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Executive SummaryBUSINESS OVERVIEW
Business Sector: Alternative Energy,(Manufacturing - SOLAR)Maturity of Company: DevelopmentStage (Commercially Producing Modules)Main Business: The Company intends tothe the first to manufacture large, roll-format, photo-voltaic (PV) modules incommercial quantities.Origin: Ascent Solar was formed inOctober 2005 from the spinout by ITNEnergy, Inc. (ITN) of its AdvancedPhotovoltaic Division and its division's key
personnel and core technologies.Location: Thornton, Colorado (USA)Number of employees: 87Management: Deep management teamwith decades of thin-film solar experience.CEO Dr. Farhad Moghadam(Intel, Applied Materials)Founder Dr. Mohan Misra(Lockheed Martin)
OPERATIONAL OVERVIEW
Capacity: New manufacturing facility is inthe final stages of completion for 30 MW
plant.Production expected Q3 2010 with anannual rated capacity of 15 MW30 MW of annual capacity by Q1 2011Backlog:Supply agreement with Goal Zero LLCto supply up to 30,700 units of its Premiermodule through 2010.Supply agreement with FTL Solar LLCwith a commitment of $6.5 million worth ofPV modules over 3 years.Supply agreement with TurtleEnergy LLC
to supply up to 67 MW of PV modules over5 years.
DCompany Snapshot
Business Model - Overview
R & D: Drives competitive advantage through patented technology (6 patents), experienced R & D team (13 yearstogether) and decades of R & D investments. Manufacturing: Flexible PV modules are fabricated in an integrated sequential operation that forms complete PV
modules, eliminating traditional, costly back-end assembly of inter-cell connections.
Sales and Distribution: Strategy is based on forming strategic relationships with key partners, including originalequipment manufacturers (OEMs) and distributors, who deal d irectly with installers and end-users in prime target markets.
OPERATING STRUCTURE
Products:Thin-film CIGS PV Modules on plastic substrate, which provide highest efficiency rates available,unprecedented flexibility and lightweight advantages.
Applications: Integrating solar power into various productsand applications, including building integrated products(BPIV), electronic integrated and electronic portableproducts (EIPV), defense, space, fabrics and non-flatsurfaces.
PRODUCTS
2
Commercial Builders & Architects: BIPV(Roof Tiles, Building Facades)
Consumer Electronics Manufacturers: EIPVfor Consumer Electronics such as mobile phones,iPods, GPS, etc.
Government Military and DefenseCompanies: Portable Power Packs
CUSTOMERS
CUSTOMER VALUE PROPOSTION
For commercial customers: PV modules can bemore readily integrated into building materials,electronic products, military, and space applications,compared to competing technology.
For military customers: By displacingconventional fuels, the military can become morecost effective by utilizing CIGS PV modules wherethere is no reliably operating electric grid.
For end users: There is a reduction in the overallsystem cost, installation cost and logistical cost-per-watt for solar applications.
UNIQUE SELLING POINT
High efficiencycombined with athin, lightweight,flexible product thatis both low cost andmonolithic
Strategic relationship with Norsk Hydroprovides directaccess to apotentially largecustomer base in the
global BIPV market.
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TRANSACTION
Series A Convertible
Participating [Redeemable]
Preferred Shares
Executive SummaryD
Market Overview
Investment Overview
On average, U.S.solar companies areprojecting 30-40
percent annualgrowth in the next
decade.
Center of Excellenceand BW ResearchPartnership
Steep dive in prices of
solar componentsrepresents a permanent
ratcheting down of pricestructures that will
transform the industry
into a more competitivemarketplace.
Henning Wicht, seniordirector PV systems
iSuppli Corp.
Worldwide PV Installation Forecast in Megawatts Solar photovoltaics(including modules, systemcomponents, andinstallation) will grow from a$30.7 billion industry in 2009to $898.9 billion by 2019.
Global installed watts for PVsystems will grow by 64% in2010, reaching 8.3 Gigawatts(GW). As a result of solarpowers benefits andgovernment support, thesolar power market has seensustained and rapid growth. /
Photovoltaic Market Size and Growth Fragmented, intense competition
from C-Si PV manufacturers, otherthin-film PV manufacturers andcompanies developing other solarsolutions, such as solar thermal andconcentrated PV technologies.
The thin-film component of theindustry is largely made up of abroad mix of technology platformsat various stages of development,and consists of a large and growingnumber of medium- and small-sized companies.
Competitive Environment
LOW COST PRODUCER NEW MARKETSSTRATEGIC PARTNERSDIFFERENTIATION
Eliminate the need for costlyback-end assembly of inter-cell connections to compete
as a low cost producer PV modules require less than
1% of the semiconductor
material to achieve samepower. Thus do not face the
supply constraints and rawmaterial costs that may affect
silicon-based manufacturers.
Differentiated, lightweight,flexible product targeted atpremium market segments
Customizable and adaptablemanufacturing process
Strategic partnership businessmodel to control costs, lowerSG&A and drive channel
development. Announced Partnerships: Norsk Hydro (BIPV) Provo Craft (EIPV) FTL Solar (BIPV) TurtleEnergy (BIPV) Energy Technologies (Defense)
In the space satellite andnear space market, PVmodules are uniquely
suited for applicationsrequiring mobility,
durability and lightweight.
Strategy
3
Investment: Investors will acquire a 30%interest in the target for $33.53m, based onthe VC IRR Method using an EBITDA Exitmultiple of 8.2x and Target IRR of 30%.
Strengths: The Company already has apipeline of backlog through several supplymajor agreements. In addition, the Companyis jointly developing BIPV product solutionswith a global building systems supplier.
Weaknesses: The Company has a limitedoperating history and their business is basedon new and unproven technology
$105,307,668
$273,700,000$222,127,129
"
$117,300,000$168,872,871
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
EQUITY - ENTRY (2010) EQUITY - PRE-EXIT(2014)
PROCEEDS UPON EXIT(2014)
COMMON-FOUNDERS&OPTI ONPOOL PREFERRED-VC
IRR 53%Capital Structure
30%
70%
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Company OverviewD
4
Headquarters:
Ascent Solar Technologies, Inc.
12300 Grant StThornton, Colorado 80241
(720) 872-5000
ascentsolar.com
ITN founded global solar in
1996 to manufacture flexibleCIGS thin-film technology using a
steel substrate. This experience ledto the development of Ascent
Solar's thin-film CIGS technology
on plastic substrates, the onlycompany producing thin-film on
flexible plastic today.
Mission: The Company intends to be the first company to manufacture large,roll-format, PV modules in commercial quantities that use CIGS on a flexible,plastic substrate.
