ukpvc 2010 bruce huber - the business opportunities according to a leading investmant banking group
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Investment Banking Perspective: Solar PV
June 2010
Authorised and regulated by the Financial Services Authority Jefferies International Limited
Bruce Huber, Managing Director Global Head Cleantech Investment Banking
bhuber@jefferies.com +44 20 7029 8020
June 2010
Overview Of Jefferies
Key Points
New York Stock Exchange Listed “JEF”
Founded 47 years ago
One of the great success stories on Wall Street
$28 billion in assets
2,700 employees, high employee productivity
International headquarters in London; worldwide headquarters in New York
35% owned by employees and directors
No government involvement in any form
Primary Dealer for Federal Reserve, UK Debt Management Office and German Debt Management Agency
LTM Net Revenue / Number of Employees ($Thousands/Employee)
1.466
884
665 494 485 457 434 408 342 309
Goldman Sachs Jefferies Credit Suisse Deutsche JPMorgan Morgan Stanley UBS BofA Barclays Citi Source: As of latest earnings announcements, except of Barclays as of 12/31/09
Principal Offices
Source: Stock price from Capital IQ, as of 04/30/10
Jefferies stock price has consistently outperformed peers Since 01/01/00 Since 01/01/02 Since 01/01/04 Since 01/01/06 Since 01/01/08
Bank %
Change Rank %
Change Rank %
Change Rank %
Change Rank %
Change Rank Jefferies 395% 1 157% 1 65% 1 21% 1 18% 1 Goldman Sachs 54% 2 57% 2 47% 2 14% 2 (32%) 4 JPMorgan (18%) 3 17% 3 16% 3 7% 3 (2%) 2 Barclays (24%) 4 (41%) 6 (32%) 6 (45%) 6 (33%) 5 Banc of America (29%) 5 (43%) 7 (56%) 8 (61%) 8 (57%) 8 Credit Suisse (37%) 6 (30%) 4 10% 4 (26%) 4 (27%) 3 Deutsche Bank (38%) 7 (35%) 5 (22%) 5 (37%) 5 (42%) 6 Morgan Stanley (58%) 8 (46%) 8 (48%) 7 (47%) 7 (43%) 7 Merrill Lynch (72%) 9 (78%) 10 (80%) 10 (71%) 9 (78%) 10 Bear Stearns (78%) 10 (84%) 11 (88%) 11 (77%) 11 (89%) 12 Citigroup (90%) 11 (91%) 12 (91%) 12 (91%) 12 (85%) 11 UBS (92%) 12 (60%) 9 (60%) 9 (73%) 10 (66%) 9 Lehman Brothers (100%) 13 (100%) 13 (100%) 13 (100%) 13 (100%) 13
United States Atlanta Boston Charlotte Chicago Dallas Houston Los Angeles Nashville New York San Francisco Silicon Valley Stamford Washington DC
Europe Frankfurt London Paris Zurich
Asia Hong Kong Mumbai Shanghai Singapore Tokyo
1
June 2010
Cleantech Investment Banking
Jefferies is one of the few international investment banks with an integrated global Cleantech investment banking practice – covering renewable energy and sustainable technologies
25+ professionals working across Europe, North America and Asia
Industry-focused top-rated research targeting the global Cleantech sector – covering the entire value chain for solar, wind power, water, advanced batteries, efficient lighting/LEDs, fuel cells, biofuels and biomaterials
Global Cleantech industry conferences (2x per year, Europe and North America) represent one of the largest growth-equities platforms for investors and issuers today
Jefferies has the leading track record in financing emerging technologies
2
June 2010
Power Management/ Power Storage/ Infrastructure
Solar/Wind Clean Fuels/ Renewable Resources
Jefferies Has Raised In Excess Of $4Bn For Cleantech Clients Globally Since ‘05
3
June 2010
Equity Research: We Maintain Leadership In Solar (And Broader Cleantech)
% of Companies Covered by Market Cap
101 research professionals
Over 610 companies covered
33 research professionals
17 senior research analysts
Over 150 companies covered
2009 Research has sponsored 18
investor conferences in Europe and US
Non-deal roadshows for 239 companies over 351 days
Sources: Bloomberg and Autex. Includes Follow-Ons and IPOs from 1 July 2007 to 30 June 2009. Autex ranking is from pricing to 30 June 2009. Excludes bought deals.
