sets clear objectives, monitors performance regularly, reports results, and audits to ensure continuous improvement. The Company’s Pollution Prevention Plan and Process Safety Management Plan cover environmental risks in its operations and the annual, quarterly, monthly and weekly reporting includes emissions to air and water, as well as waste management. The production of silicon materials is energy intensive and varies based upon the volume and mix of products manufactured. Total energy consumption decreased by 31.5 percent. Greenhouse gas emissions decreased by 25.7 percent because the reduction in energy usage at Moses Lake has a lower impact on greenhouse gas emissions because it Board of Directors’ report