Thank you for the insightful presentation on First Solar and the solar energy sector. I appreciate you taking the time to provide such a thorough analysis.

1. First Solar Inc., (FSLR)
Raja Uppuluri (MScE)
McGill University (MBA 2nd year)

2. About me..
• Completed MScE from University of New
Brunswick (2005)
• Worked as an Lead Project Analyst at MDA
Space missions for 4 years (2005-09)
• Started MBA-Finance at McGill and
expected to graduate in 2009/10
• Doing Intern at Lester Asset Management
as Equity analyst covering Energy Sector
• Working as Buy-Side Equity analyst at
Desautels Capital, McGill owned company 2

3. Agenda
Sector Overview
Company Overview
Financial Analysis
Valuation
Risks and Concerns
Q&A
3

4. Pollution due to power
generation
• Power generation contribute more than
40% of global carbon dioxide (Co2)
• Global energy demand projected to grow
by more than 50% between now and
2030. Result, CO2 emissions could
increase 55% compare to 2004 levels
4

5. Carbon Footprint is a Fraction
of Conventional Sources
*Source: FSLR 2009 Investors Relations meeting
5

6. Emphasis on Renewable
Energy
Various governments set a new goal requiring utilities to
obtain their power from renewable sources as follows:
• European Union - 20% by 2020
• California - 33% by 2020
- 80% by 2050
• China - 20GW Solar by 2020
• India - 20GW Solar by 2020
More jobs creation: For million dollar investments
Solar Industry - 5.65
Wind Energy - 5.70
Coal Industry - 3.96
6

7. Cost comparison
Coal 2-6 cents per kWh
Nuclear 2-5 cents per kWh
Wind 3-6 cents per kWh
Natural gas 5.5-9 cents per kWh
Biomass 5-10 cents per kWh
Geothermal 5-10 cents per kWh
Solar 12-35 cents per kWh
Source: US Department of Energy, Energy Information Administration, World Nuclear Association, IEA, Oregon.gov, WSJ
article - "The New Math of Alternative Energy", 2007.
7

8. Cost of Solar Electricity vs.
Grid Electricity
2009E 2010E 2011E 2012E
Germany Solar Electricity € 0.38 € 0.33 € 0.31 € 0.29
Grid Electricity € 0.22 € 0.24 € 0.26 € 0.28
Italy Solar Electricity € 0.26 € 0.23 € 0.22 € 0.21
Grid Electricity € 0.26 € 0.28 € 0.30 € 0.32
United States Solar Electricity $0.22 $0.19 $0.18 $0.17
Grid Electricity $0.10 $0.10 $0.11 $0.11
Japan Solar Electricity ¥30.04 ¥24.16 ¥22.10 ¥20.80
Grid Electricity ¥20.68 ¥20.56 ¥20.39 ¥20.29
8

9. Global Solar Module Demand
25
20
15
10
5
0
2007 2008 2009 2010 2011 2012
Source: UBS Solar Industry Report June 2009
9

10. Global Solar Module
Average Selling Prices
$/Watt
$4.00
$3.00
$2.00
$1.00
$0.00
2008 2009 2010 2011 2012
Source: UBS Solar Industry Report June 2009
10

11. Solar Sector Overview
Significant growth in future
Subsidies across the world
Least Global Warming Potential
Recommendation: Long Term
11

12. Investment Thesis
General Industry Specific
• Capital structure • Manufacturing
• Margins cost
• Management • Conversion
• Manufacturing efficiency
Capacity • Suppliers & Long
term contracts
• Subsidies
12

13. An Investment Opportunity
Strong Attractive
Balance Sheet Growth
FSLR
Long Term Industry
Projects Leader
13

14. Company Snapshot
Market Cap $12.5 bil Price 145
52-Wk
Total Debt $249 mil Range $85.28-$317
Inst. Own 54% P/E 26
No. Shares 85 mil Div Yield 0
14

15. Company Overview
Designs and manufactures solar
modules
Top player in the Solar Industry
Operations in Germany, Malaysia,
United States etc.,
Reported revenues of US$1.25 billion
in FY2008 (550MW)
Outperforming Management
15

16. Manufacturing Method
16

17. Projects & Applications
• Leading system integrators, independent power
project developers, and utility companies to
implement turnkey solar power systems.
Free Field Power
Plants
Commercial
FSLR Customers
Rooftop Systems
Residential
Rooftop Systems
17

18. Free Field Power Plants
Region: Boulder City, NV
Project Size: 10 MW
Region: Brandis, Germany
Project Size: 40 MW
18

19. Commercial Rooftop Systems
Region: Gescher, Germany
Project Size: 1.4 MW
Region: Fontana, CA
Project Size: 2 MW
19

20. Revenue
5%
21% Germany: US $920 mil
Other: US $265
US: US $63
74%
20

21. Operations
21

22. Production Capacity: 2008
(23 lines x 49MW/line/year)
22

23. Top player in the industry
Long-term Contracts: $6 billion (2009-12)
Outperforming Management
Lowest Manufacturing cost
Conversion Efficiency
23

