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Polysilicon 2012-2016: Supply, Demand & Implications for the Global PV Industry

Webinar on February 9, 2012

Moderator: Carolyn Campbell Research Associate campbell@gtmresearch.com

Speaker: Brett Prior Senior Analyst prior@gtmresearch.com

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http://www.greentechmedia.com/research/report/polysilicon-2012-2016

200+ Pages 120+ Company profiles 90+ Charts, Tables, and Illustrations Historical and forecast capacity, cost, and price from 2008-2016

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Why should you care about the cost of polysilicon?
Because lower poly prices and higher module efficiency will shave ~$0.20/W off the cost of a c-Si module in 2012 alone

Numbers look too low? Here are the 3Q11 results: Forecasts included in the full report • Trina
• • • $0.65/W non-silicon cost $0.37/W silicon cost $1.02/W total cost

Best-in-class conversion costs by step
• • • • Wafer Cell Module Non-Si $0.17/W (GCL) $0.17/W (LDK) $0.28/W (CSI) $0.62/W

Forecasts included in the full report

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Solar PV manufacturing 101

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Polysilicon manufacturing 101

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Polysilicon industry is concentrated, could be considered a “balanced oligopoly”

HHI is measure of industry concentration on a scale of 0 to 10,000 (10,000 is a monopoly) A market with an HHI less than 1,000 is regarded as competitive Poly industry is ~640

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Even with 22 GW of c-Si PV installed in 2011, there still remains significant oversupply at all stages of the value chain

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

China, the US, and Korea are the 3 largest producers of polysilicon

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Costs that vary by technology include energy (~13%), and depreciation & interest (~48%)

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Energy use matters, and in this category FBR and UMG win

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

But Capex (which determines Depreciation & Interest) is much more important than energy use, and on this metric Siemens HC and UMG “take the cake”

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Lower purity poly sells at a 10-30% discount to higher purity poly

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Excluding Depreciation & Interest, FBR is the cost leader

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

But, when depreciation & interest are included, Siemens HC is the lowest cost option

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

And on the most important metric, profit, Siemens HC again takes the gold

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Historically, capacity has remained close to total demand

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

But in the last 4 years, capacity growth has outstripped demand growth, and this imbalance may get worse before it gets better

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Profit margins are key to understanding where pricing is headed

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Spot prices are driven by cash costs, whereas contract prices have a floor set by total costs

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Since 2009, cash costs for poly have been reduced from ~$40/kg to <$20/kg
Poly Cash Costs (excl depreciation, SG&A), 2009-present
$80

Poly Cash Cost, excl depreciation ($/kg)

$70

$60
$50 $40
ReneSola, $36

$30

$20
$10 $0

GCL, $18

LDK, $20 OCI, $18 Daqo, $18

REC FBR, $13

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 2012

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Depreciation adds another $3-8/kg to manufacturing costs
Poly Manufacturing Costs (incl depreciation, excl SG&A), 2009-present
$120

Poly Manufacturing Cost, incl depreciation ($/kg)

$100 $80 $60

$40
$20 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 2012

LDK, $27 Daqo, $22 GCL, $21 REC FBR, $20

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Poly ASPs collapsed in 4Q 2011, falling over 40% at REC
$80
$70 $60
REC, $57 Daqo, $52 GCL, $44 42% drop from 3Q to 4Q

Poly ASP by Manufacturer, 2010-present

Poly ASP ($/kg)

$50 $40

REC, $35

$30 $20 $10 $0

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

EBITDA Margins have fallen from very attractive (50-70%) to toxic in just 4 quarters

EBITDA Margin by Poly Manufacturer, 2008-present
80%
OCI, 70%

EBITDA Margin, % of revenue

70% 60%

50%
40% 30%

REC, 51% Wacker, 39% OCI, 34% REC, 28%

20%
10% 0%
1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Including the impact of depreciation, EBIT margins are now approaching 0%
EBIT Margin by Poly Manufacturer, 2008-present
60%
OCI, 57%

EBIT Margin, % of revenue

50%
40%
REC, 34%

30% 20%

Daqo, 29%

10%
OCI, 6% REC, 4%

0% 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

What is next for the polysilicon industry?
• Where is pricing headed?
• When will the plant closures allow the supply/demand gap to close? • The feast is over - which companies are best positioned to survive this period of famine?

1. Polysilicon Overview

2. Comparison of Polysilicon Production Technologies

3. Polysilicon Supply and Demand

4. Polysilicon Economics

Supply stack analysis can help to reveal the likely winners and losers, as well as future pricing trends

Cost estimates for every operational poly plant included in the full report

Q&A
Moderator: Carolyn Campbell Research Associate campbell@gtmresearch.com Speaker: Brett Prior Senior Analyst prior@gtmresearch.com