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March 2010

Six Solar Market Myths: An Investor Perspective

Presented by:

Walther Lovato

Portfolio Manager

April 2011

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Passport Capital Overview

Specialists in Global Equity Long & Short

$4.3 billion in assets under management*

Established in 2000

Headquartered in San Francisco

Federally registered investment advisor with the S.E.C.

Investors in Renewable Energy since 2005

Investors in Middle East since 2007

*Estimate as of 2/28/2011

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Oil

Natural

Gas

PowerRenewable

Equipment

Renewable

IPPs

Grid

Infrastructure

Electric

Transportation

Energy

Efficiency Coal

E&P

E&P Services Shipping Refining Biofuels

Services Distribution LNG

Passport Energy Overview

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Market Myths…

Experts have all the answers

Solar requires subsidies

Government needs to pick/back a technology

PV doesn’t scale / CSP is the answer

Local manufacturing requires $1bn+ bet

Saudi local market not big enough

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Market Myths







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Imagination…

2002

2004

XLE

WTI

NEX

2005

2007

Investing in Saudi

Arabia

2011

Source: Bloomberg, First Solar, Pareto

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Imagination…

In 1980, AT&T asked McKinsey to estimate the market for cell

phones in 2000.

2000 actual: 109M

McKinsey estimate: 900k

2010 actual: 5B

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Imagination…

Source: MIT Technology Review

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Market Myths







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Will the real $/w please stand up!

Source: EIA, Bloomberg, Passport Estimate s

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The opportunity cost

* Assumes average oil prices for historical years and the 20 year forward average ($90)

Source: Ministry of Water & Electricity, Zawya & Passport Estimates, BP Statistical Review 2010

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Market Myths







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DOE Loan Guarantee Program

Unfortunately the DOE loan guarantee program is one that has to

pick winners.

-Earth2tech, Nov 2010

Source: NYT, Earth2Tech

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The CA Case Study

“The reverse auction mechanism relieves the pressure

on the program designers to set an incentive level

correctly. Instead it allows the market to set the

incentive levels by forcing developers to compete to

participate in the program.”

-Forbes, Nov 2010

• At 258MW in 2010, CA is the biggest

solar market in the US

• CA policies are least-cost focused &

technology agnostic

• This allows utilities to adapt as

technologies evolve

• Backed by RPS of 33% by 2020

• Volumes met through auction

mechanism, viability ensured by

deposits

Source: SEIA, NYT, Forbes.com

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Market Myths







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The CA Case Study: Part 2

• In the last 3 months, 1.8GW of

CSP projects have been

cancelled

• 750MW of that has been

replaced by PV

• Meanwhile, FSLR’s 290 MW

Agua Caliente plant began

construction in late 2010

Source: Bloomberg, SolarServer

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Cost reduction road maps:

• Solar thermal (CSP): mature,

competitive, but limited cost-

reduction potential

• Photovoltaic (PV): c-Si is

mature, thin-film will reduce

costs by an additional 2x

• Concentrated PV (CPV):

unproven, roadmap to

competitive costs …

Source: Greentech Media

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Efficiency System CostAbility to

Scale

Capacity per dollar

of InvestmentWater required

“Solar 2.0” –next generation:

disruptive technology

medium efficiency,

low cost, low cap-ex

Experimental technology:

demonstration projects

high cost, low cap-ex

Companies

Solar options for the Middle East

Crystalline

Silicon

CSP

Thin Film

CPV

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Market Myths







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Solar manufacturing: what to look for

Lowest cost production

Leading next-gen technology

Best in class ROIC

Ability to scale

High EROEI (Energy Return

on Energy Investment)

Avoiding Costly

Mistakes

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What can you get for $1bn?