Technology: Their proprietary manufacturing process deposits multiple layers ofmaterials, including a thin film of highly efficient copper-indium-gallium-diselenide (CIGS) semiconductor material, on a flexible, lightweight, plasticsubstrate and then laser patterns the layers to create interconnected PV cells, orPV modules, in a process known as monolithic integration.
Expansion: The Company intends to incrementally expand our aggregateproduction capacity to 30 MW by attaining the following milestones within thetime frames indicated:
- Second half of 2009: complete product certification with Underwriters Laboratory (UL) inthe U.S. and Technischer berwachungs-Verein (TV) in Europe from 1.5 MW
production line.- Fourth quarter of 2009: begin qualification of production tools for the first 30 MW.- First half of 2010: begin production of the first half of initial 30 MW capacity.- Second half of 2010: commence ramp up to full 30 MW of rated capacity.
Business Overview
History
Financial Overview
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Products & ServicesD
5
CIGS versus a-Si: Although a-Si, like CIGS, can be deposited on a flexiblesubstrate, its conversion efficiency, which already is generally much lower thanthat of CIGS, measurably degrades when it is exposed to ultraviolet light,including natural sunlight. To mitigate such degradation, manufacturers of a-Si
solar cells are required to implement measures that add cost and complexity totheir manufacturing processes..
CIGS versus CdTe: Although CdTe modules have achieved conversionefficiencies that are generally comparable to CIGS in production, CdTe hasnever been successfully applied to a flexible substrate on a commercial scale.The use of CdTe on a rigid, transparent substrate, such as glass, makes CdTeunsuitable for a number of the applications that the Company is targeting in theBIPV and other markets. Also, CIGS can achieve higher conversion efficienciesthan CdTe.
Advantages of CIGS on a Flexible Plastic Substrate
BIPV Modules: BIPV, flexible solar modules modules laminate onto roofing, shading and building surfaces to decrease energy costs and provide a clean,renewable source of energy.
EIPV Modules: EIPV, flexible solar modules provide the flexibility necessary for easy integration to all types of materials including fabrics and plastic, specifically produced forintegrating solar power into electronic devices and consumer products. Applications include: cell phones, portable media devices and battery chargers.
Defense Modules: Defense thin-film, flexible modules are specifically produced for creating solar-powered products that increase the efficiency of military operations.Applications include: Tactical shelters, supplemental energy for conventional power systems and solar-powered communication devices, backpacks and battery chargers.
Product Offerings
Product Development Strategy
5
The technology is an enabling technology. The Companysproduct development strategy is to work with potentialcustomers who are developing various products andapplications for BIPV and EIPV markets.
The Company works with potential customers on a productdevelopment plan, because those products are not on themarket yet. The Company starts with a product developmentplan, and currentlythey have between 8 and 9 potential customers witha product development plan in place, which leads to an LOI, and
eventually a purchase order.
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Business ModelD
6
RESEARCH & DEVELOPMENT MANUFACTURING
While focused on speed to market, the Company believes that quality and consistency of product will be paramount to their success in the marketplace. Consequently, the
path to commercialization is defined by a highly disciplined, staged progr ession based upon the achievement of key milestones and supported by over fourteen years ofconcerted research and development activity by their scientists.
SALES AND DISTRIBUTION
LeveragingPartnerships toExpand Sales
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CustomersD
7
Customers
Customer Value Proposition
7
Commercial Builders & Architects: BIPV (Roof Tiles, Building Facades) Government Military: Portable Power Packs
Consumer Electronics Manufacturers: EIPV for Consumer Electronics NASA, Satellite & Aerospace Companies: Satellite and HAA
ELECTRONIC INTEGRATED PV AEROSPACE & DEFENSE APPLICATIONS BUILDING INTEGRATED PV
VALUE PROPOSITION
! Lightweight with excellent power density enablingportable and deployable integrated systems
! Match existing battery recharging ecosystems! Expands troop capabilities with increased supply
line independence
! No Glass; more durable in handling tests
VALUE PROPOSITION
! High Power and voltages density; eliminates needfor expensive power conditioning devices
! No Glass; more durable in drop tests! Solar cell phones rapidly growing market segment,
particularly in Asia
! Custom products to suit specific customer needs
VALUE PROPOSITION
! Dual value as building component and electricitygeneration surface
! Qualifies for higher feed-in tariffs! Power density competes with crystalline modules! Lower barrier to entry for architects/builders! Demand for >100MWp of modules
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MarketD
8
Global Photovoltaic Market Share
Global PV Market Share Forecast Several new
growth markets will come intoplay in 2010,the mostsignificant of which are theUnited States,Italy andChina. Together, theethree marketswill account for50% of thegrowthprojected tooccur in 2010.
Global Photovoltaic Market Size
Solar photovoltaics(including modules,system components,and installation) willgrow from a $30.7billion industry in2009 to $98.9 billionby 2019.
In 2010, total solarcell production isexpected to reach12.1GW, or 25%growth over 2009.
Global Solar Cell Production Thin-Film PV Market by Application
Thin films are set to overtake crystalline silicontechnologies through lower costs per watt. By2019, the market for thin film technologies willalready be in excess of US$42 billion.
Solar Cell Technology Market Share
The entry of large
Korea basedcompanies' market
participation suchas Samsung
Electronics, LG
Electronics andLG Display would
accelerate massproduction era for
thin film solar cell
applied withvarious technology"
and anticipatedmarket expansion
for thin film solar
cell in nearfuture..Mark Jee, senioranalyst at Energy
research division,Displaybank
The growth of
PV installations in
2010 will be led bya newly energizedGerman market,
which recovered
from sluggishperformance in the
first half of 2009to achieve gradual
growth in the second
halfa trendexpected to continue
for the first sixmonths of this year.iSuppli
Installations on residential, commercial, and industrial buildings toaccount for more than 50% the thin film photovoltaic market in2010.
8
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Competition
9
Market for PV products is dominated by large manufacturers of crystalline silicon technology. In 2008, the five largest of these manufacturers were; Q-cells (Germany), Suntech Power Holdings Co., Ltd. (China), Sharp (Japan), Kyocera (Japan), and Motech Industries (Taiwan).
The landscape of thin-film manufacturers encompasses a broad mix of technology platforms at various stages of development, and consists of a largeand growing number of medium and small sized companies.
The two largest thin-film PV manufacturers are First Solar, Inc. and Energy Conversion Devices, Inc. Competitors currently developing or sellingCIGS-based PV modules include AVANCIS GmbH & Co. KG, Global Solar Energy, Inc., HelioVolt Corporation, Honda Soltec Co. Ltd., MiaSol,NanoSolar, Inc., Solyndra, SoloPower, Inc. and Wrth Solar GmbH & Co.