Jefferies has the best track record in providing ongoing research for clients
Broad Research Coverage Of The Solar Sector Globally Coordinated Sector Research
Jefferies Long-term Research Commitment for Bookrun Equity Offerings
Rank Bank % covered Avg. Autex Ranking Rank Bank % covered Avg. Autex
Ranking 1 Jefferies 100.0% 3.3 1 Jefferies 100.0% 4.6 2 JP Morgan 96.4% 3.8 2 Barclays 80.6% 11.6 3 Citigroup 84.0% 4.0 3 JP Morgan 78.9% 6.0 4 Deutsche Bank 83.3% 5.1 4 Deutsche Bank 73.6% 5.9 5 Credit Suisse 82.1% 2.9 5 Citigroup 72.1% 2.9 6 Barclays 77.3% 17.1 6 Credit Suisse 68.3% 3.1 7 UBS 75.0% 1.7 7 Bank of America 68.0% 2.7 8 Morgan Stanley 74.3% 1.9 8 UBS 66.1% 2.0 9 Bank of America 73.5% 16.9 9 Goldman Sachs 61.5% 7.3 10 Goldman Sachs 72.4% 6.2 10 Morgan Stanley 50.0% 2.8
IPOs: Follow-ons
4
June 2010
While Europe continues to dominate end market installation, global annual PV projections show gradual shift toward US, China and India (1)
38%
3% 12%
4% 1% 3%
4%
35% Germany
Spain
Italy
France
UK
Czech Republic
Rest of Europe
RoW
Solar poised for strong growth (GW) (1) PV module prices are declining towards retail grid parity (2)
8
14 14
16
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012
2009: ~8GW 2012: ~16GW
GW
3,77
3,84
2,47 2,37 1,92
1,69
0,00
0,50
1,00
1,50
2,00
2,50
3,00
3,50
4,00
4,50
2007 2008 2009 2010 c-Si Europe
2010 c-Si China
2010 Thin-Film
a-Si
APP $/Wp
Strong Fundamental Drivers Continue To Propel Solar’s Growth
(1) Source: Jefferies estimates; Bloomberg New Energy Finance (2) Source: Jefferies. Average purchase price for end buyers of solar modules
52%
3% 10%
3% 0% 5%
5%
22%
5
June 2010
Solar Components
150%
15%
(18%)
(24%)
(4%)
FTSE 100
Downstream
Solar Cells/Modules
Integrated Solar
Trading Performance Of Solar Since ’09 Shows High Volatility …Except For Component Suppliers Who Represent Bottlenecks In The Supply Chain!
Integrated Solar: REC, SolarWorld, First Solar, SunPower, Yingli Green. Solar Cells/Modules: Canadian Solar, Suntech Power Holdings, Q-Cells, ReneSola, JA Solar, Solon, Evergreen Solar. Downstream: Centrosolar, Conergy, Solaria Energía y Medio Ambiente, Phönix Solar. Solar Components: SMA, STR Holding.
As of 18/06/2010.
0
50
100
150
200
250
300
jan 09 feb 09 mrt 09 mei 09 jun 09 aug 09 sep 09 nov 09 dec 09 feb 10 mrt 10 apr 10 jun 10
Integrated Solar Solar Cells / Modules Downstream Solar Components FTSE 100 Index - Share Pricing
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June 2010
‘Solar 2.0’ is about:
The Solar Market Is Shifting Downstream: ‘Solar 2.0’
Customer access and strong distribution models
Offerings that deliver competitive costs for customers – whether measured in $/Wp, cost per kWh, or attractive IRRs
High brand value
Delivering end customer solutions
Robust business models
Well established companies
Scale
Asset-light with outsourced manufacturing and agnostic to the capital intensive upstream business
Focused on operating leverage and cash generation
Established track record
Low technology risk
Practical product innovation (evolution vs. revolution)
German market growth still dominates for 2010, but this market is becoming more saturated…
…Bringing other European markets into focus
0
2.000
4.000
2010 2011 2012
Germany – Annual installations (MW)
7%
47 104
261
0
100
200
300
2010 2011 2012
UK – Annual installations (MW)
1.225 1.386 1.595
0 500
1.000 1.500 2.000
2010 2011 2012
Italy – Annual installations (MW)
270 420
554
0
200
400
600
2010 2011 2012
France – Annual installations (MW)
Major focus of the global solar industry until FiT reduction that should become effective in July ‘10
Attractive FiT (41.5p/kWh) since Apr ‘10
2010-2012 CAGR: 136%
One of the hottest PV markets, with the highest FiT for BIPV (up to 0.58 €/kWh)
Extremely favourable FiT scheme (up to 0.46 €/kWh)
2010 will be a record year, with high PV demand continuing in 2011 and 2012
122% 151%
56% 32%
13% 15%
Source: Bloomberg New Energy Finance
?
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June 2010
There Are Surprisingly Few Downstream Rooftop Installers With Scale
Company Domicile Country End Markets Key Characteristics
Germany Strong downstream distribution network. ~150MW sold in 2009.
Germany Offering standardised solutions for residential rooftops. > 90MW integrated systems sold in 2009
Germany One-stop shop and fully-serviced solution for private homes. Will install ca. 65-70MW in Germany in 2010.
United Kingdom
Offering both highly customised premium BIPV installations and standardised kits for rooftops.
Over 780 commercial and public sector installations completed since 1999; also an active distributor.