Source: Passport Estimates

Leading

CIGS

First Solar Thin Film

Silicon

Silicon PV

Capacity for $1bn Capex

(MW)

2,000 MW 1,250 MW 500 MW 600 MW

Minimum efficient scale 120 MW 625 MW 500 MW 100 MW

Rev potential ($MM,

2013)

$2,100 $1,300 $530 $800

EBIT potential ($MM) $720 $500 $30 $70

EBIT Return on Capital 72% 50% 3% 7%

Jobs Created 4,000 3,000 2,300 1,500

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Market Myths







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Pocket change


Oil Opportunity Cost $40.3B

$40.3B / $2.50 per watt fully installed = 16.1GW of capacity

16.1GW * 2000 hours = 32.2Twh generated

32.2Twh / 206Twh = 15.6% of total generation, 27.4% of oil generation

27.4% * $40.3B = 11.2B avoided oil cost

Simple Payback of $40.3B / $11.2B ~ 3.6 years

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Surprisingly small

16.1GW : 23 km x 23 km

To power KSA: 58 km x 58 km

To power GCC: 80 km x 80 km


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Energy Growth High Power Prices Solar Resource Policy Support Access to Capital

Ideal Market Characteristics

? ?Saudi

Arabia

USA

Germany

China

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Imagine…

7¢ Solar Electricity

$200 Oil

Buildings Powering Industry

‘Finding’ 1mbpd of

Production

High Value Jobs

Exporting Solar

Energy to the world

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Important Disclosures & Risk Considerations

THE FOREGOING REFLECTS PASSPORT CAPITAL, LLC’S (“PASSPORT”) PARTICULAR VIEWS, BELIEFS AND ASSESSMENTS BASED ON PASSPORT’S RESEARCH, OBSERVATIONS, AND ANALYSES',

SUBJECT TO THE ATTACHED DISCLOSURES AND RISK CONSIDERATIONS AND THOSE SET FORTH IN THE FUND DOCUMENTS.

THESE MATERIALS ARE PROVIDED FOR GENERAL INFORMATION PURPOSES ONLY BY PASSPORT IN CONNECTION WITH A CONFIDENTIAL PRIVATE PRESENTATION DESCRIBING

PASSPORT’S INVESTMENT STRATEGIES. THESE MATERIALS ARE NOT INTENDED TO BE RISK DISCLOSURE DOCUMENTS, AND ARE SUBJECT IN THEIR ENTIRETY TO DEFINITIVE

DISCLOSURE, SUBSCRIPTION AND OTHER DOCUMENTS (COLLECTIVELY, THE “FINAL DOCUMENTS”) REGARDING ANY INVESTMENT IN A PASSPORT ADVISED FUND OR ACCOUNT.

THESE MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE BASED ON PASSPORT’S EXPERIENCE AND EXPECTATIONS ABOUT THE MARKETS IN WHICH THE FUND

INVESTS AND OPERATES. FORWARD-LOOKING STATEMENTS ARE SOMETIMES INDICATED BY WORDS SUCH AS “ANTICIPATES,” “EXPECTS,” “BELIEVES,” “SEEKS,” “MAY,” “INTENDS,”

“PLAN,” “SHOULD,” “ATTEMPTS,” “WILL,” “INTENDED TO,” “DESIGNED TO,” “SEEKS TO "OR THE NEGATIVE OF THESE TERMS OR OTHER SIMILAR EXPRESSIONS. UNDUE RELIANCE

SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS AS SUCH STATEMENTS SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. FORWARD-LOOKING

STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO MANY RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT. ACTUAL

RESULTS MAY DIFFER, AND SUCH DIFFERENCES MAY BE SIGNIFICANT. NEITHER THE FUND NOR PASSPORT UNDERTAKES ANY OBLIGATION TO REVISE OR UPDATE ANY FORWARD-

LOOKING STATEMENT FOR ANY REASON, UNLESS REQUIRED BY LAW. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THESE MATERIALS ARE EXPRESSLY QUALIFIED BY THIS

CAUTIONARY STATEMENT.