Competitive Landscape
Competitors
While silicon
based
manufacturerscurrently dominatethe market, thin-
film manufacturers
will begin to capturean increasingly
larger share of themarket..
Some established
crystalline siliconmanufacturers are
starting to pursuethin film technologies,
either in conjunction
with their crystallineefforts, or more
recently as a way todiversify their
technology portfolios
and insulatethemselves from
silicon supplyshocks.
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Unique Selling Point
10
UNIQUE PRODUCT ATTRIBUTESAscent Solars approach to thin film holds the promise of relatively high efficiency combined with a thin, lightweight, flexible product that is both
low cost and monolithic, compared to discrete manufacturing processes. Furthermore, its technology does not use silicon, so it is immune to thesilicon shortages that strike the rest of the industry.Monolithic refers to the manufacture of the module as one unit rather than the PV material being cut into individual cells and then re-attached inmultiple steps.Discrete implies that cells have to be assembled into a module, which requires several extra steps, additional cost, and tends to leave more opensurface area on the module that is not generating electricity.STRATEGIC PARTNERSHIP ACCESS TO BIPV MARKETNorwegian aluminum giant, Norsk Hydro ASA, owns a 35% stake in Ascent Technologiess The two (2) companies are also in partnership to tointegrate Ascent's PV products into certain products manufactured by Norsk's building products division.A stake by a much larger, well-established company may help Ascent's credibility with suppliers and potential customers.Strategic relationships with other parties (ITOCHU and Icopal) could open low-cost distribution channels for its BIPV and EIPV applications.Strategic relationship with Norsk Hydro provides us with d irect access to a potentially large customer base in the global BIPV market.
Strategic Differentiation
Unique Product Attributes Strategic Norsk Hydro Relationship Offers DirectAccess to Global BIPV Market
Flexibility is thought to be an
important attribute of BIPV
for architectural features becausethe PV must bend and twist toconform to the shapes of the
underlying building materials or
able to be fused together withroofing membrane materials.
NORSK HYDRO ASA
(NYSE:NHY) is a Fortune500 energy and aluminum
company with 30,000employees in nearly 40
countries. Hydro is a a major
aluminum and building systems
supplier and a leader in thedevelopment of renewableenergy sources
Highlights of Norsk Hydro investment in Ascent SolarImmediately explore joint development of BIPV product solutionsExplore integration of building integrated PV (BIPV) into NorskHydro existing product brandsFuture deployment of BIPV building solutions through Norsk Hydromarket channels
Further develop PV integration opportunities across Norsk HydroAluminum businesses
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Market Opportunity
11
Thin-Film Market Expansion
Ascent Solars opportunities in the photovoltaic manufacturing market are driven by (1) thin-film solar cells displacing crystalline Si solar cells due to equalconversion efficiency, cheaper cost and better adaptability to bespoke applications (2) strong federal incentives for solar implementation for residential, commercialand utilities applications, and (3) the system cost of solar implementations reaching cost competitiveness with utilities.
Federal Tax Incentives
Grid Parity
The U.S. will get a big boost from economic subsidies aspart of the financial rescue package through an 8-yearextension of a 30 percent tax credit for solar-electricinvestments and the elimination of a $2,000 federal taxcredit cap.
Due to economomic subsidies, the U.S. has a shot tobecome the biggest market for photovoltaics and one ofthe largest producers over the next few years.
By 2015, two-thirds of the U.S. will have achieved gridparity, the point at which electricity generated fromphotovoltaics is equal in cost or less expensive than gridpower.
The consensus is that grid parity for PV solar panels willbe achieved when they can be manufactured for less thanUS$1 per Watt of peak power, after which a huge boomin the number of solar installations is likely to occur.
Thin-film solar has the potential to reach conversionefficiency of crystalline Si solar cells, which compriseapproximately 90% of the market, with the added benefitof low cost production. Thin film products may be suitedfor applications that traditional crystalline silicon modulesmay not be able to serve, which presents an opportunity tosteal market share from crystalline producers.
MarketShare
PV production capacity by technology
Market Penetration from Grid Parity
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Costly and Wasteful
Wafer Substrate Manufacturing
Streamlined and Flexible
Plastic Roll (substrate)
Corporate StrategyD
.
In the space and nearspace markets thepower producingmodules are uniquelysuited for applicationsrequiring mobility,durability andlightweight.
Entry into the spaceand near spacemarkets is based uponstrategic relationships with large players inthese application areas.
LOW COST PRODUCER STRATEGIC PARTNERSHIPS NEW MARKETS
Large format, roll-to-rollmanufacturing process andproprietary monolithic integrationtechniques allow the Company toachieve a per watt manufacturingcost lower than most of theflexible, lightweight, thin-filmcompetitors.
Thin-film PV modules require lessthan 1% of the semiconductormaterial to achieve the same poweroutput as a c-Si-based PV device.
DIFFERENTIATION
The choice of a flexibleplastic substrate materialfurther differentiates theCompany from other thin-film PV manufacturers.
For markets that place a highpremium on weight, likerooftop, defense, space andnear space markets, theCompanys materials provideattractive increases in thepower and voltage-to-weightratios than do competingflexible PV thin-filmtechnologies.
The Companysmarketing anddistribution strategy is toform strategicpartnerships to supporttheir partnersdevelopment, testing andcertification of newintegrated PV products. This should enable themto identify and cultivatepromising marketsegments. By cooperating with strategic partners inthis way, the Company
hopes to create sufficientand consistent demandfor their PV modules.
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Management
13
Farhad Moghadam has been the Chief ExecutiveOfficer and President of Ascent Solar Technologies Inc.since August 3, 2009. Dr. Moghadam has extensive seniorexecutive experience in global operations, businessdevelopment and commercialization of complex, state-of-the-art technologies. Prior to Ascent Solar Dr. Moghadamserved as Senior Vice President and General Manager of Thin Films Product Business Group and FoundationEngineering of Applied Materials Inc. He is an inventorof approximately 65 patents and has more than 120technical papers published in various technical journalsand periodicals. He earned both his Masters andDoctorate degrees in Materials Science and Engineeringfrom Stanford University in 1979 and 1981, respectively.
Name Title Background
Ascents management team includes a strong technology team with both academic and industry experience developing thin film.
