Solar Merger & Acquisition Activity
Transaction Activity in the Solar Industry Solar transactions by year
Solar transactions by quarter 35
100 90 80 70 60 50 40 30 20 10 0
30 25 20 15 10 5 0
2005
2006
2007
2008
YTD Q3 2009
Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09
• 32 completed solar energy transactions in Q3 2009 representing a 100% increase from the 16 recorded in Q3 2008 • YTD 2009 transaction volume is 8.0x the volume within the solar industry exhibited in 2005 • 2009 is on track to be another record year from a transaction perspective • Drivers include companies diversifying into solar, strategic combinations due to capital constraints, and consolidation within fragmented sectors (i.e. installation)
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Transaction Activity by Sector Over the last year EPC Integrators / Developers have been the most active category for solar transactions Transaction volume by target company category
14 12 10 8 6 4 2 0 Q4-08
Q1-09
Equipment for Solar Industry Cells/Modules EPC Integrators / Developers
Q2-09
Q3-09
Producers of Solar Energy Vertically Integrated Companies Wafers/Ingots
• Consolidation and the limited availability of project financing is driving continued EPC Integrators / Developers transaction volume • There is also significant growth in transactions of Producers of Solar Energy (already in place MW)
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Types of Solar Transactions Consolidation and Vertical Integration continue to be driving forces of transaction volume Transaction volume by quarter and type of transaction 16 14 12 10 8 6 4 2 0 Q4-08 Q1-09 Consolidation Diversification into Solar Energy
Q2-09 Q3-09 Vertical Integration Private Equity/Investors
• Vertical integration and Consolidation combined for 22 transactions representing nearly 69% of total transaction volume in Q3 2009 • Entry into solar has increased over the last year both through private equity investment and diversification
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Geographies of Solar Transactions Transaction volume in the United States and Europe continues to grow Solar transactions by quarter
Solar transactions by year 35 30
20
25
15
20 15
10
10
5
5
0
0
Q4-2008 U.S./Canada
Q1-2009 Europe
Q2-2009 Asia
2008
Q3-2009
Cross-Border
U.S./Canada
Europe
Asia
Cross-Border
• The European market still exhibits its maturity and leadership in the solar industry remaining the leader in transaction activity with 53% of the transaction volume for Q3 2009 and 47% for 2008 • U.S./Canada transaction volume has nearly tripled since Q1 2008 • The stimulus legislation is driving additional transaction growth with more opportunities being created in the solar industry
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Solar Company Valuations Multiples have declined through Q1 2009 and are now showing an increase in Q2 and Q3 2009… Enterprise value / EBITDA
Multiple of EBITDA
Enterprise Value*/ EBITDA 30.0x 20.0x 10.0x 0.0x Q3-08
Q4-08
Wafers/Ingots Vertically Integrated
Q1-09
Q2-09
Q3-09
Cells/Modules EPC Integrators/Developers
Valuations on the rise Note: Enterprise Value is calculated as Market Cap on September 30, 2009 plus debt, preferred equity and minority interest less cash
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Future Expectations
The Future is Bright for Solar
Look for market growth beyond 2009 into 2010
The U.S. Solar market growth will outpace more mature foreign markets
Solar OEMs moving toward outsourcing module assembly
Project financing is essential for success
Strategic alternatives are key to making existing companies successful for the future
Revenue for companies in the worldwide solar industry is expected to be down or essentially flat for 2009, however solar projects have been growing Share gains will come to differentiated players with strong balance sheets Companies need to broaden markets, expand geographies, and execute mature business plans to emerge stronger when industry growth resumes
Stimulus benefits are providing incentives that will drive industry growth Potential growth acceleration with RPS initiatives or the establishment of feed-in-tariffs
Module assembly and manufacturing is not a core competency of most solar companies and is more efficiently provided through outsourcing arrangements Divestiture of internal module assembly and manufacturing capacity provides the greatest immediate benefit to a solar company (e.g. greatest value achieved through sale “process”)
The PPA party is critical for project financing Access to tax equity and tax equity partners is critical to project financing Interest from international strategic partners in U.S. projects provides an alternative to traditional project financing sources
Solar companies will need to focus on their core competencies Current capital constraints will force companies to pursue focused strategies Alternatives made available through mergers, acquisitions, or divestitures will be necessary to help companies capitalize on future market growth and sustain leadership positions
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