THESE MATERIALS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITIES, AND ARE QUALIFIED IN THEIR ENTIRETY BY THE

INFORMATION CONTAINED IN THE FINAL DOCUMENTS. PROSPECTIVE INVESTORS ARE ADVISED TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM PASSPORT CONCERNING THE

FUND OR ACCOUNT AND TO OBTAIN ANY ADDITIONAL INFORMATION THEY CONSIDER NECESSARY FOR THEIR DECISION TO INVEST WITH PASSPORT THROUGH THE FUND OR

ACCOUNT.

WHILE INFORMATION USED IN THESE MATERIALS MAY HAVE BEEN OBTAINED FROM VARIOUS PUBLISHED AND UNPUBLISHED SOURCES CONSIDERED TO BE RELIABLE, NEITHER

PASSPORT NOR ANY OF ITS AFFILIATES GUARANTEES ITS ACCURACY OR COMPLETENESS AND ACCEPTS NO LIABILITY FOR ANY DIRECT OR CONSEQUENTIAL LOSSES ARISING FROM ITS

USE. THIS INFORMATION IS CONFIDENTIAL AND INTENDED SOLELY FOR THE USE OF PASSPORT AND ITS AFFILIATES AND THE CLIENT OR PROSPECTIVE CLIENT TO WHOM IT IS

PRESENTED. IT IS NOT TO BE REPRODUCED OR DISTRIBUTED TO ANY OTHER PERSONS EXCEPT TO THE RECIPIENT’S PROFESSIONAL ADVISORS.

IN MAKING THEIR DECISION TO INVEST IN A FUND OR ACCOUNT, PROSPECTIVE INVESTORS SHOULD RELY SOLELY UPON THEIR OWN INDEPENDENT INVESTIGATION, INCLUDING A

REVIEW OF THE FINAL DOCUMENTS. NEITHER PASSPORT NOR ANY OF ITS AFFILIATES, EMPLOYEES, OR AGENTS ARE AUTHORIZED TO MAKE ANY REPRESENTATIONS OR WARRANTIES

INCONSISTENT WITH OR IN ADDITION TO THOSE CONTAINED IN THE FINAL DOCUMENTS. STATEMENTS MADE HERE WITH RESPECT TO THE FUND OR STRATEGIES OR PASSPORT ARE

NOT NECESSARILY COMPLETE, AND ALL INFORMATION CONTAINED IN THIS PRESENTATION IS SUBJECT TO UPDATING, CHANGE, COMPLETION, REVISION,

AMENDMENT AND FINAL VERIFICATION.

THE INVESTMENT OPPORTUNITIES DESCRIBED HEREIN HAVE GENERALLY NOT BEEN REGISTERED FOR SALE TO THE PUBLIC IN ANY JURISDICTION AND WILL NOT BE MADE

AVAILABLE FOR INVESTMENT EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS. THE INVESTMENT

OPPORTUNITIES DESCRIBED HEREIN ARE NOT GUARANTEED BY PASSPORT OR ITS AFFILIATES.

THE FUND OR ACCOUNT MAY NOT ACHIEVE THE DESIRED RESULTS DUE TO IMPLEMENTATION LAG, OTHER TIMING FACTORS, PORTFOLIO MANAGEMENT DECISION-MAKING,

ECONOMIC OR MARKET CONDITIONS OR OTHER UNANTICIPATED FACTORS. THE VIEWS AND OPINIONS EXPRESSED IN THESE PRESENTATION MATERIALS ARE AS OF MARCH 31, 2011,

ARE SUBJECT TO CHANGE WITHOUT NOTICE, MAY NOT COME TO PASS AND DO NOT REPRESENT A RECOMMENDATION OR OFFER OF ANY PARTICULAR SECURITY, STRATEGY, OR

INVESTMENT.

