REC Silicon Annual Report 2019

51 Notes to the consolidated financial statements, REC Silicon Group REC Silicon Annual Report 2019 Discount rates (%) 2019 2018 POST-TAX PRE-TAX POST-TAX PRE-TAX Semiconductor Materials CGU 12.9 15.2 Solar Materials CGU 13.5 16.2 14.5 17.1 KEYASSUMPTIONS AND SENSITIVITIES Key assumptions include future revenues (sales prices and sales volume), cost of major inputs, conversion costs and efficiency (production volume), and maintenance capital expenditures. Price trends are difficult to predict in the current market environment and external views of anticipated market conditions differ widely. When possible, REC Silicon has used third party analyses to estimate product prices. When third party estimates are not available or vary widely, REC Silicon uses internal estimates based on experience and market intelligence to estimate market conditions and prices. Estimates of long term average solar grade polysilicon prices used in this analysis are at levels which management believes are sufficient to attract the capital necessary for new cost-effective polysilicon capacity to support supply chain expansion consistent with analysts’ estimates of growth in end use demand for PV installations. Estimates of future cash flows include the assumption that market conditions will support an increase in production capacity utilization of the Moses Lake FBR facility to 100 percent capacity utilization in 2022. If access to solar grade polysilicon markets is not restored and idled capacity is not restarted, additional impairment charges would be required. Current market conditions result in negative cashflows until FBR production is restarted. As a result, the estimated timing of the increase in capacity utilization is a key assumption. If market conditions do not improve or if REC Silicon does not regain access to polysilicon markets in China, additional impairment would be required. This sensitivity is reflected in the table of sensitivities below in the line volume (production and sales). Costs have been estimated using contractual obligations, third party indexes when appropriate, and historical spending trends adjusted for inflation. Capital expenditures have been estimated using past experience and an evaluation of anticipated replacement requirements of specific items of equipment (useful lives of fixed assets). The table below presents the estimated change in impairment of the Solar Materials CGU due to an isolated change in the key assumption for all years. Spending includes fixed manufacturing costs, selling general and administrative expenses, and capital expenditures in total. The estimates are based on the assumptions used in the December 31, 2019 impairment analysis. KEY ASSUMPTION (USD INMILLION) CHANGE ESTIMATED CHANGE IN IMPAIRMENT Post-tax discount rate +/-1% point -9.7/+11.6 Sales prices +/-2% +/-20.8 Volume (production and sales) +/-2% +/-12.3 Spending +/-2% +/-10.0 Negative amounts represent an estimated increase in impairment.