Founder & Chairman
Mohan S. Misra, Ph.D. Dr. Misra is the founder andChief Executive Officer of ITN Energy Systems.Before founding ITN in 1994, Dr. Misra spent 19 yearswith Martin Marietta in the areas of material research,development and manufacturing. While at MartinMarietta, Dr. Misra worked first as manager ofResearch and Technology, then led the company'sdevelopment of long-term technology strategies. Dr.Misra has helped develop and implement several keytechnologies for aerospace applications including thin-film photovoltaic, smart materials, advancedcomposites and lightweight structures. Dr. Misra holdsa Ph.D. in Metallurgical Engineering from theColorado School of Mines.
President & CEO
Dr. Mohan Misra Founder & ChairmanDr. Farhad Moghadam President & CEO
Dr. Joe Armstrong
Joseph McGabe
Gary Gatchell
Rafael Gutierez
Ashutosh Misra
Zane Rakes
Founder and ChairmanPresident & CEO
CTO
VP of Business Development
CFO
SVP of Sales & Marketing
SVP of Corporate Development
VP of Manufacturing
Management Bios
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GROWTH DRIVERS
MW Capacity Increase: The Company will increase revenuebased on the expected ramp-up of the Fab2 facility from 30 MWin 2011 to 110 MW in 2013 and then a 75% MW increase in 2014,due to significant expansion into the BIPV market through NorskHydros supply channels and distribution networks (APPENDIX).
Capacity Utilization: The Companys increasing revenue will alsobe generated from increasing market demand for thin-filmproducts in target markets as well as existing backlog from long-term supply agreements. We are forecasting a steady rise in plantcapacity utilization from 52% in 2010 to 85% in 2014.
Income Statement
14
Revenue
PROFIT DRIVERS COGS: We have relied on forecasts from Solar Sector Cost
Review to estimate the 2010 COGS based on the Average All-In-Cost ($/W) for PV modules. We have estimated COG for 2011 to2014 to improve through economies of scale, process costreductions and improved cell efficiency. (APPENDICES).
Operating Expenses: According to industry estimates, recurringoperating expenses account for 10-20% of revenue. SG&A costsare typically around 5-15% of revenue and R&D costs around5-6%. We have estimated 2010-2011 based on company guidance,as stated in the FYE 2010 Annual Report and smoothed
2012-2014 to gradually decline to a long-term run rate of 22%.
COGS & Operating Expenses
52%63%
82%
90%
95%
48% 37%18%
10% 5%
$-
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Capacity Available Utilization Revenues
For the Years Ended December 31,
INCOME STATEMENTS (ACTUAL $DOLLARS) 2007 2008 2009 2010 2011 2012 2013 2014
ACTUAL ACTUAL ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTEDRevenues 1,002,674$ 1,499,729$ 1,464,346$ 7,800,000$ 34,965,000$ 74,439,375$ 142,778,144$ 239,577,808$Cost of Gods Sold - - - 5,655,000 24,475,500 50,618,775 97,089,138 162,912,909Gross Profit 1,002,674$ 1,499,729$ 1,464,346$ 2,145,000$ 10,489,500$ 23,820,600$ 45,689,006$ 76,664,898$
Operating ExpensesResearch & Development 4,802,538$ 8,762,055$ 14,908,209$ 11,181,157$ 5,590,578$ 6,699,544$ 8,566,689$ 11,978,890$Depreciation & Amortization 102,416 1,415,424 2,582,706 8,332,917 11,904,167 23,808,333 23,808,333 23,808,333G&A Expenses 4,024,035 5,558,322 5,711,860.00 6,283,046 6,911,351 6,699,544 11,422,252 16,770,447
Total Operating Expenses 8,928,989$ 15,735,801$ 23,202,775$ 25,797,119$ 24,406,096$ 37,207,421$ 43,797,273$ 52,557,670$
Operating Income (7,926,315)$ (14,236,072)$ (21,738,429)$ (23,652,119)$ (13,916,596)$ (13,386,821)$ 1,891,733$ 24,107,228$
Other Income/(Expense)Interest expense (424)$ (3,438)$ -$ -$ -$ -$ -$ -$Interest income 1,423,320 2,145,370 531,697 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Realized Gain/(Loss) on Investments - (32,103) 59,383 - - - - -Realized Gain/(Loss) on Forward Contracts - (322,430) (541,771) - - - - -Unrealize d Gain/(Loss) on Forward Contrac ts - (766,403) 766,403 - - - - -
Total Other Income/(Expense) 1,422,896$ 1,020,996$ 815,712$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$Income Taxes* - - - - - - - -
Net Income (6,503,419)$ (13,215,076)$ (20,922,717)$ (22,652,119)$ (12,916,596)$ (12,386,821)$ 2,891,733$ 25,107,228$
EBITDA (7,823,899)$ (13,941,584)$ (18,871,708)$ (15,319,203)$ (2,012,429)$ 10,421,513$ 25,700,066$ 47,915,562$
* The Company has approximately $50,000,000 in NOLS and will incur additional operating losses in 2010 to 2012, which will offset any taxable income between 2013 and 2014.
For the Years Ended December 31,
INCOME STATEMENTS (COMMON SIZE) 2007 2008 2009 2010 2011 2012 2013 2014
ACTUAL ACTUAL ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
Research & Development Revenues 100% 100% 100% 100% 100% 100% 100% 100%Cost of Gods Sold - - - 73% 70% 68% 68% 68%Total Revenues 100% 100% 100% 28% 30% 32% 32% 32%
Operating ExpensesResearch & Development 479% 584% 1018% 143% 16% 9% 6% 5%Depretiation & Amortization Expense 10% 94% 176% 107% 34% 32% 17% 10%G&A Expenses 401% 371% 390% 81% 20% 9% 8% 7%
Total Operating Expenses 891% 1049% 1585% 331% 70% 50% 31% 22%
Operating Income -791% -949% - 1485% -303% -40% -18% 1% 10%
Other Income/(Expense)Interest expense 0% 0% 0% 0% 0% 0% 0% 0%Interest income 142% 143% 36% 13% 3% 1% 1% 0%Realized Gain/(Loss) on Investments 0% -2% 4% 0% 0% 0% 0% 0%Realized Gain/(Loss) on Forward Contracts 0% -21% -37% 0% 0% 0% 0% 0%Unrealized Gain/(Loss) on Forward Contracts 0% -51% 52% 0% 0% 0% 0% 0%
Total Other Income/(Expense) 142% 68% 56% 13% 3% 1% 1% 0%
Net Income -649% -881% -1429% -290% -37% -17% 2% 10%
EBITDA -780% -930% -1289% -196% -6% 14% 18% 20%
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Balance Sheet
15
PP&E: Property andequipment are recordedat the original cost to theCompany. Assets arebeing depreciated overestimated useful lives ofthree to ten years usingthe straight-line method,
commencing when theasset is placed in service.
