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To: Jill who wrote (46539)	11/13/2008 10:35:37 AM
From: Eric	Read Replies (2) \| Respond to of 57684

From my friends at CS: ___________________________ JASO & Solon update – solar panel prices in free fall Bottomline. Two concerning reports in solar today Solon and JASO. Solon revised down CY08 guidance; and off the lower base guided 2009 to up 20%, down from prior guidance of up 50%. Solon noted some banks are not doing any projects till year end; and some customers are de-installing panels from Spain and shipping to Germany. JASO's results suggest cell pricing is down ~25% q/q in 4Q08; but appears company is only assuming a 5% decline in 2009. Both results were broadly concerning for all solar companies. Supply is growing much faster than demand. On the demand side, project financing dollars are not growing even shrinking for some banks. On the supply side, we have heard from SPWR, FSLR, ESLR and JASO. Collectively these four companies are guiding supply to grow from ~1GW in CY08 to 2.5GW in CY09. We still have not heard from major producers like Q-cells, STP and YGE. In addition to these planned capacity expansions, we are hearing that Sumco, Wacker and Shinetsu are starting to sell semi-grade poly into the solar market, something we noted was a possibility after WFR report. Where is cash cost? Cash cost for panels in China we think is ~$1.25/watt. Poly cash cost is ~$25/kg – or ~20c/watt (including depreciation, we are looking at $35/kg). Wafering cash cost is ~30-40c/watt. Cell+module cash cost is ~70 80c/watt. This implies, total cash cost for making a panel is ~$1.20-$1.40/watt. Panel prices have declined from $4+ in 2Q08 to around $3/watt now but cash cost is more than 50% below current levels. Poly spot in free fall also. JASO commented that poly price is at $220-$230/kg, down from over $350/kg a few months ago. We have one of the lowest estimates for WFR in our model, but even we are assuming poly prices of ~$200/kg in CY09 for WFR. While cell and panel companies can idle factories (as most of the cost is materials, and not depreciation), poly companies may keep running factories if prices remain above cash cost as they have a higher depreciation, and there is a much higher start/stop penalty with poly factories.