Case Analysis essay
This case was ready by Jennifer Ballen, MBA 2017, and Professor Neil Thompson. Copyright © 2017, Neil Thompson and Jennifer Ballen. This work is licensed below the Inventive Commons AttributionNoncommercial-No By-product Works Three.zero Unported License. To view a replica of this license go to http://creativecommons.org/licenses/by-nc-nd/Three.zero/ or ship a letter to Inventive Commons, 171 Second Road, Suite 300, San Francisco, California, 94105, USA. 17-181 September 13, 2017 First Photo voltaic Neil Thompson and Jennifer Ballen Tymen deJong, First Photo voltaic’s senior vp of module manufacturing, 1 fixated but once more on the firm’s newest 10-Okay. DeJong had joined the corporate in January of 2010, at a time when First Photo voltaic’s future appeared vivid. Now, simply two years later, First Photo voltaic’s price benefit was eroding and deJong was going through challenges that will require powerful choices. In 2009, First Photo voltaic broke price data by turning into the primary photovoltaic (PV) producer to provide panels that generated a megawatt of energy at a producing price of lower than $1.00 per watt.2 The firm’s proprietary thin-film cadmium telluride expertise had made it the most important and lowest-cost producer for almost a decade. Nonetheless, the 2011 Kind 10-Okay on deJong’s desk revealed a web working lack of $39 million, the corporate’s first year-end web working loss prior to now seven years. Though revenues have been $2.7 billion, income progress had slowed from 66% in FY 2009, to 24% in FY 2010, and then to a meager eight% in FY 2011.Three A lot of this slowed progress was attributable to broader tendencies affecting all the PV business. Chinese language producers, backed by their authorities, have been flooding the market with low-price crystalline-silicon (c-Si) photo voltaic panels. Market demand for PV panels was additionally weakening. The 2008–2009 international monetary disaster had squeezed authorities budgets and weakened the monetary positions of many banks. In consequence, the once-heavy European photo voltaic subsidies have been shrinking and the willingness of banks to finance photo voltaic tasks had nearly disappeared. Silicon uncooked materials costs have been additionally falling. This helped First Photo voltaic’s opponents, which produced silicon-based panels, however not First Photo voltaic, which produced cadmium telluride-based ones. 1 As of July 2015, Tymen deJong grew to become the chief working officer (COO) of First Photo voltaic. 2 Watt: a unit of energy is outlined as 1 joule per second; it measures the speed of vitality circulate. Three First Photo voltaic Inc., Kind 10 Okay, 2007. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 2 As deJong mirrored on the corporate’s latest monetary droop, he questioned if First Photo voltaic’s aggressive edge had eroded completely. How ought to First Photo voltaic reply to the menace from the Chinese language producers? What may the corporate do to take care of its price benefit? Had been First Photo voltaic’s latest acquisitions of down-stream photo voltaic panel installers a strategic profit or a distraction? DeJong knew that to reply these questions, he first wanted to raised perceive the sources of First Photo voltaic’s aggressive benefit and whether or not these sources have been sustainable. PV Photo voltaic Manufacturing and Distribution Photo voltaic Trade Historical past and Evolution In 1839, nineteen-year previous French scientist Edmond Becquerel found the photovoltaic impact: that shining mild on the junction of two dissimilar supplies, corresponding to a steel and a semiconductor, creates electrical present. This led to Bell Lab’s 1954 creation of the primary useful photo voltaic cell. Early photo voltaic cells have been inefficient and expensive to fabricate, so their use was restricted to high-value purposes, corresponding to house satellites.four By the early 1980s, PV photo voltaic cell use had broadened to client purposes, such as calculators and watches, and by the mid-1990s utility corporations had begun utilizing PV photo voltaic vegetation, though prices continued to be larger than nonrenewable vitality sources. On the flip of the 21st century, two main forms of photo voltaic applied sciences had emerged: photo voltaic thermal and photovoltaic. Photo voltaic thermal energy vegetation used daylight to generate warmth that was used to boil water, with the ensuing steam driving a turbine to create electrical energy. However, the quickest rising photo voltaic market was photovoltaics: the conversion of daylight immediately into electrical energy. First Photo voltaic produced solely photovoltaic panels Overview of Photovoltaics By early 2012, there have been two dominant applied sciences used to provide PV solar energy: (i) thin-film and (ii) crystalline silicon (c-Si) (Exhibit 1). The PV provide chains sometimes concerned the next steps (Determine 1). four “Photo voltaic Defined: Photovoltaics and Electrical energy,” U.S. Power Data Administration, October 25, 2015. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 Three Determine 1 Steps within the PV Provide Chains Manufacturing Stage Course of for Crystalline Silicon Course of For Skinny Movie i) Uncooked materials preparation Uncooked silica, typically within the type of sand, is bought and purified. A substrate (e.g. glass) and semiconductor (e.g. cadmium telluride, CdTe) are ready by third events. ii) Photo voltaic wafer manufacturing Silicon is fashioned into skinny round wafers. N/A iii) Photo voltaic cell production5 Photo voltaic wafers are layered to generate electrical present when hit by daylight. A skinny layer of semiconductor is layered on high of the substrate, coated, after which outlined with a laser. iv) Module array manufacturing Photo voltaic cells are electrically wired collectively into photo voltaic modules and weatherproofed. v) System integration and growth System integrators set up accomplished modules and arrays. For utility prospects, integrators additionally present financing, engineering, development, and ongoing upkeep. Supply: Case writers. Crystalline silicon was the dominant expertise out there, accounting for almost 85% of manufactured photo voltaic panels during the last decade. Crystalline silicon was used for semiconductors in each electronics and photo voltaic cells. In 2001, 20% of whole silicon use was allotted in the direction of photo voltaic cell manufacturing, and 80% in the direction of electronics. By 2010, this had reversed: 80% of whole silicon use was for the manufacturing of photo voltaic cells. The speedy progress in demand from photo voltaic producers elevated silicon costs from $50/kg in 2001 to a peak of $475/kg in 2008.6 In response, crystalline silicon producers raced to enhance cell effectivity and cut back the thickness of the silicon wafer, which decreased silicon use in photo voltaic cells from roughly 15 grams per watt in 2001 to five grams per watt by EOY 2011.7 From 2008–2011, provide of silicon ramped up, inflicting costs to plunge from $475/kg again to $65/kg (Exhibit 2). Trade consultants predicted that silicon costs would proceed to say no additional within the close to future, benefiting First Photo voltaic’s opponents. A substitute for crystalline silicon was skinny movie expertise, first commercialized within the early 2000s by First Photo voltaic and a small variety of different producers. True to its title, skinny movie expertise concerned the position of skinny layers of semiconductor materials, corresponding to cadmium telluride, on high of cheap substrates, corresponding to glass or aluminum. Panels utilizing skinny movie have been sometimes decrease price and required 98% much less semiconductor materials than conventional c-Si panels. In 2011, cadmium telluride use in skinny movie photo voltaic panels was roughly zero.1 grams per watt. The value of cadmium telluride various 5 “The Distinction Between Photo voltaic Cells and Photo voltaic Panels,” RGSEnergy.com. 6 “Mineral Commodity Summaries,” U.S. Geological Survey, January 2012. 