Stockholders Equity: The Companys issuedcapital stock consists of95,000,000 shares ofcommon stock at$0.0001 par value. Each
share of common stockhas the right to one vote.Management has stockoptions totaling5,000,000 shares.
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Cash Flow Statement
16
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Valuation
17
Valuation
Upon exit, Founders
and Management willcontrol 70% of the
Company throughcommon stock and
management options.
The investors 30%equity is comprised
solely of convertibleparticipating
[redeemable] preferred
shares
Capital Structure and Transaction Proceeds
Comparative Valuation of Exit Value
VCC IRR Method
Based on the EBITDA
multiples and Salesmultiples from Pure-Play
PV module manufacturers.
This model implies an Exit
Value at the end of theinvestment period.
The target IRR is
estimated to be 30%resulting in a pre-money
valuation of$73,715,368. This
implies an EV/Revenue
(2010) of 13.5x.Investors are paying for
future revenue growth,based on backlog from
long-term supply
contractual agreementsbeginning in 2010.
Guideline Companies
TEV/EBITDATEV/Sales
Guideline Company Approach
Estimated Ongoing Earnings
Pricing Exit Multiples
Implied Value ($MM)
Exit Valuation
TA
Entr Valuation
Trina Solar Ltd. Suntech Power Holdings Co. Ltd. First Solar, Inc. Average Min
8.2x 11.6x 12.7x 10.8x 8.2x1.6x 1.7x 3.7x 2.3x 1.64x
TEV /EBITDA TEV /Sales
2014 E $47,915,562 $239,577,808
8.2x 1.64x
$390,668,414 $393,343, 157
ROUNDED $391,000,000
GET IRR: 30%
$105,307,668
Opportunity- The Company already has a pipeline ofbacklog through several supply agreements to deliver67MW+ of product in the next five (5) years. Inaddition, the Company will jointly develop BIPVproduct solutions with Norsk Hydro, a global buildingsystems supplier. Coupled with a high industry growthrate, the Company represents an attractive investmentopportunity arising from strong growth that aninvestment in additional production capacity willgenerate.
Basis for Investing- An investment in the Company will fund their manufacturing expansion plan, which
entails the design, installation, qualification, testing andoperation of additional production tools to increasetheir rated production capacity.
Form of Investment - The investment consists ofSeries A Convertible Participating [Redeemable]Preferred Shares.
Valuation -The comparable valuation method was usedto determine the Exit value of the Company in 2014. There is no debt upon initiation of the transaction.From the exit value, we applied the VC IRR methodwith a 30% IRR to arrive at a Post-money valuation of$105.3MM. Therefore, our 30% stake represents aninitial investment of $31.6MM, resulting in a Pre-moneyvaluation of $73.7MM.
Financial Returns - Based on our valuation andfinancial structuring, we expect an annualized return of53% upon exit at a base case Exit multiple of 8.2xEBITDA.
Exit Strategy- Investors will exit through an IPO orTrade Sale at the end of a 5-year period.
Investment Strategy
PROCEEDS EXIT 2014
Investor Ownership % 30% Enterprise Value $391,000,000
Required IRR 30% Less: Net Debt -Entry Year 2010 Total Equity Value $391,000,000
Exit Year 2014 Less: Total Preference (63,184,601)
Shares Outstanding Pre-investment 120,918,984 Less: Tota l Accrued Dividends (10,490,929)
Shares Outs tanding Post- investment 172 ,741 ,406 Less: Participation (95,197,341)
Exit Multiple (EBITDA) 8.2x Equity Va lue to Common $222,127,129
I mplied Entr y Multiple (Revenue 201 0E) 13. 5x
Pre-Money Valuation $73,715,368 VC Preference $63,184,601
Investment Tranches: VC Accr ued Divends 10,490,929
Tranche 1: $10,530,767 VC Participating 95,197,341
Tranche 2: 10,530,767 Total Proceeds to VC $168,872,871
Tranche3: 10,530,767
Total Investment $31,592,300 Realized IRR 53%
Post-Money Valuation $105,307,668 Cash-on-Cash (CoC) 5.3x
VALUATION SUMMARY
$105,307,668
$273,700,000$222,127,129
"!!!!
$117,300,000$168,872,871
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
EQUITY - ENTRY (2010) EQUITY - PRE-EXIT
(2014)
PROCEEDS UPON EXIT
(2014)COMMON - FOUNDERS & OPTION POOL PREFERRED - VC
IRR 53%Capital Structure
30%
70%
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Sensitivity Analysis (IRR)
18
The Company has a limited operating history and their business is based on new and unproven technology; therefore, an investment in the business is subject to
considerable risk. The ability to achieve their business, commercialization and expansion objectives will depend on a number of factors, including:
The company can successfully begin commercial production on the equipment installed in FAB2; Failure to consummate strategic relationships with their key partners in various target market segments; Failure to further refine their technology and develop and introduce improved PV products could render their PV modules uncompetitive or obsolete; and Government regulations and policies may present technical, regulatory and economic barriers to the purchase and use of PV products
Risk Factors
Key Sensitivity Drivers
EXIT MULTIPLE
REVENUE GROWTH
EBITDA MARGIN & GROSS MARGIN
An exit multiple of 8.2x and a required IRR of 30%were used to the value of the firm at entry. Due torisk inherent in the business cycle we haveperformed a sensitivity analysis with a range of +/-50%.
According to our analysis and guidance from theCompany, 2014 will entail significant revenue growthand will be the year of our exit. Revenue growthrates will contribute to the valuation of the Company
upon exit; therefore, we have performed a sensitivityanalysis with a range of +/- 50%.
We have chosen to perform a a sensitivity analysiswith a range of +/- 50% on key two (2) key marginsthat will affect the EBITDA in the terminal year:EBITDA margin and Gross Margin. Gross Marginprovides an indicator of how well the company ismanaging the manufacturing process, while EBITDAmargin includes this affect plus the cost of overhead.
Sensitivity Analysis
IMPLIED IRR
Therefore, we have considered any IRR below the Target IRR of 30% unsatisfactory.