24. Outperforming Management
• Outperforming results
• Transparent
• Reduced the manufacturing cost
and increased the margins
significantly
• Improved factory run rate
24

25. Low Manufacturing Cost
FSLR •$0.93/watt
Tier-1 •$2.5-$3.0
Tier-2 •$2.0-$2.5
25

26. Cost ($/Watt)
1.59
1.5 1.4
1.23
0.98
1 0.93
0.65
0.5
2005 2006 2007 2008 2009 1Q 2010 2011 2012
Cost
26

27. MFG cost Reduction Roadmap
27

28. Factory Run Rate
28

29. Module Conversion
Efficiencies
29

30. Conversion efficiency
FSLR SPWRA STP ENER
Conv. Efficiency (%) 10.9 19.3 15-17 6.3
• The record for cadmium telluride cell
efficiency is 16.5 percent, which was
achieved in a lab by the United States'
National Renewable Energy Laboratory
30

31. Financial Analysis
31

32. Financial Performance (1)
3,400
Revenue ($mil)
2,600
2,100
1,246
504
135
2006 2007 2008 2009E 2010E 2011E
300
200
$145
100
0
17-Nov-06 17-Nov-07 17-Nov-08
32

33. Financial Performance (2)
33

34. Financial Performance (3)
3
Act. EPS Exp. EPS
2.5
2
1.5
$
1
0.5
0
Q4 06 Q3 07 Q2 08 Q1 09 Q4 09 Q3 10
-0.5
34

35. Financial Performance (4)
Stock Price EPS
300 2.5
2
200
1.5
Price
EPS
1
100
0.5
0 0
Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
35

36. Financial Performance (5)
$1,600 60%
54.4%
49.0%
Gross Margin
$1,200 40.2% $1,246 40%
34.5% 35.2%
27.2%
22.4%
$800 20%
15.7%
RONA
Operating Margin 2.1%
$400 -5.5% 0.2% $504 0%
-10.0%
$135
$48
$0 -20%
FY05 FY06 FY07 FY08
36

37. Financial Performance (6)
First
Performance Solar
Industry
Revenue ($m) 1,246 1,205
Gross Margin (%) 55 24
Operating Margin(%) 35 8
Profit Margin (%) 28 5
ROA 20 3
ROE 26.7 7
37

38. Financial Performance (7)
Capital Structure: Cash is “KING”
1,500 1495 Cash ($m)
Total Debt ($m)
1,000 827 760
467 406
500 249 340 339
151 200
0
First Solar SunPower Corp Sun Tech Power Yingli Green Energy Conv Dev
Energy
400% 332% Debt/Equity Cash/Debt
200% 172%
121% 100%
42% 32% 27% 48% 26%
14.0%
0%
First Solar SunPower Sun Tech Yingli Green Energy Conv
Corp Power Energy Dev
38

39. 2009 1Q Results
•Global down turn effect:
•Sales went up significantly: From $418.2 mil
(2009 1Q) to $196.2 mil (2008 1Q)
•EPS (2009 1Q):
• $1.99 compared to analyst estimation $1.51
•Most of their competitors posted losses
•Gross margin was an eye-popping 56% compare
to analyst estimates 50%
•The cost per watt declined from $0.98 to $0.93
•Efficiency edged up from 10.8% to 10.9%
39

40. 2009 1Q Results (ctd..)
•Receivables rose from $62 million in 4Q/08 to $185
million; days receivables jumped from 13 to 40
•Low silicon price : pressure on margins
•CEO Mike Ahearn will give up his CEO duties to
focus on public policy as executive chairman.
Inventory Days Acc Receivable Acc Payable
days (DSO) Days (DPO)
2008 09 1Q 2008 09 1Q 2008 09 1Q
First Solar 55 65 13 40 21 21
Suntech Power 51 84 46 76 26 53
40

41. Will it maintains the
current growth..?
41

42. Growth Analysis
Revenue
COGS
FX
Loan and Interest payment
Income Tax
Market Expansion
42

43. Revenue
• Long term contracts: USD $6 billion
• Every year price reduce 6.5%. FSLR has to
reduce its manufacturing cost more 6.5%
• 5 main Customers: Each accounted for 11%
- 19% of FLSR sales
• Opti Solar Production Line
• Actively enter into the US market
• Possible reduction in its price
– Close to 10 % to remain as a industry leader
43

44. COGS
• Long term contracts with suppliers
• Low manufacturing cost and more
subsidies
– Labour costs
– Other expenses
• Low cost of input material: Glass,
glue etc.,
44