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Important Disclosures & Risk Considerations

THE INVESTMENT ENVIRONMENT AND MARKET CONDITIONS MAY BE MARKEDLY DIFFERENT IN THE FUTURE AND INVESTMENT RESULTS WILL FLUCTUATE. THE RETURNS OF THE

FUNDS AND STRATEGIES COULD BE MATERIALLY DIFFERENT FROM THE RETURNS OF THE ABOVE COMPOSITE.

RISK CONSIDERATIONS

ANY FUND OR ACCOUNT MAY NOT ACHIEVE THE DESIRED RESULTS DUE TO IMPLEMENTATION LAG, OTHER TIMING FACTORS, PORTFOLIO MANAGEMENT DECISION-MAKING,

ECONOMIC OR MARKET CONDITIONS OR OTHER UNANTICIPATED FACTORS. THE PORTFOLIO MANAGERS MAY CHOOSE TO VARY THE FUNDS’ OR ACCOUNTS’ ACTIVITIES AND MAY

NOT NECESSARILY CONTINUE INVESTING IN THE MANNER THAT GENERATED THE RESULTS PRESENTED.

ALL OF THE FUNDS AND STRATEGIES USE SOPHISTICATED INVESTMENT TECHNIQUES, AND MAY NOT BE SUITABLE FOR ALL INVESTORS. THE FINAL DOCUMENTS WILL DESCRIBE IN

MORE DETAIL RISKS OF INVESTING IN ANY OF THE FUNDS OR STRATEGIES, AND PROSPECTIVE ADVISORY CLIENTS MUST READ THE DOCUMENTS CAREFULLY BEFORE INVESTING

WITH PASSPORT THROUGH THE FUNDS OR ACCOUNTS.

ANY PERSON CONSIDERING MAKING AN INVESTMENT MUST BE ABLE TO BEAR THE RISKS INVOLVED AND MUST BE ABLE TO MEET CERTAIN SUITABILITY REQUIREMENTS. SOME OR

ALL ALTERNATIVE INVESTMENT PROGRAMS MAY NOT BE SUITABLE FOR CERTAIN INVESTORS. AMONG SUCH RISKS ARE THE FOLLOWING:

AN INVESTMENT IS SPECULATIVE AND INVOLVES A SUBSTANTIAL DEGREE OF RISK.

AN INVESTMENT MAYBE LEVERAGED.

PAST PERFORMANCE RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE, AND PERFORMANCE MAY BE VOLATILE. THERE CAN BE NO GUARANTEE OR

ASSURANCE THAT THE FUND(S) OR STRATEGY(S) WILL ACHIEVE ITS RISK MANAGEMENT OBJECTIVES AND NO RISK MANAGEMENT SYSTEM CAN GUARANTEE OR ACHIEVE

FAVORABLE RESULTS IN ALL MARKET CONDITIONS.

AN INVESTOR COULD LOSE ALL OR A SUBSTANTIAL AMOUNT OF HIS OR HER INVESTMENT.

THERE IS NO SECONDARY MARKET FOR THE INVESTORS' INTERESTS IN THE FUNDS AND NONE IS EXPECTED TO DEVELOP.

THERE ARE RESTRICTIONS ON TRANSFERRING INTERESTS IN THE FUNDS.

FEES AND EXPENSES MAY OFFSET TRADING PROFITS. A PORTION OF THE TRADING MAY TAKE PLACE ON FOREIGN MARKETS.

AN INVESTMENT IS SUBJECT TO CONFLICTS OF INTEREST.

NOTE: THIS DOCUMENT IS CONFIDENTIAL AND INTENDED SOLELY FOR THE USE OF PASSPORT AND ITS AFFILIATES AND THE CLIENT OR PROSPECTIVE CLIENT TO WHOM IT IS

PRESENTED. IT IS NOT TO BE REPRODUCED OR DISTRIBUTED TO ANY OTHER PERSONS EXCEPT TO THE RECIPIENT’S PROFESSIONAL ADVISORS.

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