Half-year Report

PV Crystalox Solar PLC

Interim report 2017

PV Crystalox Solar PLC (the "Group"), a long established supplier of photovoltaic ("PV") silicon wafers, today announces its interim results for the six months ended 30 June 2017.

Highlights

· Wafer shipments were 69MW (H1 2016: 59MW)

· Net cash of €27.9 million only marginally changed since 31 December 2016

· ICC arbitration decision expected by end September 2017

Financial Overview

· Revenues €12.6m (H1 2016: €34.7m)

· Loss before taxes (EBT) €(5.4)m (H1 2016: Profit of €4.7m)

· Net cash €27.9m (31 December 2016: €28.8m)

· Inventories €7.4m (31 December 2016: €11.2m)

Iain Dorrity, Chief Executive Officer, commented:

"The Board remains mindful of the need to protect shareholder value and will await the judgement of the arbitral tribunal on the Group's dispute with a customer who failed to purchase wafers in line with its contractual obligations before completing its strategic review."

 Enquiries:

PV Crystalox Solar PLC +44 (0) 1235 437160

Iain Dorrity, Chief Executive Officer

Matthew Wethey, Chief Financial Officer and Group Secretary

About PV Crystalox Solar PLC

PV Crystalox Solar is a long established supplier to the global photovoltaic industry, producing multicrystalline silicon wafers for use in solar electricity generation systems.

Chairman's and Chief Executive's joint statement

Price erosion continues across the PV value chain and prices remain decoupled from production costs due to industry over-capacity in China. China continues to strengthen its dominant position in manufacturing and according to the China PV Industry Association ("CIPA") solar cell production in China in H1 2017 had reached around 32GW, up 28% from the same period last year and module production reached 34GW, an increase of nearly 26% from the prior year period. There has been a modest price recovery in recent weeks from the low point seen in mid-April driven by a combination of supply side issues and strong demand from markets in China and USA. Nevertheless average multicrystalline wafer prices during H1 2017 were more than 20% lower than in the same period in 2016.

Group wafer shipments totalled 69MW in H1 2017 (59MW: H1 2016) and were broadly in line with production volumes. A minor increase in wafer dimensions from 156mm to 156.75mm was carried out during Q1 2017 in line with a change in the industry standard. As in the previous year, the majority of the Group's wafers are used in modules for the French PV market where the low carbon footprint obtained by wafering in Germany is beneficial. This special market supports demand but only provides limited insulation from the pricing pressure which is currently ravaging the PV industry.

France had a cumulative installed PV capacity of around 7.1GW in April 2017and has set an ambitious growth target to reach 18-20GW by the end of 2023. In August 2016, the country introduced a 3GW large-scale solar plan, which is being enacted through auctions of around 500MW every six months for three years. The French Energy Regulatory Commission has required an official carbon footprint assessment of all modules to be eligible for the auctions and the carbon footprint is the second most important factor taken into consideration after price. Contracts from the first tender were awarded in March and the second in July.

The Group had advised in March 2017 that it would phase out multicrystalline silicon ingot production in the UK during 2017 and rely on the purchase of ingots from an external supplier. Ingots are currently processed into blocks in the UK and wafers produced in our German facility. In view of the continuing adverse PV market environment and in order to better align production costs with market prices and further reduce overheads, the Group is now stopping block production and will instead source blocks from an external supplier. As a result all production operations in the UK will cease during Q3 2017 and the vast majority of jobs in the Group's UK trading subsidiary, Crystalox Limited, will be lost. Work is already underway to clear one of the production buildings where the lease expires in October 2017. The other facilities are expected to be cleared by the end of Q1 2018 and negotiations are ongoing regarding surrender of those leases.

The Group retains its operational wafer production capabilities in Germany and will continue its focus on the French niche low carbon footprint wafer market where it has some competitive advantage.

Polysilicon Contracts

The Group is no longer burdened with purchase obligations under long term polysilicon contracts following the settlement of the outstanding contract in September 2016 but has continued to trade surplus polysilicon in order to reduce inventory volumes. Traded volumes during H1 2017 were modest in comparison with the previous year as inventory is now much reduced. It is expected that the remaining inventory will be eliminated by the end of the year.

