Cost reduction strategies in solar cell production DnB NOR Markets Solar Seminar

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1 Cost reduction strategies in solar cell production DnB NOR Markets Solar Seminar Dr. Claus Beneking, CEO ErSol Solar Energy AG Oslo, 6 June 2006 erwicon congress Erfurt 08 June

2 Disclaimer Certain statements made in this presentation may constitute forward-looking statements within the meaning of the U.S. federal securities law. Forward-looking information is subject to various known and unknown risks and uncertainties. These include statements concerning our expectations and other statements that are not historical facts. The Company believes any such statements are based on reasonable assumptions and reflect the judgement of ErSol s management based on factors currently known by it. No assurance can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. For additional information regarding risks, investors are referred to ErSol s IPO prospectus and the annual report

3 PV market development and characteristics 3

4 Development of PV market (optimistic growth scenario) Total solar sector cell/module production Gigawatts Non-silicon c-si ROUGH ESTIMATE Total 10 GW by 2010 Source: M. Rogol, 3rd Photon Silicon Conference, 3 April 2006 (Munich) 4

5 Price experience curve of photovoltaic modules [ /W p ] Barrier to partial cost competitiveness in sunny regions Cumulative installed PV Peak Power [GW P ] Sources: Fraunhofer Institut Solare Energiesysteme (ISE), EPIA, ErSol 5 5

6 Conclusions from PV market characteristics 1. Grow or die 2. Reduce production cost faster than price degression curve 6

7 Positioning and strategy of ErSol Solar Energy AG 7

8 Value chain of crystalline silicon photovoltaics Sun and sand electricity 8

9 New company structure ErSol Solar Energy AG Production and distribution of solar cells (Erfurt, Germany) 100% 100% 35% 100% 100% SRS Silicon Recycling Services, Inc. ASi Industries GmbH Shanghai Electric Solar Energy aimex-solar GmbH ErSol New Technologies GmbH Co. Ltd. Camarillo/ California,USA Arnstadt, Germany Shanghai, P.R. China Erfurt, Germany Erfurt, Germany Recycling of silicon Mono-crystalline ingots and wafers (prod. & distribution) Solar module production Marketing of solar modules Development of new photovoltaic technologies 9

10 Products of ErSol: Ingots and wafers Mono-crystalline silicon ingots / wafers Product Key characteristics Ingots with a diameter of up to 230mm 45 MWp wafer production capacity in 2006 Large wafer size 156x156mm Production expertise Outstanding quality More than 30 years of pulling experience ensures high productivity Optimised production process results in high silicon conversion rate Ongoing reduction of cost structure Each wafer is tested in 5,000 measuring points to ensure highest level of quality Strict documentation of testing process 10

11 Products of ErSol: PV cells Blue Power Black Power Product Key characteristics Multi-crystalline solar cell Ca. 50% of ErSol sales in 2006 High efficiencies of up to 16% Mono-crystalline solar cell Ca. 50% of ErSol sales in 2006 High efficiencies of up to 17% Production expertise Outstanding quality 60 MWp call production capacity in 2006 Extensive experience in cell manufacturing results in high productivity Constant introduction of larger and thinner cell sizes ErSol s cells offer high degrees of efficiency, especially in dim and diffuse light Low breakage rate and high cell stability 11

12 ErSol enters into thin-film module production ErSol plans to develop production capacity of 40 MWp p.a., medium-term annual capacity target of >100 MWp as a second growth option Approx. 80 m investment (40 m in 2006 and 2007 each) Less than 1% of silicon consumption compared with conventional wafer technology Efficiency of approx. 6% on glass substrate Project developed within ENT ErSol New Technologies Thin-film module production to be built in Erfurt, Thuringia Approx. 100 new permanent jobs 12

13 Characteristics of ErSol s company strategy 1. Integrated company covering the most important segments of the value chain (Silicon, Wafers, Solar cells) 2. Two-product strategy : High-end monocrystalline silicon and low-cost thin-film silicon products => Ensuring higher than proportional growth with faster than market cost degression 13

14 Elements of growth strategy Increased integration of ASi Increased silicon procurement Advancements of technology Entry into low-silicon-consumption technologies 14