EBITDA Margin (2014E)
EXIT 10% 13% 17% 20% 23% 27% 30%
4.1x 27.7% 31.3% 34.7% 37.7% 40.6% 43.3% 45.8%
5.4x 31.3% 35.8% 39.7% 43.3% 46.6% 49.7% 52.6%
6.8x 34.7% 39.7% 44.1% 48.2% 51.9% 55.3% 58.4%
8.2x 37.7% 43.3% 48.2% 52.6% 56.6% 60.3% 63.7%
9.5x 40.6% 46.6% 51.9% 56.6% 60.9% 64.7% 68.3%
10.9x 43.3% 49.7% 55.3% 60.3% 64.7% 68.8% 72.6%
12.2x 45.8% 52.6% 58.4% 63.7% 68.3% 72.6% 76.5%
Gross Margin (2014E)
16% 21% 27% 32% 37% 43% 48%
EXIT MULTIPLE 0% 11.2% 29.0% 35.5% 41.1% 46.0% 50.4% 54.4%
8.2 x 23% 16.9% 31.6% 39.0% 45.2% 50.7% 55.5% 59.9%
45% 22.2% 34.2% 42.3% 49.1% 54.9% 60.1% 64.7%
68% 25.3% 36.5% 45.3% 52.6% 58.8% 64.3% 69.2%
90% 26.6% 38.8% 48.2% 55.8% 62.4% 68.2% 73.3%
113% 27.8% 40.9% 50.9% 58.9% 65.7% 71.7% 77.0%
136% 29.1% 43.0% 53.3% 61.8% 68.8% 75.0% 80.5%RevenueGrowth(2014E)
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Sources & Uses
19
Expansion: Ascent Solar is in the expansion stageand is seeking a infusion ofgrowthcapitalinvestment to finance a manufacturing expansion plan, which entails the design,installation, qualification, testing and operation of additional production tools toincrease their rated production capacity.
Overview - Uses of Funds
LongTerm
Strategy
ShortTerm
Strategy
Capacity Expansion: The Companys current plan is to bring online approximately 6 to 8 MW of capacity in FAB2 in 2010.Initially, they expect that non-BIPV markets will constitute themajority of our product shipments in 2010.
Product Expansion: In order for market entry into the BIPVmarket the Company needs additional capacity in anticipation ofjoint development of BIPV product solutions with Norsk Hydro. The expansion in production capacity offers the company anopportunity to integrate their building integrated PV (BIPV) intoNorsk Hydros existing product and offers a low-cost distributionchannels and potentially large, global customer base.
Sources and Uses Table
Sources ($MM) Uses ($MM)Series A Preferred Shares 31,592,300.42 Acquisition of New Manufacturing Equipment $30,012,685
Installation of New Equipment $1,184,711
Testing $394,904
TOTAL: $31,592,300 TOTAL: $31,592,300
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SWOT Analysis
20
Strengths Streamlined manufacturing approach.: Ascents
manufacturing process avoids some duplicative steps required inother processes, performing the necessary scribes in onemanufacturing process, whereas others may have to scribe inmultiple steps.
Cost-advantages over competitors: While many thin filmsolutions promise low cost structures, few demonstrate the rightset of attributes to make them well-suited to be integrated into
building products (thin, lightweight, flexible, and monolithic) orelectronics (high voltages in small cells, easily customizable).
Ability to easily enter new markets: They can manufacturePV modules to enter different markets and develop customizedapplications without altering their production processes.
Weaknesses Early stage: The Company has a limited history of
operations, have not generated any revenue from operationsand have had limited production of our PV modules.
Additional capital requirements:The Companys plannedcapacity expansion will require additional capital which theymay not be able to obtain on favorable terms, if at all orwithout dilution to current stockholders.
Development/scale-up risk: CIGS has proven notoriouslydifficult to work with, which could lead to delays in scalingmanufacturing operations
Subject to similar risks as those of other PVmanufacturers: such as management ability, capital access,and economical access to raw materials, among others.
Opportunities Thin-film market expansion: Thin-film solar has the
potential to reach conversion efficiency of crystalline Si solar
cells, which comprise approximately 90% of the market, withthe added benefit of low cost production.
Economic subsidies: Due to economomic subsidies, the U.S.has a shot to become the biggest market for photovoltaics andone of the largest producers over the next few years.
Critical mass at grid parity: The consensus is that grid parityfor PV solar panels will be achieved when they can bemanufactured for less than US$1 per Watt of peak power, afterwhich a huge boom in the number of solar installations is likely
to occur.
Threats Competition: Other CIGS companies have constructed
pilot and early stage commercial plants or are expected to do
so in the coming one to two years Technology risk: Other solar and PV solutions are being
pursued that, if successful, could make Ascents approach tothe space (and those of other players) uneconomical orrelatively less attractive.
Government Regulation: Existing government regulationsand policies and changes to these regulations and policiesmay present technical, regulatory and economic barriers tothe purchase and use of PV products, which may
significantly reduce the demand for PV modules.
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Basic Terms
21
Financial Structuring Pre-Money Valuation: $73,715,368 Desired Ownership: 30% Stage: Growth Capital Industry: Clean Technology Investment Duration: 5 years Type of Structure: Staged Capital Commitment 3 Tranches
at a price of $.6096/share for 17,274,141/Tranche. Tranche 1 isdue immediately, Tranche 2 will be invested FYE 2010 and
Tranche 3 FYE 2012 upon achieving of the minimum RevenueProjections (Appendix).
Financial Instrument: Series A Convertible Participating[Redeemable] Preferred Shares
Expanded Share Option Pool: The expansion of the shareoption pool [prior to the investment] to represent a 15% of theequity post-funding on a fully diluted basis.
Milestones: Management options will be fully vested uponachieving an IRR of at least 30% upon Exit.
Dividend: Cumulative 8% dividend of the original investment. Convertible: Converts 1:1 to Common Stock at any time at
option of holder. Redeemable: Redemption price equal to the original
investment [plus a rate of return equal to 10% per year on theoriginal investment] minus the amount of cumulative dividends.
Liquidation Preference: Preference to the holders of theCommon Stock a per share amount equal to 2x the OriginalIssue Price plus any declared but unpaid dividends (theLiquidation Preference).
Participation: Fully Participating
Legal Structuring Anti-dilution: Full Ratchet Anti-Dilution Right of First Refusal: In the event that the Company is
to offer additional equity securities, the Investors have theright to purchase a pro-rata percentage of shares in the newoffering, based on the Investors percentage ownershipinterest in the company.
Tag-along Rights: Were the management to sell their ownshares; Investors have the right to participate in the sale, at
the same price and under the same terms and conditions. Drag-along Rights: If the Investors decide to sell a part or
all its shares, all other owners of the company are required tosell the same percentage of its shares to the potentialpurchaser.
Board Structure: The Board will consist of 9 members.The holders of the Preferred Stock designate 1 director. Mr.Justin G. Roberts (MD) Dawn Treader Capital, LLC on the Ascent Solar Board. The remaining 8 directors will beelected by the Common Stock and the Preferred Stockvoting as a single class.