Wafer Supply Contracts

The Group has a significant outstanding long term sales contract with one of the world's leading PV companies which has failed to purchase wafers in line with its obligations since 2013. The supply contract was signed in 2008 and related to wafer shipments over a seven year period with prices which reflected market prices at that time and which are considerably above current levels. Despite extensive negotiations it has not been possible to reach a mutually acceptable agreement and a request for arbitration was filed in March 2015 with the International Court of Arbitration of the International Chamber of Commerce. Subsequently in an attempt to find an amicable solution both parties agreed to follow a mediation process led by an external mediator during December 2016 but without success.

The evidentiary hearing of the arbitral tribunal took place in Frankfurt in late March 2017 and the judgement is expected before the end of September 2017. While the outcome is uncertain, the Group indicated in March 2016 that the value of any award if our claim is upheld could be a multiple of the Group's market capitalisation at that time.

As reported previously a partial resolution of the other outstanding wafer supply contract, with a customer which entered insolvency and where shipments stopped in 2012, has been achieved. Claims had been registered with the administrator and an interim settlement of €0.96m was received during H1 2016. A final payment of around €0.375m is expected following approval from the insolvency court although the timing remains uncertain.

Financial Review

In the first half of 2017 Group Revenues of €12.6 million were 64% lower than in the same period in 2016 (€34.7million) despite a 17% increase in wafer shipments. This decrease was mainly due to trading lower volumes of polysilicon than in H1 2016, when the Group was able to sell a significant portion of the raw material inventory it held at 31 December 2015 and to achieve a positive gross margin on trading additional quantities of polysilicon.

The Group's gross loss for the period was €0.3 million (H1 2016: gross profit of €6.2 million). This loss was principally due an inventory write down of €1.4 million. During H1 2016 the higher margin was due to sales of excess polysilicon inventory at prices above the 2015 year-end valuation as a result of a temporary rebound in polysilicon spot prices during Q2 2016 and stronger wafer sales prices during the period.

The write down in inventory of €1.4 million follows a review of the net realisable value of the individual items. A slight change to the standard size of wafers has negatively impacted the recoverable value of finished product inventory. Many of our wafers in inventory are of the 156mm size rather than the new 156.75mm size. As a result of the decision to close manufacturing operations in the UK some of our raw material stock has been written down to its estimated recoverable value rather than its cost.

The Group's loss before taxes was €5.4 million (H1 2016: profit of €4.7 million). This loss was mainly driven by the decrease in gross profit, a smaller currency gain than in 2016, an impairment charge of €0.5 million, a decrease in other income and an increase in other expenses.

Other income of €1.2 million was €0.6 million lower than the €1.8 million recognised in H1 2016. This income is mainly as a result of settlements relating to long-term contracts where customers had entered insolvency with more income received in H1 2016 than in H1 2017. Other expenses were €0.4 million higher in the first six months of 2017 mainly due to higher fees in relation to arbitration proceedings when the hearing was held in March 2017.

The Group's net cash position at the end of the period was €27.9 million, which was €0.9 million lower than the net position of €28.8 million at the start of the year. The Group's loss after adjustment for non cash movements was €3.3 million whilst the cash generated from releases in working capital was €3.1 million. In addition to this €0.2 million outflow there was a negative impact of €0.7 million due to the retranslation of cash and cash equivalents.

On 13 July 2017 the Group announced the closure of its manufacturing operations at Crystalox Limited in the United Kingdom. Management are still in the process of calculating the closure costs in relation to this announcement and as a result they have not been reflected in the Interim results.

A review of the recoverable value of certain items in property, plant and equipment in the UK was carried out and resulted in an impairment charge of €0.5 million.

Risk factors

The principal risks and uncertainties affecting the business activities of the Group were identified under the heading "Risk management and principal risks" in the Strategic Report on pages 10 to 11 of the 2016 Annual Report, a copy of which is available on the Group's website, www.pvcrystalox.com. In the view of the Board, the key risks and uncertainties for the remaining six months of the financial year continue to be those set out in the 2016 Annual Report.

Market Drivers

Global PV installations are expected to exceed 80GW in 2017 according to GTM Research. This represents only modest growth of 4% over 2016 installations rather the annual double digit growth seen in previous years. China remains the key driver with installations in H1 alone reaching 24.4GW as advised in a recent report from CIPA. Cumulative installed capacity in China is now only 3GW below the 105GW target set for 2020 under the 13th five year plan.

Currently the USA levies antidumping and countervailing duties against PV cells and modules imported from China and Taiwan but now imports are faced with potentially much higher tariffs. Following a complaint filed in April under Section 201 of the Trade Act of 1974 by Suniva, a Georgia based manufacturer that went into bankruptcy the US International Trade Commission ("ITC") launched a new enquiry into imports of PV cells and modules. Suniva has argued that it and other US manufacturers have suffered serious injury because of a surge in imports, and is seeking a tariff of $0.40/W on cells and a minimum price of $0.78/W for foreign modules, which would roughly double their cost in the US. The Suniva petition goes beyond the existing antidumping and countervailing duty orders because the requested safeguards are not limited to imports from specific countries. The remedies under Section 201, if granted, would be global in scope and would affect all solar cells and modules imported into the United States, regardless of origin. The scope of the petition is limited to crystalline silicon cells and modules and it expressly excludes competing thin film products.

The ITC is scheduled to give a decision on 22 September and will propose remedies to President Donald Trump by 13 November if it concludes that solar imports have been a "substantial cause of serious injury" to US manufacturing. The President then has until 12 January next year to decide how to respond.

Outlook

Current market conditions continue to be particularly severe for multicrystalline silicon products with massive over-capacity in China depressing prices for both cells and wafers. Higher efficiency monocrystalline silicon cells are gaining market share and are expected to become the dominant technology by 2019. This trend is exacerbating the pressure on multicrystalline silicon pricing and indeed the PV manufacturing industry outside China faces an existential crisis.

The Board remains mindful of the need to protect shareholder value and will await the judgement of the arbitral tribunal on the Group's dispute with a customer who failed to purchase wafers in line with its contractual obligations before completing its strategic review.

 John Sleeman Dr Iain Dorrity

Chairman Chief Executive Officer

23 August 2017

Consolidated statement of comprehensive income

for the six months ended 30 June 2017

The accompanying notes form an integral part of these financial statements.

Consolidated balance sheet

as at 30 June 2017

The accompanying notes form an integral part of these financial statements.

Consolidated statement of changes in equity

for the six months ended 30 June 2017

Consolidated cash flow statement

for the six months ended 30 June 2017

The accompanying notes form an integral part of these financial statements.

Notes to the consolidated interim financial statements

for the six months ended 30 June 2017

1. Basis of preparation

These condensed consolidated interim financial statements are for the six months ended 30 June 2017. They have been prepared in accordance with International Accounting Standard ("IAS") 34, 'Interim Financial Reporting'. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2016.

The statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the financial statements for the year ended 31 December 2016.

The Group's directors continue to operate a cash conservation strategy to enable the Group to manage its operations whilst market conditions remain difficult. The Group has taken the decision to stop block production in the UK during Q3 and instead to source blocks from an external supplier. The Group retains its operational wafer production capabilities in Germany and will continue its focus on the niche low carbon footprint wafer market where it has some competitive advantage. Despite the adverse market conditions the Group's cash cost of wafer production is currently below the market price which allows a contribution to gross margin.

As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. The assumptions around contracted sales volumes/prices and contracted purchase volumes/prices are based on management's expectations, which are consistent with the Group's experience in the first half of 2017.

The Group looked at the sensitivity in the model by considering different sales volumes and prices and noted that a significant drop in either would still leave the Group in a cash positive position in August 2018.

The nature of the Group's operation means that it can vary production levels to match market requirements so that expected demand is sufficient to consume wafering output.

On 30 June 2017 there was a net cash balance of €27.9 million, including funds held by an employee benefit trust. Therefore, whilst any consideration of future matters involves making a judgement at a particular point in time about future events that are inherently uncertain, the directors, after careful consideration and after making appropriate enquiries, are of the opinion that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the interim report. Thus the Group continues to adopt the going concern basis of accounting in preparing the annual financial statements.

As a result of these modelling assumptions the base plans indicate that the Group will be able to operate within its net cash reserves for the foreseeable future.

Were the Group not to adopt the going concern basis at any point, all assets and liabilities would be reclassified as short term and valued on a break-up basis.

2. Basis of consolidation

The Group financial statements consolidate those of the parent company and its subsidiary undertakings drawn up to 30 June 2017. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

The results of any subsidiary sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from, the date control passes.

Consolidation is conducted by eliminating the investment in the subsidiary with the parent's share of the net equity of the subsidiary.

All intra-group transactions, balances, income and expenses are eliminated upon consolidation.

3. Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the parent company is Sterling. The financial information has been presented in Euros, which is the Group's presentational currency. The Euro has been selected as the Group's presentational currency as this is the currency used in its significant contracts. The financial statements are presented in round thousands.

4. Segment reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance, has been identified as the Group Board. The Group is organised around the production and supply of one product, multicrystalline silicon wafers. Accordingly, the Board reviews the performance of the Group as a whole and there is only one operating segment. Disclosure of reportable segments under IFRS 8 is therefore not made.

Geographical information for the six months ended 30 June 2017

* Excludes financial instruments, deferred tax assets and post-employment benefit assets.

One Taiwanese customer accounted for more than 10% of Group revenue each and sales to this customer was (figure in €'000): 9,041

Geographical information for the six months ended 30 June 2016

* Excludes financial instruments, deferred tax assets and post-employment benefit assets.

^ Includees sales of surplus polysilicon feedstock.

Two customers accounted for more than 10% of Group revenue each and sales to these customers are as follows (figures in €'000:

1. 15,646 (Canada); and

2. 9,845 (Taiwan).

5. Cost of materials and services

Having reviewed anticipated selling prices In H2, ' Cost of materials and services' includes an Inventory write-down of €1.4m (H1 2016: nil).

6. Employee Benefit Trust

As at 30 June 2017 the Employee Benefit Trust ("EBT") held 1,971,910 shares (1.2%) of the issued share capital in the Company (30 June 2016: 1,971,910 shares (1.2%)). It holds these shares in trust for the benefit of employees.

7. Income tax

The average taxation rate shown in the Consolidated Statement of Comprehensive Income is nil% (H1 2016: nil%).

The anticipated long-term average tax rate for the Group, normalised on the basis that the Group returns to profitability, is approximately 32%.

8. Earnings per share

Net earnings per share is computed by dividing the net loss for the period attributable to ordinary shareholders of €3.5 million (H1 2016: profit €4.7 million) by the weighted average number of ordinary shares outstanding during the year.

Diluted net earnings per share is computed by dividing the profit/(loss) for the year by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options.

The calculation of the weighted average number of ordinary shares is set out below:

9. Property, plant and equipment

Additions to property, plant and equipment in the six months ended 30 June 2017 were less than €0.1 million (H1 2016: less than €0.2 million). Having reviewed the recoverable value of certain assets, an impairment charge of €0.5million (H1 2016: nil) is included within 'Depreciation and impairment of property, plant and equipment and amortisation of intangible assets'.

10. Changes in contingent assets and liabilities

There were no changes in contingent assets and liabilities.

11. Related party disclosures

Related parties as defined by IAS 24 comprise the senior executives of the Group including their close family members and also companies that these persons could have a material influence on as related parties as well as other Group companies. During the reporting period, none of the shareholders had control over or a material influence in the parent company.

Transactions between the Company and its subsidiaries have been eliminated on consolidation.

12. Post balance sheet events

 On 13 July 2017 the Group announced the closure of its manufacturing operations at Crystalox Limited in the United Kingdom. Closure costs as a result of this decision have not been included in the Interim results.

13. Approval of interim financial statements

The unaudited consolidated interim financial statements for the six months ended 30 June 2017 were approved by the Board of Directors on 23 August 2017.

The financial information for the year ended 31 December 2016 set out in this Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2016 have been filed with the Registrar of Companies. The Auditors' Report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

Statement of directors' responsibilities

to the members of PV Crystalox Solar PLC

The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union and that this Interim Report includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Services Authority, paragraphs DTR 4.2.7 and DTR 4.2.8.

The directors of PV Crystalox Solar PLC are listed at the end of this Interim Report and their biographies are included in the PV Crystalox Solar PLC Annual Report for the year ended 31 December 2016.

By order of the Board

Matthew Wethey

Chief Financial Officer and Group Secretary

23 August 2017