45. Other
• FX
– $0.01 change in Euro effects 10mil
– Bearish on USD (US economy grow)
• Loan Payment
– Less debt, no immediate payment, high cash
• Income Tax
– Tax Holiday: more than half of its
manufacturing in Malaysia
• Market Expansion
– US, China, India, etc., 45

46. Correlation between oil, and
FSLR stock price.
FSLR Oil
300 150
FSLR stock price
200 100
Oil Price
100 50
0 0
Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09
46

47. Company outlook
Key Issues Effects
Long term contracts ↑ Revenues
Subsidies/Laws ↑ Revenues & ↑ Growth
Management ↓ Margins & ↑ Market Size
Change in FX ↓ Costs & ↑ Profits
47

48. Investment Thesis
General Industry Specific
• Capital structure • Manufacturing
• Margins cost
• Management • Conversion
• Manufacturing efficiency
Capacity • Suppliers & Long
term contracts
• Subsidies
48

49. Valuation
49

50. Target Price
P/S
P/E 2.9x
23x
*20% Premium to Industry multiples
50

51. Risk factors
Major Minor
95% of revenue from Reduction in subsidies:
Europe Germany 6%↓
Input material
5 big customers
interruption
Conversion Efficiency Lucrative market
Oil and Natural gas
price
Poli-silicon price drop
Technology Risk 51

52. Q&A
First Solar Solar Sector
• Customers • Obama Energy Plan
• Opti-Solar • Crystalline silicon Vs. thin-film
• Top Holder • World Solar Demand
• Hedging • Solar Energy Production
• Margins Comparison US Market
• Performance • Recent deals
• Capex • US Solar Market: Segment
• Improvement in conversion • US Solar Installations by State
efficiency • U.S Utility Market Progress
• Efficiency potential of CdTe Poli-silicon
• Multiple Comparison • Polisilicon price forecast
• SWOT Analysis • Polisilicon price and effect on
• Recent deals FSLR
Risk factors • Poly Si cost vs Module Cost Vs
• Supply base interruption FSLR cost
• Technology Risk: BIPV
END 52

53. Back Up Slides
53

54. Customers
• It has long-term solar module supply
contracts with one United States and 15
European project developers
• The Company’s customers develop, own
and operate solar power plants or sell
turnkey solar power plants to end users that
include owners of land, owners of agencies
• Blitz Storm, Colexon Energy AG, Conergy
AG, Juwi Solar GmbH and Phoenix Solar
AG
54

55. Opti-Solar
•Price: $400 mil
•Acquisition of the Project Pipeline and
Development team of OptiSolar
• 550MW Topaz project with PG&E
• 1,300MW of projects in negotiations with
utilities in the Western U.S. •
•Expected incremental volumes of 600-
700 MW from 2010-2013
• Strategic land rights of ~136,000 acres
(up to 19,000 MW) 55

56. Top Holders
Shares % Share Filing
Held O/S Change Date
Estate of John T 23,003,857 28.2 0 12/31/08
Walton
JCL Holdings L.L.C. 10,102,002 12.4 -2,000,000 12/31/08
Capital World 4,400,000 5.4 4,400,000 12/31/08
Investors
Ahearn (Michael J) 3,573,839 4.4 -523,500 04/14/08
Fidelity Management 3,270,145 4.0 459,123 12/31/08
& Research
Federated Investors 1,943,501 2.4 755,972 09/30/08
Inc.
56

57. Hedging
•First Solar has hedged 26% of its forecasted 2009
revenue and 33% of anticipated net income at $1.42
per Euro
•The company has hedged 52% of its revenue for
the first half of 2009 and 12% of its revenue for the
second half
•Roughly $10M impact from a $0.01 change in the
average value of the Euro
57

58. Margins Comparison
First SunPower Sun Tech Energy Conv
Column1 Solar Corp Power Dev Industry
Revenue
($m) 1,246 1,435 1,924 256 1,205
Gross
Margin 54.43 25.35 17.83 29.13 24
Operating
Margin 35.17 11.74 9.49 2.52 8
Profit Margin 27.95 6.43 5.77 1.51 5
ROA 19.99 4.95 4.27 0.47 3
ROE 26.69 9.79 11.19 0.66 7
58

59. Performance
2008 2007 2006
Revenue (mil) 1,246 504 135
Gross Margin
(%) 54.43 49.88 40.19
Operating
Margin(%) 35.17 27.22 2.08
Profit Margin
(%) 27.95 31.42 2.94
ROA 19.99 16.24 1.17
ROE 26.69 20.99 1.87
59

