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UKPVC 2010 Bruce Huber - The business opportunities according to a leading investmant banking group

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The business opportunities according to a leading investmant banking group …

The business opportunities according to a leading investmant banking group
Bruce Huber - Managing Director Jefferies International, Global Head Cleantech Investment Banking

Published in: Economy & Finance, Business

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