7 Shyam Mehta, “The Shifting Relationship Between Photo voltaic and Silicon in Charts,” Greentech Media, 2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 four over time, from $48/kg in 2006 to $192/kg in 2011 (Exhibit 2). Offsetting thin-film’s price benefit was its traditionally decrease effectivity in changing daylight into energy for many purposes (Exhibit Three). The price of nonrenewable fossil gasoline energy had traditionally been decrease than that of renewable energy. By the tip of 2010, ignoring subsidies, it price utilities roughly $zero.15-$zero.35/kWh to provide electrical energy from solar energy, $zero.08-$zero.10/kWh to generate electrical energy from wind, and $zero.06-$zero.08/kWh for pure gasoline.eight Coal price solely $zero.04/kWh, however was the dirtiest type of energy. Certainly, many coal vegetation with remaining helpful life have been being decommissioned to keep away from the environmental and well being harm they brought about. Pure gasoline was turning into cost-competitive with coal as a result of lowered price of extracting pure gasoline via hydraulic fracking, 9 a way that had elevated in use considerably over the previous decade. Nonetheless, pure gasoline, whereas cleaner than coal, nonetheless produced carbon emissions and posed environmental dangers. Traditionally, the price of photo voltaic was a lot larger than different types of energy. In 1976, the price of photo voltaic was roughly $2.00/kWh, however this price was falling considerably as producers learned-by-doing and took benefit of economies of scale (Exhibit four). World Market Over the past decade, PV photo voltaic vitality had turn out to be the fastest-growing energy technology expertise in the world. A lot of this progress was pushed by regulatory insurance policies, as photo voltaic was nonetheless costlier than conventional fossil fuels. Authorities incentives sometimes enhanced the returns for photo voltaic suppliers in two methods: both offering larger costs for solar energy suppliers or requiring utilities to buy a certain amount of solar energy. 10 For instance, Feed-in Tariffs (FiTs) have been broadly used, notably in Europe, and supplied photo voltaic producers long-term contracts at above-market, government-mandated charges. One other incentive, termed renewable portfolio requirements, mandated that sure percentages of the vitality produced by utilities be sourced from renewables, corresponding to photo voltaic, wind, geothermal, or hydroelectric energy. Renewable portfolio requirements have been utilized by many states in america, most importantly California that had been rising renewable share necessities since 2002. From 2002–2008, international PV demand elevated at a median annual price of 48%. Nonetheless, in early 2009 the worldwide monetary disaster impacted the photo voltaic market, tightening the wallets of economic establishments and reducing authorities spending. Present subsidies allowed demand to proceed rising, however at a slower price, after 2009. By early 2012, many governments had considerably lowered incentive applications. This was notably evident in Europe, whose share of general demand fell, albeit from a eight “Electrical energy Technology Estimates,” U.S. Power Data Administration and Michigan State College, April 2011. 9 Hydraulic fracking is an extraction method for oil and gasoline wells wherein pressurized liquid is injected into the cracks in rock formations. As soon as the hydraulic strain is faraway from the properly, the remnants of the fracking fluid ease the extraction of oil and gasoline. 10 Authorities incentives got here in many alternative kinds together with, however not unique to: feed-in-tariffs, renewable portfolio requirements, quotas, tax credit, tendering methods, web metering, rebates, loans, and manufacturing incentives. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 5 excessive stage (Exhibit 5). Regardless of this, the entire international PV put in base at EOY 2011 was 65 gigawatts and consultants predicted that this might develop by 400-600 gigawatts by 2020. 11 The largest change in photo voltaic manufacturing was the large-scale entry of Chinese language producers. In 2001, China comprised lower than 1% of general photo voltaic manufacturing, however by 2012 Chinese language producers have been manufacturing almost 60% of all the world’s provide of PV panels12 (Exhibit 6). Market Segments There have been three broad markets for solar energy: residential householders, industrial companies, and utilities. The residential section represented 29% of the entire market and was predicted to develop to 35% by 2020. Industrial companies comprised 40% of the market; this section was anticipated to shrink to 25% by 2020. The utility market was predicted to be the quickest rising section, with an anticipated improve in market share from 31% in 2011 to 40% by 2020. In all three markets there have been quite a few methods integrators. The Residential Market Within the residential market, PV photo voltaic producers bought panels to third-party system integrators, installers, and distributors, who would bodily place the panel on a home-owner’s roof and join the panel to the regional electrical grid. Residential customers have been inspired to undertake photo voltaic via funding tax credit and web metering incentives (which inspired photo voltaic operators to promote unused electrical energy again to utilities). Residential prospects sometimes didn't deal with the expertise or maker of their photo voltaic panels, however as a substitute on the general prices and advantages of the put in system. The important thing standards for a residential buyer buying from a panel producer have been (in descending order): the levelized price of electrical energy (a median price measure per kWh throughout the lifetime of the system), 13 set up and distribution prices (bills that have been paid by the home-owner), watts per unit space, and typically even aesthetics, as some residential householders have been involved concerning the look of extremely seen rooftop panels. The Industrial Market Industrial and industrial companies looking for to decrease their working bills and carbon footprints additionally bought solar energy methods via third get together system integrators and distributors. As industrial tasks have been sometimes bigger in scope and required higher wattage per panel, the first buy consideration for industrial companies was the levelized price of electrical energy. When buying panels, industrial prospects additionally centered on watts per unit space, set up and distribution prices, and reliability of the expertise. 11 Krister Aanesen, Stefan Heck, and Dickon Pinner, “Photo voltaic Energy: Darkest Earlier than Daybreak,” McKinsey & Firm, Could 2012. 12 Robert Castellano, “China’s EV Battery Trade May Be A Repeat of Photo voltaic and Uncommon Earth Dominance,” Searching for Alpha, October 25, 2016. 13 See Glossary for extra particulars. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 6 The industrial and utility markets each financed photo voltaic tasks with photo voltaic leases and energy buy agreements (PPAs), monetary contracts between patrons and suppliers of electrical energy. With a PPA, the developer was liable for the design, financing, and set up of the photo voltaic system at little to no price for the client. The developer additionally operated and maintained the system over the period of the contract, sometimes 10-25 years. In return, the client bought the generated vitality at a hard and fast price from the developer. At contract termination, the client would both prolong the PPA, take away the system, or buy the system from the developer. PPAs supplied an assurance of each quantity (all the kWh have been bought) and value (as set by the PPA contract). The Utility Market In distinction to the residential and industrial markets, the utility market encompassed a smaller variety of larger-scale tasks. For instance, in america, there have been roughly 60 new utility-scale photo voltaic tasks in 2011, as in comparison with a whole bunch of 1000's of tasks in residential and industrial markets.14 Some utilities bought panels immediately from PV producers, whereas others bought from system integrators and installers. System builders supplied a wide range of companies to utility prospects, together with: i. Mission Growth: acquiring land permits, negotiating buy agreements, transmission interconnection, main engineering, and development. ii. Operations and Upkeep: subsequent to growth, signing long-term contracts to offer on-site operations and upkeep, corresponding to efficiency evaluation, forecasting, contractual and regulatory recommendation, efficiency reporting, and stock administration. iii. Mission Finance: negotiating and executing energy plant gross sales, elevating capital from debt and fairness markets, and structuring non-recourse project-level debt financing. iv. Engineering, Procurement and Development: engineering and designing energy vegetation, growing grid integration, development administration, and procuring part elements from third events. The first buy consideration for the utility market trusted the position. In spaceconstrained areas, an important issue was sometimes watts-per-square meter, in order that as a lot energy as doable might be generated in small areas. Utilities that weren't house constrained have been prepared to buy much less environment friendly panels if the panels had a decrease price per kilowatt-hour. Many utility installations weren't house constrained. A vendor observe document of profitable and well timed set up was sometimes the following buy consideration for utilities. PV producers that needed to promote merchandise to utilities in a sure location would typically first set up a relationship with integrators that had a positive observe document with a view to higher attain that market. Lastly, utilities bought panels based mostly on confirmed expertise and anticipated 14 “An Evaluation of New Electrical Technology Tasks Constructed in 2011,” Electrical Market Reform Initiative and American Public Energy Affiliation, March 2012. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 7 reliability of the system. Feed-in-tariffs have been carried out by many governments to encourage demand and required utilities to purchase renewable vitality at above-market charges. Utilities typically handed this incremental monetary burden to their prospects via a small additional payment on month-to-month electrical payments. First Photo voltaic Transient Firm Historical past First Photo voltaic originated as a glass firm in 1984 below the title Glasstech Photo voltaic, based by glass entrepreneur Harold McMaster. In 1990, the corporate was renamed to Photo voltaic Cells, Inc., after which as soon as once more in 1999 to First Photo voltaic, LLC, after True North Companions bought a controlling curiosity within the firm and the agency was recapitalized. John Walton, the son of Walmart’s founder Sam Walton, and Mike Ahearn (who later grew to become co-founder, Chairman, and the primary CEO of First Photo voltaic) based True North Companions. Walton and Ahearn each believed within the energy of expertise to speed up sustainability. On November 17, 2006, First Photo voltaic grew to become a publicly-traded firm (FSLR), elevating $450 million at an preliminary providing value of $20 per share.15 First Photo voltaic’s enterprise mannequin centered solely on part manufacturing at first: designing and producing PV photo voltaic cells and modules to promote to venture builders, system integrators, and operators of unpolluted vitality tasks. Starting in 2007 with a collection of acquisitions, First Photo voltaic vertically built-in, shopping for system integrators primarily in america. By means of its methods enterprise, First Photo voltaic managed the engineering, procurement, development, operations, upkeep, and growth of solar energy vegetation, and at instances, venture finance. Manufacturing and Prices First Photo voltaic manufactured PV photo voltaic cells and modules utilizing a sophisticated thin-film cadmium telluride (CdTe) expertise, controlling all levels of manufacturing fully in-house which, in accordance with First Photo voltaic’s 10-Okay, “…eradicated the a number of provide chain operators and costly and time consuming batch processing steps which are used to provide crystalline silicon photo voltaic modules.” In 2005, First Photo voltaic produced its first industrial photo voltaic module. First Photo voltaic used a proprietary vapor deposition expertise to coat glass panels with two skinny layers of semiconductor materials: first cadmium sulfide, then cadmium telluride. Excessive velocity lasers then divided the semiconductor into cells, the elemental models for absorbing mild and changing it into electrical energy. Photo voltaic cells have been mixed to kind photo voltaic modules and photo voltaic modules have been mixed to kind photo voltaic panels to scale up the quantity of electrical energy supplied. Tymen deJong commented on First Photo voltaic’s use of thin-film: 15 Nasdaq, First Photo voltaic Inc. IPO priced November 17, 2006. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 eight Many of the early work in photovoltaic technology was completed on crystalline silicon, in order that’s the place the R&D investments went. Whereas there was an consciousness of thin-film and cadmium telluride, there merely was not that a lot cash being invested in it. There are vital technical challenges in making use of cadmium telluride. We figured it out early and, to this present day, we've an amazing quantity of IP round how to do this. The limitations to entry to determine this all out are years of R&D and a whole bunch of hundreds of thousands of in capital expenditures. And, to be truthful, the entire early effectivity data have been based mostly on c-Si…it appeared like a greater expertise to new entrants. However, if you wish to have a look at thin-film, you must do all that work your self. Our firm leaders had this imaginative and prescient round CdTe and what we may do. Traditionally, First Photo voltaic produced all of its modules at its manufacturing plant in Perrysburg, Ohio, which later advanced to additionally turn out to be the corporate’s main analysis and growth (R&D) middle. In April of 2007, First Photo voltaic expanded manufacturing internationally and commenced to provide modules at its Frankfurt/Oder Germany plant. As of 2011, First Photo voltaic operated 36 manufacturing traces in Perrysburg, Ohio; Frankfurt, Germany; and, Kulim, Malaysia. Of those, the Malaysian vegetation had the bottom manufacturing prices, however the different vegetation had benefits when it comes to R&D or serving explicit markets. The corporate’s latest plant was constructed in Frankfurt, Germany in November of 2011. This was First Photo voltaic’s second plant in Frankfurt, including a capability of 250 megawatts per 12 months to the area. The plant had taken First Photo voltaic one 12 months to assemble and value roughly 170 million euros (US $230 million).16 First Photo voltaic additionally had two vegetation below development in Mesa, Arizona and Ho Chi Minh Metropolis, Vietnam.17 Historically, First Photo voltaic had operated its vegetation very near 100% capability with a view to maximize use of the costly fastened capital required to provide PV panels. By 2011, nonetheless, the rising market share of Chinese language opponents led to First Photo voltaic producing just one.7 gigawatts of panels (roughly 21 million photo voltaic modules) regardless of having the capability to provide 2.5 gigawatts. The manufacturing price per watt for First Photo voltaic and its opponents is proven in Exhibit 7. Buyer and Market Technique Nearly all of First Photo voltaic’s early prospects have been system integrators, builders, and operators, primarily situated in subsidy-rich Europe. In 2008, roughly 74% of the corporate’s web gross sales resulted from Germany alone. 18 So as to diversify, First Photo voltaic expanded into direct gross sales in highsunshine, non-subsidy reliant markets, primarily promoting methods to utilities in Africa, the Center East, and the Americas. 16 Jonathan Gifford, “First Photo voltaic Inaugurates Second German Plant,” PV Journal, November Three, 2011. 17 First Photo voltaic Inc., Kind 10-Okay, 2011. 18 First Photo voltaic Inc., Kind 10-Okay, 2010. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 9 The corporate first ventured into the methods enterprise in late 2007 with a $34.four million acquisition of system integrator, Turner Renewable Power. Additional acquisitions of Mission Edison’s venture pipeline, OptiSolar (an influence plant contractor), NextLight Renewable Energy (a photo voltaic panel developer), and Ray Tracker (a part elements agency), expanded First Photo voltaic’s presence within the methods market.19 Whereas First Photo voltaic grew to become nearer to the client, these acquisitions additionally introduced with them larger SG&A bills. From 2009 to 2011, First Photo voltaic grew its utility-scale methods enterprise from 5% to 25% of general gross sales, narrowing the hole between itself and methods chief, SunPower, which derived 53% of its enterprise from methods in 2010 and 46% in 2011. Chinese language producers have been largely absent from the methods enterprise. Exhibit eight offers further particulars. Monetary Technique First Photo voltaic pursued a conservative monetary technique, borrowing lower than its opponents. From 2007– 2011, First Photo voltaic had a median annual debt of $276 million, whereas SunPower had $687 million, Suntech had $1.7 billion, and Yingli Photo voltaic had $1.1 billion. First Photo voltaic additionally persistently stored more money available than opponents, to be used in financing promising photo voltaic tasks. Capability expansions have been sometimes funded with 50% money and 50% fairness. Bruce Sohn, former President and Board member (2003–2011), commented on First Photo voltaic’s monetary method: The explanation we pursued a low leverage technique was as a result of we needed a powerful stability sheet. This served to each decrease borrowing prices [for First Solar customers] and supply confidence to patrons that we'd have the ability to maintain our enterprise for the long-term. We did it by design for these causes. In distinction, our opponents throughout this time have been levering up and borrowing to increase, and thus had weak stability sheets. Folks didn’t belief these corporations. First Photo voltaic took the other method. Exhibit 9 reveals each the revenue statements and stability sheets for First Photo voltaic and its fundamental opponents. Vertical Integration All PV producers produced photo voltaic modules, with a number of outsourcing varied points of semiconductor manufacturing. Few forward-integrated into methods, so First Photo voltaic was uncommon on this respect. The corporate divided its enterprise into two interrelated segments: elements and methods. The elements enterprise manufactured cadmium telluride photo voltaic cells and modules, whereas the methods enterprise developed these elements into full photo voltaic methods. The elements section had traditionally achieved larger profitability and generated more money than methods, however the methods enterprise had much less margin variability as a result of the supply of ongoing upkeep, engineering, and development was much less depending on supplies costs. 19 First Photo voltaic Inc., Kind 10 Okay, 2007. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 10 Sohn commented on the vertical integration: We realized that we may scale our manufacturing quicker than our prospects [the systems integrators] have been capable of scale their enterprise. Our prospects have been the constraint and we decided that if we may vertically combine, particularly in locations the place our prospects didn't function, then we may develop considerably quicker. This successfully doubled our cargo price and enabled steep quantity progress even throughout a interval of heightened competitors. Having our personal utility scale photo voltaic enterprise additionally supplied us with the chance to optimize general system design…For a number of years, First Photo voltaic was capable of ship methods that yielded as much as 5% higher efficiency than opponents due to our intimate data concerning the [First Solar] panels. Competitors United States Though U.S. prospects have been initially slower to undertake PV solar energy than their European and Asian counterparts, by 2011 U.S. photo voltaic installations had grown enormously, doubling from 2009 to 2011. In 2011, the U.S. market share of whole international PV installations elevated from 5% to 7%. U.S. market share was anticipated to outpace the expansion of different nations over the following 5 years. Reported put in photo voltaic capability from 2010–2011 in america was a complete of 1,855 megawatts, comprised of 16% residential, 43% industrial, and 41% utility. The utility market had solely lately grown in measurement, whereas the industrial market had lengthy accounted for over 50% of photo voltaic vitality progress.20 As in the remainder of the world, nearly all of modules produced in america used crystalline silicon expertise. In 2011, First Photo voltaic managed roughly 41% of the U.S. market. SunPower was the second largest PV producer, controlling 38.5%, whereas the remaining 20.5% of the market went to smaller gamers together with Solyndra, SunEdison, SunRun, Evergreen Photo voltaic, and Spectrawatt, Inc.21 SunPower manufactured extremely environment friendly (18.1%–20.1%) and costlier, photo voltaic panels and modules. In 2011, SunPower was struggling an identical destiny to First Photo voltaic, additionally recording its first year-end web working loss since 2007. SunPower’s gross margin over the previous 5 years had decreased from 19% in 2007 to 10% at EOY 2011. In April 2011, SunPower bought a 60% controlling curiosity to the oil firm Complete for $1.38 billion. Complete supplied SunPower as much as $1 billion of credit score over the following 5 years.22 Solyndra, a California-based photo voltaic panel producer, additionally competed within the thin-film market, utilizing a copper indium gallium (di)selenide (CIGS) expertise to design and manufacture panels, primarily for 20 “U.S. Photo voltaic Market Perception Report 2011 12 months-In-Evaluate,” Photo voltaic Power Industries Affiliation, 2011. 21 First Photo voltaic, Inc., Kind 10Okay, 2011; SunPower Company, Kind 10Okay, 2011. 22 “Complete to Start Pleasant Tender for As much as 60% of SunPower Shares,” Bloomberg, March 28, 2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 11 industrial prospects. Though Solyndra had elevated manufacturing from 30 MW in 2009 to 67 MW in 2010,23 the corporate was finally compelled to declare chapter in September of 2011. Analysts speculated the chapter was as a result of an over-leveraged stability sheet and tightening credit score circumstances. China In 2009, the Chinese language authorities declared management in PV photo voltaic manufacturing a nationwide precedence, ratifying a mess of photo voltaic subsidy applications that remodeled China into the world’s largest producer of photo voltaic panels in just some brief years. Crystalline silicon producers from China started producing shortly, cheaply, and in mass portions, exporting over 90% of their panels overseas.24 Chinese language producers additionally had a lot decrease R&D expenditures, sometimes a 3rd to a half as a lot as First Photo voltaic. Main gamers within the Chinese language market included Suntech, Yingli, and Trina Photo voltaic. The Chinese language authorities backed each the demand and provide of PV photo voltaic panels. Domestically, the authorities backed demand via a collection of initiatives. In March of 2009, China launched its first nationwide photo voltaic subsidy initiative referred to as “building-integrated photovoltaics,” a authorities subsidy offering as much as 20 RMB (US$Three) per watt for such methods and 15 RMB per watt for rooftop methods.25 By July, this system had supplied $1.2 billion in subsidies. That very same 12 months, China launched its second nationwide photo voltaic subsidy program: Golden Solar. This program sought to speed up the event of utility-scale photo voltaic tasks, providing a 50% subsidy for constructing, transmission, and distribution prices. The subsidy elevated to 70% for PV tasks in distant areas missing connection to the grid. The authorities’s said intent was to put in over 500 megawatts of solar energy in two to 3 years.26 A number of related subsidies have been carried out within the following years. Collectively, the yearly set up of PV panels in China grew greater than 1000% from 2009 to 2011.27 Chinese language subsidization of suppliers is tougher to quantify. One 2011 U.S. Division of Power and Stanford College examine tried to quantify the dimensions of some great benefits of producing in China, together with subsidies, low-cost tools, cheaper labor, and regional provide chain benefits (Exhibit 10). This examine discovered that the Chinese language price benefit as a result of subsidies for PV producers was roughly 18-20% of prices, when put next with a 60 MW crystalline silicon U.S. plant. In 2011, the World Commerce Group (WTO) started an investigation of Chinese language subsidies, finally concluding that of the 18-20% price benefit, 1/5 was as a result of subsidies, most of which manifested in the type of decrease depreciation. In different phrases, the Chinese language authorities was primarily subsidizing the constructing of recent vegetation reasonably than ongoing operations.28 23 “2010 Photo voltaic Applied sciences Market Report,” U.S. Division of Power, November 2011. 24 “Why Tens of millions of Chinese language-Made Photo voltaic Panels Sat Unused in Southern California Warehouses for Years,” Pacific Customary, June 30, 2015. 25 You will need to observe that this quantity applies to all the photo voltaic system, not simply the panel, and due to this fact will not be similar to values in Exhibit 2. 26 Lin Jones, “China’s Nationwide Photo voltaic Subsidy Packages,” China Coverage in Focus, 2012. 27 Greentech Media Analysis, PV Pulse, 2008-2011. 28 Mark Clayton, “China Sponsored Photo voltaic Panels, U.S. Finds…” Csmonitor.com, March 2012. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 12 Chinese language producers produced so many panels over this era that they needed to retailer hundreds of thousands of panels in warehouses in California. Many of those panels sat unused till they grew to become out of date for the U.S. market.29 In October 2011, Solarworld, together with six nameless PV producers, filed an antidumping30 lawsuit with the Division of Commerce and the Worldwide Commerce Fee, contending that crystalline-silicon Chinese language producers have been benefiting from unlawful subsidies and dumping their modules into the U.S. market. Trade consultants had given credence to this anti-dumping lawsuit by accusing Chinese language suppliers of promoting modules beneath their invoice of supplies and contending that the Chinese language authorities was giving free tools, presents of land, deferred taxes and different advantages to its home producers. The severity of this for First Photo voltaic was captured within the firm’s 2011 10-Okay Submitting: In 2011, business common module pricing declined considerably as opponents lowered costs to sell-through inventories in Europe and elsewhere. If opponents cut back module pricing to ranges close to or beneath their manufacturing prices, or are capable of function at minimal or unfavourable working margins for sustained intervals of time, our outcomes of operations might be adversely affected. At December 31, 2011, the worldwide PV business consisted of greater than 150 producers of photo voltaic modules and cells. Within the combination, these (international PV) producers have put in manufacturing capability that considerably exceeded international demand in 2011. We imagine this structural imbalance between provide and demand (i.e., the place manufacturing capability considerably exceeds present international demand) will proceed for the foreseeable future, and we anticipate that it'll proceed to place strain on pricing, which may adversely have an effect on our outcomes of operations. Bankruptcies The mixture of the flood of cheap panels from China and the drop in subsidies in Europe drove down photo voltaic costs worldwide, forcing the closure of quite a few manufacturing vegetation, notably in america. On August 15, 2011, U.S producer Evergreen Photo voltaic, Inc. filed for chapter, closing at $zero.18 on the NASDAQ, a dramatic finish to a inventory that in 2007 had a value of $113.10 and a promising future. The value of photo voltaic wafers, Evergreen Photo voltaic’s fundamental product, had dropped 35% within the final 12 months. 31 Only one week later, SpectraWatt Inc., backed by Intel Corp. and Goldman Sachs Group, additionally filed for Chapter 11 chapter. 32 The U.S. photo voltaic business was struggling, and higher-cost producers have been being hit the toughest. 29 “Why Tens of millions of Chinese language-Made Photo voltaic Panels Sat Unused in Southern California Warehouses for Years,” Pacific Customary, June 30, 2015. 30 Dumping: when a international producer sells items or companies in home nation for a value decrease than manufacturing prices and/or the home producer’s promoting value. The value distinction is known as the dumping margin. 31 Nichola Groom, “Photo voltaic Firm Evergreen Information for Chapter,” Reuters, August 15, 2011. 32 Andrew Herndon and Michael Bathon, “Intel-Backed Photo voltaic Firm Information for Chapter as Costs Slide,” Bloomberg, August 24, 2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 13 In September of 2011, U.S. CIGS33 producer Solyndra filed for chapter after simply six years of operation, ensuing within the lack of 1000's of jobs. Solyndra’s insolvency was additionally politically charged as a result of simply two years earlier the corporate had obtained a $535 million mortgage assure from the U.S. Division of Power, the first-ever mortgage recipient below the 2009 American Restoration and Reinvestment Act. On the time, U.S. President Barack Obama had publicly praised Solyndra for setting a optimistic instance for the “future” of American vitality companies.34 Solyndra had additionally obtained over $700 million in enterprise capital funding throughout its time of operation.35 Though Solyndra was not thought of a serious participant within the international photo voltaic market, its default on a federal mortgage assure carried larger implications than different bankruptcies: Solyndra grew to become a proof of idea for these looking for to diminish loan-guarantees and different incentives for clear vitality. First Photo voltaic’s Response Protagonist Prepares for Upcoming Assembly DeJong was involved. The quarterly Board assembly was simply across the nook and he knew that the firm’s latest monetary underperformance meant he must subject intense questions from staff and buyers. The $413 million loss in 4Q 2011 amounted to a per-share lack of $four.78. Simply one 12 months in the past, throughout 4Q 2010, First Photo voltaic had earned a $155.9 million ($1.80 per share) quarterly revenue. May First Photo voltaic nonetheless be worthwhile if silicon costs continued to fall? Was the methods enterprise a aggressive benefit or a distraction? What adjustments did First Photo voltaic have to make to counter the menace of Chinese language entrants? If First Photo voltaic was compelled to retrench, which market ought to the corporate deal with, and would it not have the ability to prevail in that market? May the corporate preserve its aggressive benefit or would it not comply with different American photo voltaic producers into chapter 11 within the face of those tough challenges? 33 CIGS: brief for Copper-Indium-Gallium-Selenide, a expertise used to fabricate thin-film photo voltaic cells and modules. 34 Joe Stephens and Carol D. Leonnig, “Solyndra Photo voltaic Firm Fails after Getting Federal Mortgage Ensures,” Washington Put up, August 31, 2011. 35 Tom Hals, “U.S. Photo voltaic Frm Solyndra Information for Chapter,” Reuters, September 6, 2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 14 Exhibit 1 Skinny-Movie and Crystalline Silicon Photo voltaic Cells Skinny movie Crystalline Silicon Supply: First Photo voltaic. Exhibit 2 Uncooked Supplies Costs36 Sources: U.S. Geological Survey, Mineral Commodity Summaries, January 2012; PV Insights. 36 Cadmium telluride costs calculated based mostly on the price of the 2 enter supplies: cadmium and telluride. 2006 2007 2008 2009 2010 2011 Silicon Costs $100 $280 $475 $140 $60 $65 Cadmium Telluride Costs $49 $47 $115 $81 $118 $192 $zero $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $/kg Uncooked Supplies Costs FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 15 Exhibit Three Module Measurement and Wattage37 Firm Space of Photo voltaic Module Watts per Module First Photo voltaic eight ft2 80 SunPower 23.Three ft2 435 Suntech 13.eight ft2 190 Yingli 10.76 ft2 130 Supply: Firm SEC Kind 10-Ks and Annual Experiences. Exhibit four Studying Charges38 Supply: Trancik, Jessika E., Patrick R. Brown, et al. “Know-how Enchancment and Emissions Reductions as Mutually Reinforcing Efforts: Observations from the World Growth of Photo voltaic and Wind Power.” Cambridge, MA: Institute for Knowledge, Programs and Society, Massachusetts Institute of Know-how, November 13, 2015. URL: http://hdl.deal with.web/1721.1/102237. 37 “Yingli-Panel Specs”, First Photo voltaic 10Okay, “SunPower_PanelSpecs”, “Suntech_Panel Specs” 38 Studying price: share lower in prices, given a doubling of manufacturing. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 16 Exhibit 5 New World PV Installations Supply: Greentech Media Analysis, PV Pulse, 2008-2011. Exhibit 6 Module Manufacturing by Area Supply: Greentech Media Analysis, PV Pulse, 2008-2011. Europe U.S. China RoW zero 5,000 10,000 15,000 20,000 25,000 30,000 2008 2009 2010 2011 New World PV Installations (MW) China Europe U.S. RoW zero 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2008 2009 2010 2011 Module (MW) Module Manufacturing by Area FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 17 Exhibit 7 Manufacturing Price per Watt FIRST SOLAR 2011 2010 2009 2008 2007 Watts (1000's)39 1,700,581 1,400,696 1,zero66,711 525,841 205,344 Manufacturing Price Per Watt $zero.75 $zero.77 $zero.87 $1.08 $1.23 SUNPOWER 2011 2010 2009 2008 2007 Watts (1000's) 1,408,304 999,612 649,509 563,717 234,846 Manufacturing Price Per Watt $1.48 $1.71 $1.91 $1.93 $2.67 SUNTECH 2011 2010 2009 2008 2007 Watts (1000's) 2,zero83,841 1,594,451 705,542 677,289 440,621 Manufacturing Price Per Watt $1.26 $1.41 $1.78 $2.14 $2.40 YINGLI 2011 2010 2009 2008 2007 Watts (1000's) 1,630,835 1,zero82,250 531,422 285,328 144,167 Manufacturing Price Per Watt $1.16 $1.14 $1.50 $Three.01 $2.91 Supply: Firm SEC Kind 10-Ks and Annual Experiences. 39 Complete Capability Watts FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 18 Exhibit eight Share of Gross sales in Parts and Programs (US$) Supply: Firm SEC Kind 10-Ks and Annual Experiences. First Photo voltaic 2011 2010 2009 2008 2007 Parts Programs Parts Programs Parts Programs Parts Programs Parts Programs 74.eight% 25.2% 85.2% 14.eight% 95.1% four.9% 95.9% four.1% 99.Three% zero.7% SunPower 2011 2010 2009 2008 2007 Parts Programs Parts Programs Parts Programs Parts Programs Parts Programs 54.zero% 46.zero% 46.6% 53.four% 57.1% 42.9% 42.7% 57.Three% 40.1% 59.9% SunTech 2011 2010 2009 2008 2007 Parts Programs Parts Programs Parts Programs Parts Programs Parts Programs 95.eight% four.2% 95.Three% four.7% 94.9% 5.1% 92.eight% 7.2% 98.eight% 1.2% Yingli 2011 2010 2009 2008 2007 Parts Programs Parts Programs Parts Programs Parts Programs Parts Programs 99.6% zero.four% 99.5% zero.5% 99.Three% zero.7% 99.6% zero.four% 99.9% zero.1% FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 19 Exhibit 9 Consolidated Monetary Statements for First Photo voltaic, SunPower, Suntech, and Yingli Inexperienced Power FIRST SOLAR: INCOME STATEMENT (‘000s of USD) 31-Dec-11 31-Dec-10 26-Dec-09 27-Dec-08 29-Dec-07 Web Gross sales 2,766,207 2,563,515 2,zero66,200 1,246,301 503,976 Price of Gross sales 1,794,456 1,378,669 1,zero21,618 567,908 252,573 Gross Revenue 971,751 1,184,846 1,zero44,582 678,393 251,403 Working bills Analysis and Growth 140,523 94,797 78,161 33,517 15,107 Promoting, basic, and administrative 412,541 321,704 272,898 174,zero39 82,248 Manufacturing start-up 33,620 19,442 13,908 32,498 16,867 Goodwill impairment40 393,365 - - - - Restructuring 60,366 - - - - Complete Working Bills 1,040,415 435,943 364,967 240,zero54 114,222 Working (loss) Revenue (68,664) 748,903 679,615 438,339 137,181 EBIT Margin (%) -2.48% 29.21% 32.89% 35.17% 27.22% International foreign money acquire (loss) 995 (Three,468) 5,207 5,722 1,881 Curiosity revenue 13,391 14,375 9,735 21,158 20,413 Curiosity expense, web (100) (6) (5,258) (509) (2,294) Different revenue (expense), web 665 2,273 (2,985) (934) (1,219) Revenue (loss) earlier than revenue taxes (53,713) 762,zero77 686,314 463,776 155,962 Revenue tax (profit) expense (14,220) 97,876 46,176 115,446 (2,392) NET INCOME (LOSS) ($39,493) $664,201 $640,138 $348,330 $158,354 Web Margin (%) -1.43% 25.91% 30.98% 27.95% 31.42% Supply: First Photo voltaic Inc., SEC Kind 10Okay, 2007-2011. 40 As said on First Photo voltaic’s 2011 10Okay, Goodwill represents the surplus of the acquisition value of acquired enterprise over the estimated truthful worth assigned to the particular person belongings acquired and liabilities assumed. First Photo voltaic doesn't amortize goodwill, reasonably checks for impairment not less than yearly. First Photo voltaic recorded a goodwill impairment of $393.four million throughout the 4th quarter of 2011 associated to its elements reporting unit, particularly associated to the goodwill that had been allotted to the corporate’s acquisitions of OptiSolar in 2009 and NextLight in 2010. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 20 Supply: SunPower SEC Kind 10Okay Submitting, 2007-2011. SUNPOWER CORPORATION: INCOME STATEMENT (‘000s of USD) 1-Jan-12 2-Jan-11 Three-Jan-10 28-Dec-08 30-Dec-07 Income Utility and energy vegetation 1,064,144 1,186,zero54 653,531 823,307 464,178 Residential and industrial 1,248,350 1,033,176 870,752 614,287 310,612 Complete Income 2,312,494 2,219,230 1,524,283 1,437,594 774,790 Price of Income Utility and energy vegetation 967,zero76 908,326 526,850 659,752 386,532 Residential and industrial 1,117,214 801,011 713,713 428,221 240,507 Complete Price of Income 2,zero84,290 1,709,337 1,240,563 1,087,973 627,zero39 Gross Margin 228,204 509,893 283,720 349,621 147,751 Working bills Analysis and growth 57,775 49,090 31,642 21,474 23,138 Gross sales, basic, and administrative 319,719 321,936 190,244 173,740 108,256 Goodwill impairment 309,457 - - - - Different intangible asset impairment 40,301 - - - 14,zero68 Restructuring fees 21,403 - - - - Complete working bills 748,655 371,zero26 221,886 195,214 145,462 Working Revenue (loss) (520,451) 138,867 61,834 154,407 2,289 EBIT Margin (%) -22.51% 6.26% four.06% 10.74% zero.30% Different revenue (expense) web Curiosity Revenue 2,zero54 1,541 2,109 10,789 13,882 Curiosity expense (67,zero22) (55,276) (36,287) (22,814) (12,zero36) Different, web (2,344) 98,281 15,964 (26,313) 2,377 Different Revenue Expense, web (67,312) 44,546 (18,214) (38,338) four,223 Revenue (loss) earlier than revenue taxes and fairness in earnings of unconsolidated investees (587,763) 183,413 43,620 116,zero69 6,512 Provision for revenue taxes (22,zero99) (23,375) (21,zero28) (40,618) 22,zero84 Fairness in earnings of unconsolidated investees 6,003 6,845 9,929 14,zero77 (278) Revenue (loss) from persevering with operations (603,859) 166,883 32,521 89,528 28,318 Revenue from disctd. ops., web of tax - 11,841 - - - NET INCOME (LOSS) ($603,859) $178,724 $32,521 $89,528 $28,318 Web Margin (%) -26.11% eight.05% 2.13% 6.23% Three.65% FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 21 Supply: Suntech SEC Kind 10Okay Submitting, 2007-2011. SUNTECH POWER HOLDINGS CO, LTD: INCOME STATEMENT (‘000s of USD) 31-Dec-11 31-Dec-10 26-Dec-09 27-Dec-08 29-Dec-07 Web Revenues PV modules Three,zero14,000 2,766,300 1,606,300 1,785,800 1,331,700 Others 132,600 135,600 87,000 137,700 16,600 Complete Web Revenues Three,146,600 2,901,900 1,693,300 1,923,500 1,348,300 Price of Revenues PV modules 2,626,200 2,211,900 1,235,600 1,448,200 1,057,600 Others 133,800 146,900 95,700 132,400 16,600 Complete Price of Revenues 2,760,000 2,358,800 1,331,300 1,580,600 1,074,200 Gross Revenue 386,600 543,100 362,000 342,900 274,100 Promoting bills 162,600 118,000 82,100 59,300 30,600 Common & Administrative bills 248,800 125,100 76,900 85,800 44,500 Analysis & Growth bills 38,600 40,200 29,000 15,300 15,000 Provision for prepayment to associates 120,000 eight,000 - - - Impairment of goodwill 281,500 - - - - Impairment of long-lived belongings 180,300 54,600 - - - Complete working bills 1,zero31,800 345,900 188,000 160,400 90,100 Revenue from operations (645,200) 197,200 174,000 182,500 184,000 EBIT Margin (%) -20.50% 6.80% 10.28% 9.49% 13.65% Curiosity expense (143,300) (99,500) (103,300) (106,100) (49,400) Curiosity revenue 7,400 7,600 9,600 32,600 31,200 Different (expense) revenue, web (171,300) (94,400) 11,200 (76,700) (eight,700) Earnings earlier than revenue taxes, non-controlling curiosity and fairness in web earnings (loss) of associates (952,400) 10,900 91,500 32,300 157,100 Fairness in web earnings (loss) of associates (98,700) 250,800 (Three,300) 300 (700) Revenue (loss) from persevering with operations earlier than tax (1,051,100) 261,700 88,200 32,600 156,400 Tax expense (profit) 47,200 (23,800) (2,500) (1,600) (13,200) Revenue (loss) from persevering with operations earlier than tax (1,003,900) 237,900 85,700 31,000 143,200 Loss from disctd ops., web of tax (14,100) - - - - NET INCOME (LOSS) ($1,zero18,000) $237,900 $85,700 $31,000 $143,200 Web Margin (%) -32.35% eight.20% 5.06% 1.61% 10.62% FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 22 Supply: Yingli SEC Kind 10Okay Submitting, 2007-2011. YINGLI GREEN ENERGY HOLDING CO, LTD: INCOME STATEMENT (‘000s of USD) 31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07 Web revenues Gross sales of PV modules 2,287,467 1,860,129 1,zero48,717 1,zero91,358 550,515 Gross sales of PV methods eight,537 eight,585 7,354 four,zero43 268 Different revenues 36,090 25,223 6,773 11,673 5,700 Complete web revenues 2,332,094 1,893,937 1,zero62,844 1,107,074 556,483 Price of PV modules gross sales 1,891,594 1,232,002 799,643 857,634 418,868 Price of PV methods gross sales 6,876 7,453 5,838 2,820 205 Price of different revenues 44,409 25,272 6,206 7,762 6,240 Complete price of revenues 1,942,879 1,264,727 811,687 868,216 425,312 Gross Revenue 389,215 629,210 251,157 238,858 131,171 Promoting bills 129,971 118,219 50,916 23,zero54 15,071 Common & administrative bills 95,763 70,836 60,zero80 38,369 20,538 R&D bills 45,267 20,837 27,zero05 eight,391 2,405 Provision for (restoration of) uncertain accounts receivable 6,195 (1,985) 47,271 - - Impairment of intangible asset 361,465 - 19,217 - - Impairment of goodwill 43,436 - - - - Provision for stock commitments 135,321 - - - - Complete working bills 817,418 207,907 204,489 69,814 38,zero14 Revenue from operations (428,203) 421,303 46,668 169,zero44 93,157 EBIT Margin -18.36% 22.24% four.39% 15.27% 16.74% Different revenue (expense) Fairness in lack of associates, web (1,518) (95) (406) (319) (152) Curiosity expense (99,578) (66,365) (55,133) (21,868) (eight,888) Curiosity revenue four,584 2,423 926 1,867 1,867 International foreign money positive factors (losses) (30,264) (51,245) 5,624 (9,716) (four,478) Loss on debt extinguishment - - (35,855) - - Loss from revaluation of spinoff - - (33,892) - - Different revenue 14,902 1,782 1,zero79 893 - Earnings (loss) earlier than revenue taxes (540,zero77) 307,803 (70,989) 139,901 81,507 Revenue tax profit (expense) 21,197 (50,524) four,663 819 (1,772) NET INCOME (LOSS) ($518,880) $257,279 ($66,326) $140,720 $79,735 Web Margin -22.25% 13.58% -6.24% 12.71% 14.33% FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 23 FIRST SOLAR: BALANCE SHEET (‘000s of USD) 31-Dec-11 31-Dec-10 26-Dec-09 27-Dec-08 29-Dec-07 Money and Money Equivalents 605,619 765,689 664,499 716,218 404,264 Marketable Securities 66,146 167,889 120,236 76,042 232,686 Accounts Receivable, web 310,568 305,537 226,826 61,703 18,165 Inventories 475,867 195,863 152,821 121,554 40,204 Deferred tax belongings, web 41,144 388 21,679 9,922 Three,890 Pay as you go bills and different present belongings 1,113,917 149,094 165,210 91,962 103,300 TOTAL CURRENT ASSETS 2,613,261 1,584,460 1,351,271 1,zero77,401 802,509 Property, plant, and tools, web 1,815,958 1,430,789 988,782 842,622 430,104 Non-current venture belongings 374,881 320,140 131,415 - - Deferred tax asset, web 340,274 259,236 130,515 61,325 51,811 Marketable securities 116,192 180,271 329,608 29,559 32,713 Restricted money and investments 200,550 86,003 36,494 30,zero59 14,695 Funding in associated get together - - 25,000 25,000 - Goodwill 65,444 433,288 286,515 33,829 33,449 Inventories 60,751 42,728 21,695 - - Different belongings 190,303 43,488 48,217 14,707 6,zero31 TOTAL ASSETS $5,777,614 $four,380,403 $Three,349,512 $2,114,502 $1,371,312 Present Liabilities: Accounts Payable 176,448 82,312 75,744 46,251 26,441 Revenue taxes payable 9,541 16,831 eight,740 99,938 24,487 Accrued bills 406,659 244,271 186,682 140,899 76,256 Present portion of long-term debt 44,505 26,587 28,559 34,951 39,309 Different present liabilities 336,571 99,676 95,202 59,738 14,803 TOTAL CURRENT LIABILITIES 973,724 469,677 394,927 381,777 181,296 FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 24 Accrued photo voltaic module assortment and recycling legal responsibility 167,378 132,951 92,799 35,238 13,zero79 Lengthy-term debt 619,143 210,804 146,399 163,519 68,856 Different liabilities 373,506 112,zero26 62,600 20,926 10,814 TOTAL LIABILITIES $2,133,751 $925,458 $696,725 $601,460 $274,zero45 Stockholders' Fairness Widespread inventory 86 86 85 82 79 Further paid-in capital 2,zero22,743 1,815,420 1,658,zero91 1,176,156 1,zero79,775 Contingent consideration - 1,118 2,844 - - Collected earnings 1,626,071 1,665,564 1,zero01,363 361,225 12,895 Collected different complete loss (5,037) (27,243) (9,596) (24,421) four,518 TOTAL STOCKHOLDERS' EQUITY $Three,643,863 $Three,454,945 $2,652,787 $1,513,042 $1,097,267 Complete Liabilities & Stockholders’ Fairness $5,777,614 $four,380,403 $Three,349,512 $2,114,502 $1,371,312 Supply: First Photo voltaic SEC Kind 10Okay Submitting, 2007-2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 25 SUNPOWER CORPORATION: BALANCE SHEET (‘000s of USD) 1-Jan-12 2-Jan-11 Three-Jan-10 28-Dec-08 30-Dec-07 Money and money equivalents 657,934 605,420 615,879 202,331 285,214 Restricted money & equivalents, present 52,279 117,462 61,868 13,240 - Quick-term investments - 38,720 172 17,179 105,453 Accounts receivable, web 390,262 381,200 248,833 194,222 138,250 Estimated earnings in extra of billings 54,854 89,190 26,zero62 29,750 39,136 Inventories 397,262 313,398 202,301 248,255 148,820 Advances to suppliers, present portion 43,143 31,657 22,785 43,190 52,277 Mission belongings - vegetation & land, present 24,243 23,868 - - - Pay as you go bills & different present belongings 482,691 192,934 104,442 101,735 33,110 TOTAL CURRENT ASSETS 2,102,668 1,793,849 1,282,342 849,902 802,260 Restricted money/ equivalents, noncurrent 27,276 138,837 248,790 162,037 67,887 Property, plant, and tools, web 607,456 578,620 682,344 622,484 377,994 Mission belongings - plant & land, noncurrent 34,614 22,238 - - - Goodwill 35,990 345,270 198,163 196,720 184,684 Different intangible belongings, web four,848 66,788 24,974 39,490 50,946 Advances to suppliers, web of present 278,996 255,435 167,843 119,420 108,943 Different long-term belongings 183,349 178,294 91,580 92,693 61,zero24 TOTAL ASSETS $Three,275,197 $Three,379,331 $2,696,zero36 $2,zero82,746 $1,653,738 Accounts payable 416,615 382,884 234,692 259,429 124,723 Accrued liabilities 234,688 137,704 114,zero08 136,116 79,434 Billings in extra of estimated earnings 170,828 48,715 17,346 15,634 69,900 Quick-term debt - 198,zero10 11,250 - - Convertible debt, present portion 196,710 - 137,968 - 425,000 Buyer advances, present portion 46,139 21,zero44 19,832 19,zero35 9,250 TOTAL CURRENT LIABILITIES 1,064,980 788,357 535,096 430,214 708,307 FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 26 Lengthy-term debt 355,000 50,000 237,703 54,598 - Convertible debt, web of present portion 423,268 591,923 398,606 357,173 - Buyer advances, web of present 181,947 160,485 72,288 91,359 60,153 Different long-term liabilities 152,492 131,132 76,822 50,715 21,188 TOTAL LIABILITIES $2,177,687 $1,721,897 $1,320,515 $984,zero59 $789,648 Widespread inventory 100 98 97 86 85 Further paid-in capital 1,657,474 1,606,697 1,305,zero32 1,064,916 883,033 Retained earnings (collected deficit) (540,187) 63,672 100,733 67,953 (22,815) Collected Different Compr. Revenue eight,540 Three,640 (17,357) (25,611) 5,762 Treasury inventory (28,417) (16,673) (12,984) (eight,657) (1,975) TOTAL STOCKHOLDERS’ EQUITY $1,097,510 $1,657,434 $1,375,521 $1,zero98,687 $864,090 Complete Liabilities & Stockholders’ Fairness $Three,275,197 $Three,379,331 $2,696,zero36 $2,zero82,746 $1,653,738 Supply: Sunpower SEC Kind 10Okay Submitting, 2007-2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 27 SUNTECH POWER HOLDINGS CO, LTD: BALANCE SHEET (‘000s of USD) 31-Dec-11 31-Dec-10 26-Dec-09 27-Dec-08 29-Dec-07 Money and money equivalents 492,400 872,500 833,200 507,800 521,000 Restricted money 216,600 142,500 124,900 70,700 94,700 Inventories 516,500 558,200 280,100 231,900 176,200 Accounts receivable, web of ADA 466,600 515,900 384,400 213,100 237,600 Different receivables, web of ADA 14,300 19,000 39,300 46,800 30,700 Advances to suppliers 84,400 84,400 48,800 56,900 61,400 Deferred tax belongings, web 21,400 22,600 10,800 7,200 1,700 Quantities due from associated companions 67,700 55,100 185,500 101,000 - Different present belongings 206,100 142,200 249,00 86,500 134,200 TOTAL CURRENT ASSETS 2,zero86,000 2,412,400 2,156,000 1,321,900 1,257,500 Property plant and tools, web 1,569,200 1,236,200 777,600 684,500 293,000 Intangible belongings, web 23,000 156,000 140,800 176,700 86,000 Goodwill - 278,000 86,100 87,600 29,800 Investments in associates 454,200 545,900 251,400 221,100 1,000 Lengthy-term prepayments 185,100 213,800 188,100 248,800 161,700 Lengthy-term loans to provider - 53,000 54,700 84,000 103,300 Quantities due from associated events 67,600 94,100 193,600 278,000 - Different noncurrent belongings 152,200 137,700 135,400 121,200 24,700 TOTAL ASSETS $four,537,300 $5,127,100 $Three,983,700 $Three,223,800 $1,957,000 Quick-term borrowings 1,573,400 1,400,800 800,400 638,500 321,200 Accounts payable 555,300 457,000 264,200 117,500 58,900 Different payables 207,200 170,300 126,700 137,600 57,400 Revenue tax payable - 66,700 four,300 12,800 7,300 Different present liabilities 273,000 275,200 322,500 70,300 33,300 TOTAL CURRENT LIABILITIES 2,608,900 2,370,000 1,518,100 976,700 478,100 FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 28 Lengthy-term financial institution borrowings 133,300 163,300 138,000 5,900 20,700 Convertible notes 580,900 551,200 516,900 981,200 500,000 Accrued guarantee prices 94,100 81,000 55,200 41,400 22,500 Deferred tax liabilities - 15,600 33,100 38,800 22,100 Different long-term liabilities 167,300 155,800 109,600 96,900 7,700 TOTAL LIABILITIES $Three,584,500 $Three,336,900 $2,370,900 $2,140,900 $1,051,100 Bizarre shares 1,800 1,800 1,800 1,600 1,500 Further paid in capital 1,148,000 1,134,800 1,114,700 597,100 530,800 Retained earnings (365,000) 653,600 416,700 412,300 324,100 Collected different complete revenue 161,600 77,500 64,900 63,400 31,600 Suntech Energy Holdings Co. Ltd Fairness 946,400 1,867,700 1,598,100 1,074,400 888,000 Non-controlling curiosity 6,400 12,500 14,700 eight,500 17,900 TOTAL STOCKHOLDERS’ EQUITY $952,800 $1,880,200 $1,612,800 $1,zero82,900 $905,900 Complete Liabilities & Stockholders’ Fairness $four,537,300 $5,217,100 $Three,983,700 $Three,223,800 $1,957,000 TOTAL LIABILITIES $Three,584,500 $Three,336,900 $2,370,900 $2,140,900 $1,051,100 Bizarre shares 1,800 1,800 1,800 1,600 1,500 Further paid in capital 1,148,000 1,134,800 1,114,700 597,100 530,800 Retained earnings (365,000) 653,600 416,700 412,300 324,100 Collected different complete revenue 161,600 77,500 64,900 63,400 31,600 Suntech Energy Holdings Co. Ltd Fairness 946,400 1,867,700 1,598,100 1,074,400 888,000 Non-controlling curiosity 6,400 12,500 14,700 eight,500 17,900 TOTAL STOCKHOLDERS’ EQUITY $952,800 $1,880,200 $1,612,800 $1,zero82,900 $905,900 Complete Liabilities & Stockholders’ Fairness $four,537,300 $5,217,100 $Three,983,700 $Three,223,800 $1,957,000 Supply: Suntech SEC Kind 10Okay Submitting, 2007-2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 29 YINGLI GREEN ENERGY HOLDING CO, LTD: BALANCE SHEET (‘000s of USD) 31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 29-Dec-07 Money 664,300 887,293 475,847 162,538 131,752 Restricted Money 227,567 97,716 31,526 16,011 982 Accounts receivable, web 338,483 289,291 256,508 214,727 170,656 Inventories 424,366 382,569 243,927 299,118 172,896 Prepayments to suppliers 61,478 86,960 48,266 120,797 144,871 Worth-added tax recoverable 150,778 141,187 44,zero28 67,656 - Quantities due from & prepayments to associated events 88,268 44,176 44,496 595 51,836 Pay as you go bills & different present belongings 68,671 26,423 21,033 7,zero92 24,691 TOTAL CURRENT ASSETS 2,zero23,911 1,955,615 1,165,631 888,534 697,684 Restricted Money, non-current - - 24,579 - - Lengthy-term prepayments to suppliers 210,158 76,413 99,373 98,815 87,362 Property, plant, and tools, web 1,968,443 1,505,145 963,075 496,252 202,866 Land use rights 83,131 54,369 51,943 9,237 7,536 Intangible belongings, web 17,539 24,318 30,447 57,569 45,421 Goodwill - 41,464 40,zero92 40,112 Three,819 Different belongings 63,492 7,600 6,540 31,861 7,323 TOTAL ASSETS $four,366,674 $Three,664,924 $2,381,680 $1,622,380 $1,zero52,011 Present liabilities: Quick-term debt + present portion of Lengthy-term debt 1,306,833 887,557 512,903 299,626 172,905 Accounts payable 473,zero34 375,zero63 271,351 92,181 21,670 Advances from prospects 142,zero45 151,711 - 7,612 Three,zero36 Quantities as a result of associated events 38,541 12,800 four,562 1,299 836 Convertible senior notes 22,140 - 189,256 - - Different present liabilities 74,893 55,138 38,554 14,zero01 17,618 TOTAL CURRENT LIABILITIES 2,057,486 1,482,269 1,zero16,626 414,719 216,zero65 FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 30 Convertible senior notes - 13,838 14,670 182,zero31 173,105 Medium-term notes 382,337 151,686 - - - Lengthy-term debt, excluding present 548,451 378,255 110,287 97,172 - Different liabilities 257,686 82,266 40,861 27,606 10,766 TOTAL LIABILITIES $Three,245,960 $2,108,314 $1,182,444 $721,528 $399,936 Stockholders’ Fairness: Bizarre shares 1,908 1,800 1,665 1,454 1,355 Further paid-in capital 1,zero28,952 971,666 898,180 539,588 496,371 Treasury inventory (19,675) - - - - Collected OCI 22,zero85 eight,967 1,873 four,979 1,672 Retained earnings (213,238) 282,852 70,327 150,338 49,203 Complete fairness attributable to Yingli Power 820,zero32 1,265,285 972,zero45 696,359 548,601 Non-controlling pursuits 300,682 291,325 227,191 204,493 103,474 TOTAL SHAREHOLDERS’ EQUITY $1,120,714 $1,556,610 $1,199,236 $900,852 $652,075 Complete Liabilities & Stockholders’ Fairness $four,366,674 $Three,664,924 $2,381,680 $1,622,380 $1,zero52,011 Supply: Yingli SEC Kind 10Okay Submitting, 2007-2011. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 31 Exhibit 10 Core Manufacturing Prices 1 On stage taking part in subject, China benefit < four% 2 Authorities supported export business, scale is a big issue Three Trade scale has lowered regional provide chain advantages: buying energy, regional provide chain advantages Supply: “Photo voltaic PV Manufacturing Price Evaluation: U.S. Competitiveness in a World Trade,” Stanford College and Nationwide Renewable Laboratory, October 10, 2011. $zero.25 $zero.35 $zero.45 $zero.55 $zero.65 $zero.75 $zero.85 $zero.95 U.S. (60 MW plant) China (60 MW plant) 2,000 MW plant Low cost Gear Low cost Supplies 2011 $U.S. price per watt Plant Kind Wafer Primarily based Silicon Cell: Core Manufacturing Prices Wafer Metallization Different supplies Labor Power Depreciation Upkeep $zero.89 $zero.851 $zero.822 $zero.803 $zero.733 No Automation Absolutely Automated FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 32 Glossary Stability of Programs (BOS) prices: the extra part prices of a photo voltaic system past the modules, corresponding to the prices of set up labor, mounting hardware, wiring, and inverters, which typically comprised over half of the entire prices of a utility-scale system. Grid Parity: happens when the associated fee to generate energy via photo voltaic vitality or different different supply of vitality is lower than or equal to the price of buying electrical energy immediately from the electrical grid. Hydraulic fracking is an extraction method for oil and gasoline wells wherein pressurized liquid is injected into the cracks in rock formations. As soon as the hydraulic strain is faraway from the properly, the remnants of the fracking fluid allow ease of extracting oil and gasoline, rising the speed of extraction (supply: Investopedia). Levelized Price of Electrical energy (LCOE): the current worth of the per-kilowatt hour price (in actual ) of constructing and working a producing plant over an assumed monetary life and obligation cycle. LCOE takes into consideration capital prices, gasoline prices, fastened and variable operations and upkeep (O&M) prices, financing prices, and an assumed utilization price for every plant kind (supply: U.S. Power Data Administration). Manufacturing throughput: the period of time required for a product to move via a manufacturing course of, thereby being transformed from uncooked supplies into completed items. The idea additionally applies to the processing of uncooked supplies right into a part or sub-assembly. Web Debt: short-term debt plus long-term debt much less money and money equivalents. Web Metering: a system that credit residential and industrial house owners of photo voltaic methods for extra electrical energy fed again to the grid. For instance, a residential home-owner with a photo voltaic panel on his/her roof may generate extra vitality than required by his/her home. Any extra vitality equipped again to the energy grid is credited, normally within the type of a discount from the month-to-month electrical fee. Photovoltaic capability: the utmost energy output a photo voltaic module is able to producing. Photovoltaic impact: the phenomenon wherein the incidence of sunshine or different electromagnetic radiation upon the junction of two dissimilar supplies, as steel and a semiconductor, induces the technology of an electromotive pressure. Photovoltaic effectivity: the quantity of daylight that may be transformed into electrical energy; the conductivity of photo voltaic vitality. FIRST SOLAR Neil Thompson and Jennifer Ballen September 13, 2017 33 Bodily vapor deposition (PVD): describes a wide range of vacuum deposition strategies, which could be used to provide skinny movies. PVD makes use of bodily course of (corresponding to heating or sputtering) to provide a vapor of fabric, which is then deposited on the article, which requires coating. Energy Buy Settlement (PPA): a monetary contract between a purchaser and supplier of electrical energy that eliminates up-front set up prices. Developer installs photo voltaic system on buyer’s land free of charge and the client purchases electrical energy from the developer at a hard and fast price, sometimes beneath the speed supplied from the utility, at some point of the contract. PPE: Property, plant, and tools (PP&E) is an account on the stability sheet that represents the sum of an organization’s purchases of property, manufacturing vegetation, and tools to that cut-off date, much less any amortization. Pure Play: a publicly traded firm centered on just one business or product. SG&A: an acronym used to confer with Promoting, Common, and Administrative Bills, which is a serious non-production price introduced in an revenue assertion. Watt: a unit of energy outlined as 1 joule per second. -research paper writing service