60. Capex
Increasing factory run rate from 49 (2009 1Q) to
>80 (2014)
60

61. Improvement in conversion
efficiency
61

62. Efficiency potential of CdTe
Source: First Solar Inc., 2009 Investors relations conference
62

63. Multiple Comparison
First SunPower Sun Tech Energy
Solar Corp Power Conv Dev Industry
Price/Sales 5.19 1.241 1.526 1.715 2.418
P/E 18.13 14.003 22.769 21.656 19.1395
P/B 4.278 1.712 2.218 0.821 2.25725
EV/EBITDA 12.405 8.125 13.953 8.538 10.75525
63

64. SWOT Analysis
Strengths Weakness
•Top player in industry • Customers are facing
•Long term contracts financial issue
•Good Management • Solar Industry Growth
•Independent on Silicon
Opportunities Threats
•Strong growth in foreseeable • More competition
future •Break through technology
•Expanding in US & Malaysia
64

65. Recent deals
• Opti-Solar Project: Supply 550 MW in ext 4
years
• Solar City Corporation: Five year contract,
supplying 100 MW
• Masdar Abu Dhabi Future Energy Company:
supply 5MW
• Sempra Generation: Supply 48 megawatt
• Tri-State Generation and Transmission
Association: 25-year contract, supply 30MW
• Solar Shop Australia, Pty Ltd: Supply 1 MW
65

66. Obama Energy Plan
Bill includes a host of provisions that will greatly benefit the
renewable energy industry
1. Congress extended the 30% investment tax credits for
clean energy.
2. Bill would allow taxpayers to receive a grant from the
Treasury Department
3. Caps on the tax credits for residential solar hot water
will be removed.
4. Create five million green jobs and invest $150 billion in
a "clean energy economy" over 10 years
5. Mandate an increase in the use of renewable energy:
10% of the nation's electricity consumption from
renewable energy sources by 2012, and 25% by 2025.
6. Manufacturing credits will not effect as it has only 66

67. Crystalline silicon Vs. thin-film
67

68. World Solar Demand
Solar Demand
(MW) 2006 2007 2008 2009E 2010E
Germany 968 1,328 1,800 2,000 2,500
Spain 110 640 2,400 500 460
Japan 300 230 300 600 750
U.S.A. 140 220 400 600 1,500
Other 226 408 680 1,900 3,950
Total 1744 2826 5580 5600 9160
Source: Banc of America Securities - Merrill Lynch estimates
68

69. Solar Energy Production:
Other, 0.3
Japan, 0.3
US, 0.4
2008: 5.5 GW
Spain, 2.5
2010: 9-10 GW
Germany, 1.5 2013: 10-20 GW
69

70. Recent deals
• Opti-Solar Project: Supply 550 MW in ext 4
years
• Solar City Corporation: Five year contract,
supplying 100 MW
• Masdar Abu Dhabi Future Energy Company:
supply 5MW
• Sempra Generation: Supply 48 megawatt
• Tri-State Generation and Transmission
Association: 25-year contract, supply 30MW
• Solar Shop Australia, Pty Ltd: Supply 1 MW
70

71. US Solar Market: Segment
700
595
600 565
500
400 340
MW
300
200 143.7 167159138
162.3
109
100 73.8 51
22
0
2007 2008 2009E 2010E
Source: IREC, SEIA, UBS Estimates Residual Commercial Utility
• The biggest growth was in the utility segment driven mostly by
California’s 20% 2010 Renewable Portfolio Standard
71

72. US Solar Installations
by State
Others
24%
Colorado
7% California
61%
New Jersey
8%
72

73. U.S Utility Market Progress
73

74. Polysilicon price forecast
74

75. Polisilicon price and effect on
FSLR
• Poly silicon prices moved from $70/kg
(2007) to $450/kg.
• Oversupply: Price went down to $70-80/Kg
and stay around 50-70$ in 2009-10.
• Impact:
– End of 2008, FSLR did not face any impact
due to less poly silicon price.
– FSLR is 90% sold out this year. May impact
2010
75

76. Poly Si cost vs Module Cost
Vs FSLR cost
76

77. Supply base interruption
– Uses approx. 20 types of raw materials
– Most of the company’s critical materials or components
are either single sourced or supplied by a limited
number of suppliers
– Suppliers are small companies that sometimes might be
unable to supply the company’s increasing demand.
– VNP: main supplier. They will not buy this company as
they may need large Capex to maintain the company.
More over investment community may not like the idea.
77

78. Technology Risk: BIPV
• BIPV: Building Integrated Photo voltaic cells. Their
product is not well suited for this technology. They never
mentioned in the quarterly or yearly meetings so far. In
simple terms, not suitable for old buildings. May suitable
for new building construction. Sun power and First solar
are not qualified for the subsidy program offered by Italy
and France. First solar is mainly for suitable for Free field
Power plants, commercial and Residential Rooftop
systems. On top of that only Italy and France are givng
subsidies. But markets in these two countries are not so
big so I am not expecting FSLR will do more research on
this technology.
78

79. Thank You
79