Veto Rights: The Investors will hold veto rights on thefollowing decisions (i) Appointing new directors (ii) issuingadditional share capital (iii) Transferring shares (iv) Incurringnew debt (v) Establishing new subsidiaries (vi) Changes inCompany statutes (vii) liquidity events
Voting Rights: The Series A Preferred Stock shall votetogether with the Common Stock on an as-converted basis,and not as a separate class
Exit Rights: Investors will exit through IPO or Trade Sale
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Appendices
22
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Indicative Term Sheet Dawn Treader Capital, LLC
This summary of terms and conditions is preliminary and subject to change. Furthermore, this summary of terms and
conditions is not intended to define or describe all of the terms and conditions of the proposed transaction described
herein. The parties recognize that neither party shall have any liability or obligation to the other as a result of this
summary of terms and conditions, it being understood that only such provisions as shall be set forth in the final
documents shall have any legal effect. Each party acknowledges that certain information provided in connection with the
transaction is confidential. Each party agrees that it will not disclose such information to any other party except as
required for the completion of the transaction described herein or as required by law, regulatory requirements, a court
order or discovery procedures.
We are pleased to announce our proposal for an investment in Ascent Solar, Inc. (the Company)
1. Investment
1.1 Investors: Dawn Treader Capital, LLC (the Investors)
1.2 Investment Form: Convertible Participating [Redeemable] Preferred Shares (Preferred
Shares) at a price of $0.6096 per Preferred Share (the Original
Issue Price) for 51,822,422 Preferred Shares for a total investment
of $31,592,300.
1.3 Ownership Percentage: The investment will represent a 30% shareholding for the Investors
on a fully diluted basis following an expansion of the option pool,
detailed in paragraph 1.6.
1.4 Pre-Money Valuation: The investment will be made at a fully diluted pre-money valuation
of $73,715,368, including employee share options equal to 21.4% of
the fully diluted equity. Current Capitalization is set out in Appendix1 and Capitalization Post-Funding is set out in Appendix 2.
/
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Market, technology review and legal review by anindependent third party.
References from customers, partners and management.2. 2 Dividends: The investors will receive a cumulative dividend of 8% [compounded
annually] of the Original Issue Price. The Company will beprevented from paying any dividends to other shareholders until the
dividend is paid to the Preferred Shares on Exit or redemption.
2.3 Optional Conversion The Series A Preferred initially converts 1:1 to Common Stock at any
time at option of holder, subject to adjustments for stock dividends,
splits, combinations and similar events.
2.4 Liquidation Preference: In the event of any liquidation or winding up of the company the
Preferred Shares shall be entitled to receive in preference to the
holders of the Common Stock a per share amount equal to 2x the
Original Issue Price plus any accrued dividends.
2.5 Participation After the payment of the Liquidation Preference to the holders of the
Preferred Shares, the remaining assets shall be distributed pro-rata to theholders of the Common Stock and the Preferred Shares on an as-
converted basis.
2.6 Redemption Rights: At election of the Investors, the Company may redeem Preferred Shares
at a redemption price equal to the Original Issue Price [plus a rate of
return equal to 10% per year on the Original Issue Price] minus the
amount of cumulative dividends owed to Preferred Shares.
2.7 Anti-Dilution Protection: The Investors will maintain the right to full percentage ownership at
the same level throughout the duration of the investment, and
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2.13 Information Rights: For the duration of the sponsors investment, the Management will
deliver the companys monthly actual vs. plan and prior year. The
company will also produce and distribute a comparison of the years
annual budget 60 days before the beginning of the fiscal year,
including direct access to the companys auditors and bankers.
2.14 Voting Rights: Preferred shares have equivalent voting rights to ordinary shares in a
general meeting.
2.15 Veto Rights: The Investors hold veto rights on the following (i) Appointing new
directors (ii) Issuing additional share capital (iii) Transferring shares
(iv) Incurring new debt (v) Establishing new subsidiaries (vi) Changes
in Company statutes (vii) liquidity events
2.16 Expiration Date: The acceptance or rejection of the above terms no later than 14
days after receipt.
3. Good Leaver/Bad Leaver Provisions
3.1 Good Leaver/Bad Leaver: In the event of an employee shareholder [{other than a Founder}]leaving the Company within 5 years of the commencement of
employment all the shares must be offered for sale:
(i) For a Bad Leaver, at the lower of market value and thenominal value of the shares
ii) For a Good Leaver, at the market value of the shares
4. Law
4 1 Governing Law: This term sheet is governed by United States Law
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Appendix 1
Pre-money Capitalization Table
Pre-Option Pool Expansion:
Post-Option Pool Expansion:
Founders 95,000,000 95,000,000 95%Dawn Treader Ca ital LLCOption Pool 5,000,000 5,000,000 5%Total Shares Oustanding 95,000,000 5,000,000 100,000,000 100%
Fully Diluted
%
Total SharesOptions
Granted
Common SharesPreferred
Shares
Outstanding
Capitalization Table
Pre-money
Founders 95,000,000 95,000,000 79%
Dawn Treader Capital , LLC
Option Pool 25,918,984 25,918,984 21%
Total Shares Oustanding 95,000,000 25,918,984 120,918,984 100%
Capitalization Table
Pre-money
Preferred
SharesOutstandin
Common Shares Options
Granted
Total Shares Fully Diluted
%
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Appendix 2
Post-money Capitalization Table
Founders 95,000,000 95,000,000 55%
Dawn Treader Capital , LLC 51,822,422 51,822,422 30%
Option Pool 25,918,984 25,918,984 15%
Total Shares Oustanding 51,822,422 95,000,000 25,918,984 172,741,406 100%
Price per Share 0.6096$ Total Preferred Shares 51,822,422 Pre-money Valuation 73,715,368$
Total Invested 31,592,300$ Preferred Ownership 30% Post-money Valuation 105,307,668$
Fully Diluted%
Total SharesCapitalization TablePost-money
PreferredShares
Outstandin
Common Shares OptionsGranted
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Appendix 3
Projections
For the Years Ended December 31,
INCOME STATEMENTS (ACTUAL $DOLLARS) 2007 2008 2009 2010 2011 2012 2013 2014
ACTUAL ACTUAL ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
Revenues 1,002,674$ 1,499,729$ 1,464,346$ 7,800,000$ 34,965,000$ 74,439,375$ 142,778,144$ 239,577,808$Cost of Gods Sold - - - 5,655,000 24,475,500 50,618,775 97,089,138 162,912,909Gross Profit 1,002,674$ 1,499,729$ 1,464,346$ 2,145,000$ 10,489,500$ 23,820,600$ 45,689,006$ 76,664,898$
Operating ExpensesResearch & Development 4,802,538$ 8,762,055$ 14,908,209$ 11,181,157$ 5,590,578$ 6,699,544$ 8,566,689$ 11,978,890$Depreciation & Amortization 102,416 1,415,424 2,582,706 8,332,917 11,904,167 23,808,333 23,808,333 23,808,333G&A Expenses 4,024,035 5,558,322 5,711,860.00 6,283,046 6,911,351 6,699,544 11,422,252 16,770,447
Total Operating Expenses 8,928,989$ 15,735,801$ 23,202,775$ 25,797,119$ 24,406,096$ 37,207,421$ 43,797,273$ 52,557,670$
Operating Income (7,926,315)$ (14,236,072)$ (21,738,429)$ (23,652,119)$ (13,916,596)$ (13,386,821)$ 1,891,733$ 24,107,228$
Other Income/(Expense)Interest expense (424)$ (3,438)$ -$ -$ -$ -$ -$ -$Interest income 1,423,320 2,145,370 531,697 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Realized Gain/(Loss) on Investments - (32,103) 59,383 - - - - -Realized Gain/(Loss) on Forward Contracts - (322,430) (541,771) - - - - -Unrealized Gain/(Loss) on Forward Contracts - (766,403) 766,403 - - - - -
Total Other Income/(Expense) 1,422,896$ 1,020,996$ 815,712$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$
Income Taxes* - - - - - - - -Net Income (6,503,419)$ (13,215,076)$ (20,922,717)$ (22,652,119)$ (12,916,596)$ (12,386,821)$ 2,891,733$ 25,107,228$
EBITDA (7,823,899)$ (13,941,584)$ (18,871,708)$ (15,319,203)$ (2,012,429)$ 10,421,513$ 25,700,066$ 47,915,562$
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Projection Assumptions
23
ASSUMPTIONS
MW Capacity Increase: based on the guidance from the companyfrom the expected ramp-up of the Fab2 facility to 2013 and then anincrease of 100% in 2014, based on significant expansion into theBIPV market through Norsk Hydros supply channels and distributionnetworks.
Factory Gate Price: based on the guidance from Daniel Tomlinson,Senior Associate of Business Development at Ascent Solar, Thinfilm modules for factory gate prices for 2009/2010 are expected to bepriced from $1.90 to $2.20. Based on industry data from IMSResearch, I have chosen $2.00 as the 2010 starting price and includeda price decay of 7.5% per year to account forprocess cost reductionsand
improved cell efficiency. Capacity Utilization: IC Insights is forecasting a steady rise in plant
capacity utilization from 52% in 2010 to 63% in 2011 and to 82% in2013. We have relied on these estimates as it reflects the economicrealities of the mismatch between photovoltaic capacity expansionsand slumping market demand that occurred in 2007 to 2009 in theindustry. A strengthening global economy should bring supply in linewith demand.
Revenue
ASSUMPTIONS
COGS: We have relied on forecasts from Photon Consulting: SolarSector Cost Review to estimate the 2010 COGS based on the Average All-In-Cost ($/W). COGS decrease from $1.45 in 2010 to $1.00 in2014.
Operating Expenses: According to industry estimates, recurringoperating expenses account for 10-20% of revenue. SG&A costs aretypically around 5-15% of revenue and R&D costs around 5-6%. Wehave estimated 2010-2011 based on company guidance, as stated inthe FYE 2010 Annual Report and smoothed 2012-2014 to graduallydecline to 22% by 2014, slightly above the industry average.
COGS & Operating Expenses
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Sources
24
Capacity Utilization:With PV manufacturers unable to abruptly curb additions to production plants, capacity utilization rates for solar devices are forecast toplummet from 83% in 2008 to 54% in 2009 and to 52% in 2010. However, the report is forecasting a steady rise in plant capacity utilizationto 63% in 2011 and to 82% in 2013. The efforts to achieve high levels of capacity utilization will stretch out to the end of the forecastperiod and will be an important contributor to the industry's reduction of the cost per watt of solar systems.http://www.1888pressrelease.com/solar-pv-capex-cuts-will-ease-capacity-growth-in-time-for-re-pr-127711.html
Cost $/Watt:
http://www.pvgroup.org/AboutPVGroup/ctr_029584;http://www.pv-tech.org/news/_a photon_consulting_picks_low_cost_solar_survivors/Thin-Film Price:
http://www.renewable-energy-sources.com/2009/03/14/pv-panels-price-forecast-for-2009/
Daniel Tomlinson - Senior Associate of Business Development at Ascent Solar
Low quality supply from China $1.80 to $2.20 (FOB)
Thin Film modules factory gate from $1.90 to $2.20
Px factory gate $2.40 to $2.80
Cz factory gate $2.60 to $3.00
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Sources (cont.)
25
PV Module Price:
http://www.solarfeeds.com/ims-research/10726-2009-pv-module-market--installations-and-shipments-up-revenues-down Gross Margin:
http://www.solarfeeds.com/ims-research/10203-quantifying-and-analyzing-pv-industry-q309-results
$2.00
~7.5% decrease/yr
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Sources (cont.)
26
Operating Expenses:
Most solar manufacturers have extremely low recurringoperating costs, with total R&D and SG&A costs under
20% of revenue. Suntech (STP), for example, reports totalSG&As and R&D at under 10% of revenue, whileSunpower (SPWRA, Evergreen Solar (ESLR), and FirstSolar are right around 15%.
One of the main reasons mid-size vendors have remained economically viable against multinational suppliers like Kyocera (KYO),Sharp, and BP is that R&D requirements for photovoltaics are extremely low once the product is released, with much of theremaining investment going to incremental efficiency increases. First Solar (FSLR), Suntech (STP), and Sunpower (SPWRA) all haveR&D/revenue ratios under 6%. The relatively low research requirements following a product launch prevent larger firms fromgaining big advantages through larger budgets, and more importantly, leave little room to cut R&D costs by merging two supplierstogether.
In addition to low R&D costs, solar suppliers' have very low SG&A costs, typically around 5-15% of revenue. So while the topthird of a solar company's income statement can make some investors wary, the middle third is usually very pleasing, especially in
comparison to IT companies, who can cut much more overhead through mergers and acquisitions.
With recurring operating expenses a very low 10-20% of revenue, there are few costs to cut by merging solar suppliers. Moreover,manufacturing efficiencies are hard to obtain by combining different materials or production processes, many of which areproprietary. Therefore, to reduce manufacturing overhead, a typical solar manufacturer has to get larger, but will not see muchbenefit from merging with a supplier that uses a different technology.
http://70.32.84.178/freesky-research/10975-low-operating-costs-preventing-pv-supplier-mergershttp://70.32.84.178/freesky-research/10842-pv-profitability-its-all-about-the-manufacturing-overhead-costs
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Competitive Industry Structure
27