LODBROK-CAPITAL

Lodbrok Capital LLP, one of the largest shareholders in REC Silicon ASA, issued the following letter in response to the statement made on 14 October 2022 by the REC board:

REC Silicon ASA (“REC”)
Fornebuveien 84
PO Box 63
1324 Lysaker
Norway

Attn: The Directors of the Board

RESPONSE TO THE BOARD’S STATEMENT DATED 14 OCTOBER 2022
Capitalised terms will have the same meaning as the letter dated 10 October 2022 (“the Lodbrok Letter”)

17 October 2022

Dear directors,

Funds and accounts managed or advised by Lodbrok Capital LLP (“Lodbrok”) at the time of this letter now own just over 3% of the shares in REC (OSE: RECSI) – making Lodbrok the largest shareholder in the company outside Hanwha based on VPS share registers – and still hold close to 20% of the 2023 senior secured bond. As mentioned in the Lodbrok Letter, we have been invested in REC since our inception in 2017 and have supported the company through difficult times in the past. We believe the current situation again warrants active involvement by Lodbrok in our capacity as a meaningful stakeholder.

We note with disappointment that your response on 14 October 2022 does not contain any concrete actions to ameliorate the concerns outlined in the Lodbrok Letter. Your response detailed the qualifications and expertise of the new CEO and the proposed directors, but failed to address the crux of the issue, being the potential conflicts of interests in Hanwha effectively hand picking a new CEO and CFO (the latter joining directly from Hanwha) and occupying an effective control of the REC board during a time where Hanwha is negotiating a potentially company-defining contract with REC.

Since the Lodbrok Letter, we highlight the following developments:

1. Lodbrok has, at the time of this letter, increased its holdings to just over 3% of the issued shares
2. A significant number of shareholders in REC have reached out to us in sympathy of our concerns
3. Certain current and potential customers of REC have – on an unsolicited basis via advisors – indicated interest in speaking to Lodbrok, which may suggest that the concerns transcend the shareholder base into the wider value chain of companies that have an interest in the important products manufactured by REC

Absent direct engagement from the board or Hanwha on concrete steps to address the suggestions in the Lodbrok Letter, we will reject all the EGM proposals and consider options that include, but are not limited to, the following:

• Increasing our holdings or aligning with other shareholders to be able to summon another general meeting with an agenda that addresses the governance concerns we have outlined, for which we believe a majority of the shareholders will be aligned with Lodbrok
• Proposing an independent investigation of any related party matters, which if supported by a qualified majority of votes will enable a Norwegian court to force an investigation at the company’s expense

Either a) postponing the EGM to identify an additional board candidate – independent or from a non-Hanwha shareholder (group) – or b) Hanwha proposing and supporting the election of such a candidate at the EGM, would be an important step in recognising our concerns. Lodbrok remains available for any engagement on such matters.

We strongly believe it will be in the best interest of the company and its shareholders to ensure optimal governance in the current situation, and Hanwha holds the key to easily accommodate the concerns raised in cooperation with Lodbrok. A continued conflict on the governance matter will have the potential to damage shareholder value.

We strongly encourage all shareholders to consider the concerns we have expressed and vote at the EGM.

Mikael Brantberg
Chief Investment Officer
Lodbrok Capital LLP

Joachim Bale
Partner
Lodbrok Capital LLP

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