15 Increased integration of ASi Integration of the wafer business into the ErSol Group 100% 90% 80% 70% Full margin addition effect from 2008 onwards 60% 50% 40% 30% 20% 10% 15% >20% 0% ASi wafers to ErSol ASi wafers to customers EBIT margin ErSol Group 15

16 More silicon secured through SRS acquisition in February 2006 Important addition to the upstream sector of the value chain Additional quantities of approx. 75 tons of scarce solar silicon for production in 2006 Feedstock material of at least 15 MWp Positive impact on margins due to higher utilisation of raw material Price of approx. 19 million euros paid from equity Silicon Recycling Services Inc. (SRS) 16

17 Advancements of technology Instalment of ~8 million technology program Optimized Back Contact Cell: 22,0% 100 µm Back Contact Cell: 21,0% 120 µm Higher efficiency Shallow Emitter Diffusion: 17,5% 220 µm Shallow Emitter Diffusion: 17,5% 220 µm Current Production: 16,5% 280 µm Current Production: 16,5% 280 µm Back Contact: 20,0% 150 µm New Front Side Structure Back Contact: 18,5% 180 µm Reduced Wafer Thickness Year Roadmap for mono-crystalline cell technology 17

18 Development of mono-crystalline cell technology within 2005 Average cell efficiency in % 17,00 16,50 16,00 15,50 15, ,00 15,80 15,70 15,50 16,10 16,40 16,60 16,70 16, , Cell thickness in µm 14,50 Jan 05 Feb 05 Mar 05 Apr 05 May 05 Jun 05 Jul 05 Aug 05 Sep 05 Oct 05 Nov 05 Dec 05 Jan Average cell efficiency in % Cell thickness in µm We re on track! 18

19 Expected breakthrough in cost reduction for high-end mono c-si Integrated production of ingots-wafers-solar cells Technological advancements (silicon yield, wafer thickness, cell efficiencies ) Economy of scale on the >100 MWp level Accelerated achievement of cost reduction targets New dimension of PV production cost Grid equality in important key markets expected achievable on 2008 time scale Higher margins at given price levels 19

20 ErSol sets new growth targets for 2008 Wafer production capacity quadrupled to 100 MWp by end 2007 Crystalline cell production capacity tripled to 180 MWp by end 2007 Additional growth through new and increasing thin-film cell technology contribution 220 MWp total cell capacity by

21 Expected capital expenditure per business segment in million euros Thin-film Solar cells Wafers Expected total investment >190 million euros within and several 100 new jobs in Thuringia! 21

22 Customers and Target Markets 2006 from Erfurt to the world! Customers Target Markets 22

23 Overview of ErSol s expected positioning in the global PV market World PV Cell/Module Production from ,0 BAU Annual Worldwide M arket in M Wp (EPIA 22nd Dec. 05) ACC. Annual Worldwide M arket in M Wp (EPIA 22nd Dec. 05) PV Market, Production [MWp] 1000,0 100,0 10,0 ErSol Solar Energy AG Solar Generation II, A nnual Installed Capacity (Greenpeace & EPIA Oct. 04) Development of PV World M arket (Dr. A.Räuber) D.A. Davidson & Co. Technology Conference (Applied Films 02/06) Development of PV World M arket (CLSA 07/05) PV Status Report 2005 (EU Commission, ILS) Development of PV World M arket (Photon 03/2006) 1, Weltweite Solarzellenproduktion (Sarasin Studie Solarenergie 2005) M ichael Rogol 3rd Silicon Solar Conference, M unich 04/

24 Cost reduction potential for different technologies Module price/ Wp (relative units) Module efficiency (%) Thin-film Crystalline silicon Dye cell and single pin amorphous silicon Source: Renewable Energy World May/June

25 Summary on cost reduction strategies Cost reduction in silicon wafer-based technology through - efficiency increase of monocrystalline silicon solar cell - higher wafer yield from silicon through decreasing wafer thickness - integrated production from wafer to solar cell - economy of scale at >100 MWp/a production volume level Additional growth option and cost reduction potential through new thin-film cell technology => Competitiveness with both crystalline and thin film PV!! 25

26 Thank you for your attention! For further information please contact Sonja Teurezbacher Investor Relations Manager phone: fax: