Suntech Power Capital Structure

Reviewed by Arseny Lebedev BT 401 Due Diligence 12/3/2008

Table of Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Arseny Lebedev

Definitions ,[object Object],[object Object],[object Object],[object Object],[object Object],Arseny Lebedev

1. Pre-401 Summary Arseny Lebedev

Overview of PV 16-20% Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

PV Market Snapshot Arseny Lebedev ,[object Object],[object Object],Current market size: $10-15 Bn Sources: SolarBuzz, Analysts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Suntech Overview ,[object Object],[object Object],[object Object],[object Object],[object Object],Dr. Zhengrong Shi Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Important Facts ,[object Object],[object Object],[object Object],Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Changes in Comparables #1 Very similar operationally Vertically integrated for silicon production PV leader Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Comparables Arseny Lebedev $Millions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Income Statement Quarterly 2007 2006 (Sep '08) MEMC Total Revenue $ 546.0 $ 1,921.8 $ 1,540.6 Gross Profit $ 269.7 $ 1,000.0 $ 689.0 Operating Income $ 227.5 $ 849.9 $ 558.3 Net Income $ 182.8 $ 826.2 $ 369.3 STP Total Revenue $ 594.4 $ 1,348.3 $ 598.9 Gross Profit $ 128.3 $ 274.1 $ 148.9 Operating Income $ 87.1 $ 171.6 $ 103.2 Net Income $ 55.9 $ 171.3 $ 106.0 Qcells Total Revenue $469.56 $1,125.78 $710.02 Gross Profit $130.03 $424.41 $273.09 Operating Income $69.40 $254.13 $166.41 Net Income $94.94 $191.44 $125.26

II. Financial Markets Arseny Lebedev

Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],“ Suntech slashed its revenue forecasts for the fourth quarter, blaming the euro's sudden fall against the dollar and delayed orders by customers who had trouble getting project financing.” – Steve Gelsi, MarketWatch

Lifetime Stock Performance (STP) $80 $25 $8 80% Loss Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Since Last May $40 to $8/share Qcells Suntech MEMC Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Analyst Coverage Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Marketwatch

Shareholders 64% of outstanding stock is held in the US Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

IV. Business Model Analysis Arseny Lebedev

PV Value Chain Majority of Revenue Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Products: PV Cells PV Modules Arseny Lebedev Priced in Watts, i.e. $4.00/Watt ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Segments & Ratios Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

P&L Arseny Lebedev $Millions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object], FY 08 Q3 Q2 Q1 7-Dec 6-Dec 5-Dec 4-Dec estimate 8-Nov 8-Jun 8-Mar (TTM) (TTM) (TTM) (TTM) Total Revenue $1,865.00 $594 $480 $435 $1,348 $599 $226 $85 Cost of Sales $1,398.75 $466 $364 $338 $1,047 $439 $154 $58 Gross Operating Profit $466.25 $128 $116 $96 $301 $160 $72 $27 Operating Profit before Depreciation (EBITDA) $251.78 $87 $77 $62 $199 $115 $47 $22 Total Net Income $ 216.94 $56 $65 $56 $ 171 $ 106 $ 31 $ 20

Capital Expenditures Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

3. Capital Structure Arseny Lebedev

Debt / Equity 3 rd Quarter Arseny Lebedev 2 nd Quarter ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Other Debt Items Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Derivatives Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Leverage Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Debt / Equity Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Cost of Capital Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Utilized vs. Potential Capacity Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Why so Debt Heavy ? Utilized/Unutilized Capacity Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Total: 750 MW 2008 Total: 1 GW 2009

Governance Nuggets ,[object Object],[object Object],[object Object],[object Object],[object Object],Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Corporate Structure Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Board of Directors Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Name Title Expertise Shi, Zhengrong Chairman of the Board, CEO Technical Know-How Maynard, Jason Independent Director Finance Qiu, Zhi Zhong Independent Director Finance Zhang, Songyi Independent Director Finance Worley, Julian Independent Director Finance

Shareholders Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

GAAP vs Non-GAAP, Misc Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Market Valuation Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Discounted Cash Flow Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Assets 3 rd Quarter Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Asset Nuggets Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Inventory Turns Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

P/E History Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Metrics Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

More Ratios Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

5. Other Risks, Conclusion Arseny Lebedev

Risks ,[object Object],[object Object],[object Object],[object Object],Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Silicon Shortage 88% of global polysilicon supply comes from five companies. ,[object Object],[object Object],[object Object],[object Object],[object Object],Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Suppliers

Polysilicon Prices Per Kilogram Source: Lehmen Brothers + Industry News Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Invest Focuses Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Conclusion (Investor POV) Arseny Lebedev ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Negatives Positives ,[object Object],[object Object],[object Object],Short: Buy @ < $10 Long: Buy & Hold < $15 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Disclaimer: I am an optimist. And STP shareholder.

Suntech Power Capital Structure

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