United States
Created SolarLease®, a way for homeowners to set up their own solar system without any upfront cost.
More than 500 workers operating in Arizona, Colorado, Oregon and Texas, in addition to California.
Netherlands
Offering residential and commercial customers a fully-serviced system, including financing.
Around 15,000 installations completed across Europe; will install ca. 100MW in 2010.
United States Offering commercial solar rooftop systems at no capital outlay. >52MW of hands-on installation experience and over 31MW
under management.
Germany Offers rooftop leasing solutions to customers. >85MW completed to date in 3,600 installations.
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June 2010
UK FiT Are Amongst The Most Attractive In Europe (For Rooftops)
Country First Introduction Current FiT (EUR/kWh) Latest Gov’t Proposed FIT Change New FiT Effective From:
Average Irradiation kWh/m2/day
UK
April 2010
0.43* (< 4kW new built residential and >4-10kW)
Just implemented April 2010 Apr 2010 2.61 (London)
3.00 (Southampton) 0.50* (< 4kW retrofit)
0.38* (>10-100kW)
0.35* (>100kW – 5MW)
Germany
January 2000 (amended in 2004, 2008, new revision pending Jul 2010)
0.25 – 0.33 -16% rooftop Jul 2010
2.52 (Hamburg)
3.12 (Munich)
0.25 -11% conversion land free field Jul 2010
0.24 -15% non-agricultural free field Jul 2010
0.21 No longer subsidies for agricultural land Jul 2010
0.21 Growth corridor -9%; -3% each GW above 3.5GW Jan 2011
Spain
January 2007, new revision pending
0.34 (BIPV <20kW) FIT modification expected in 2010 (in any event no later than 2012)
Cuts expected by up to 25%
Gov' t initiated industry contacts
Cap likely to be revised
2010, but no later than Jan 2012 4.61 (Barcelona) 0.31 (>20kW and <2MW)
0.32 (Non BIPV <10MW)
Italy
September 2005
By Sept. ’11: 0.257 -25% ground >1MW Three quarterly steps from Q1 through Q3 2011
6% yoy reduction by 2012 - 13
3.33 (Milan)
0.266 -22% ground < 1MW
0.323 -6% rooftop <200 KW
0.314 -8% rooftop <1MW
0.295 -14% rooftop >1MW
France January 2008
0.42 – 0.58 (BIPV) -3% to -30% on rooftop Jan 2010
3.34 (Paris) 0.31 + bonus -5% free field, but up to 20% bonus Jan 2010
10% digression in 2012
* GBPEUR exchange rate: 1.20 Source: Jefferies’ research
9
June 2010
Date Target Acquirer Transaction Value ($m)
EV / Revenu
e
EV / EBITDA Segment Rationale
May-10 140 Est.~3x NA Downstream Components
Unirac’s PV solar mounting solutions complement Hilti’s offering for solar parks and rooftops
Apr-10 285 NA 3.6x Downstream Pipeline
NextLight provides First Solar with over 1.1GW of development pipeline in the US
Mar-10 327 NA NA Components Solutia becomes the world’s only one-stop source for solar encapsulant solutions
Feb-10 277 NA NA Downstream Pipeline
SunRay has 1.2GW development pipeline in Southern Europe and the Middle East
Jan-10 Konca Solar Cell 125 NA NA Cells/Modules GCL expanded its ingots and wafer business
Nov-09 64 NA NA Downstream Pipeline
Concentrix acquisition represents a natural expansion for Soitec into the solar market
Nov-09 318 NA NA Downstream Distribution
SunEdison’s has a strong solar rooftop distribution network in the US
Nov-09 282 0.5x 10.4x Downstream Distribution
Aleo’s broad sales and distribution network in Germany represents a complement to Bosch’s acquisition of Ersol
The Strategic M&A Markets For Solar Have Been Active
Source: Bloomberg NEF, Thomson, Capital IQ. All values in USDm.
Jefferies advised
10
June 2010
Key Take-Aways
Solar is a massive growth market – 16GW in 2012 ($40-50 Billion market in today’s currency)
The UK offers attractive fundamentals Good solar irradiation – comparable to Germany, the world’s largest solar market
(approaching 10GW in 2010!)
Attractive feed-in-tariff structure for rooftops – although not ideally suited for solar parks given space/planning constraints
Strong government support (at least through 2013) Substantial growth (from a small base)
‘Solar 2.0’ is all about downstream execution and innovation Upstream manufacturing mainly concentrated in China/Asia - although volatile
currency movements may provide European suppliers with a ‘stay of execution’ Regional leaders provide efficient installation (<€3/Wp), scale, O&M services,
energy re-sale, tolling, other services? IRRs are significantly impacted by low installation costs!
Innovative financing is becoming an important area of focus Finance vehicles an important facilitator, noting that scale matters in financing –
IRRs can double with leverage Project finance is available, but time consuming and restricted Capital markets structures for scale deployments
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