REC Group - Effects from applying IFRS accounting principles

The transition from NGAAP to IFRS will entail certain accounting changes to the audited consolidated results of the REC Group. These changes will be applied in full to the Group Income Statement and the Balance Sheet for 2005 but will have no cash effect.
The most material effect of the transition to IFRS relates to the standards IAS 32 and IAS 39, concerning Financial Instruments. For the REC Group, this concerns the fair value of two foreign currency convertible bonds with a nominal value EUR 31 million and USD 140 million, respectively. Due to the fact that the bonds are nominated in foreign currencies, IFRS implies that they are fully accounted for as debt in the Balance Sheet as per 31 December 2005, whereas the estimated change in fair value of the convertible element is fully charged to the Group Income Statement for 2005.

The estimated effect of change in fair value of these convertible instruments will have a negative effect of approximately NOK 500 million on profit before taxes, whereas the negative effect on net profit after taxes will be around NOK 340 million due to a resulting increase in deferred taxes.
There will also be certain transition changes related to IAS 3 - Business Combinations and IAS 31 - Interest in Joint Ventures. Under IFRS, the subsidiary Solar Grade Silicon LLC ("SGS") will be consolidated according to the Joint Venture method during the period January - July 2005.
Other transition changes, including the implementation of IAS 16 - Property, Plant and Equipment and IAS 19 - Employee Benefits, are not considered to be significant.

The REC Group will present its preliminary results for 2005 on March 1 2006.  For more information, please contact;

Jon Andre L√łkke, SVP Finance, +47 67 81 52 65
Erik Thorsen, President & CEO, +47 67 81 52 60