July 23, 2009

Industry Report

Think Greentech Reason for Report:

Takeaways From Call With John Stanton, Solar Industry Update
Colin Rusch
Energy Industries Association
212-468-7015, crusch@thinkequity.com
THINK SUMMARY:
Below are our takeaways from our conference call with John Stanton, Solar
Energy Industries Association (SIEA).

Conclusion: We believe policy clarification in the U.S. will be an ongoing

process. We believe Mr. Stanton's commentary on stimulus fund flow were not
as bullish as Treasury comments from our call last week and present a realistic
scenario for federal policy impact on the solar market. We believe his
comments indicate a projected slow ramp in the U.S. solar market in 2H09,
with accelerating growth throughout 2010. Mr. Stanton's comments on the
climate bill were incrementally positive to our expectations and we believe
stronger language supporting transmission authority and Renewable Portfolio
Standard (RPS) in a climate bill would benefit solar. Despite the positive
comments, we remain cautious on the speed and impact of U.S. federal
programs and still would like to see the program in action before coming to a
conclusion on its effectiveness. In our coverage universe, we believe that
FSLR, SPWRA/B, ENER, and RSOL are most levered to U.S. solar installation
growth.
KEY POINTS:
• Senate appears likely to make major changes to Climate bill, including a
strengthened RPS and more support for federal authority to site interstate
transmission.
• SEIA expecting grant in-lieu of investment tax credit (ITC) to be by November
1 as Treasury improves is capacity to approve projects.
• Stanton expects the solar industry to attempt to extend the deadline for
qualifying for the grant in-lieu of the ITC.
• We expect the Department of Energy loan guarantees to continue to move at
an extremely slow pace.

Full takeaways continue on page 2.

Please see analyst certification (Reg. AC) and other important disclosures on pages 4-7 of this report.
 July 23, 2009
Industry Report

• Expect Senate Action on Waxman-Markey to Heat Up in September

• Expect Committee Action to Conclude by mid-September: Mr. Stanton noted that September 18 has been set as the
deadline for five Senate committees to report out their components of the Senate version of Waxman-Markey. The
Environment and Public Works Committee, which has primary jurisdiction over the climate title, is beginning to hold
hearings and will move to markup in August or September. Mr. Stanton expressed his belief that EPW would try to pass
out a climate title as quickly as possible, and that the climate title would then be referred to Senate Energy Committee
Chairman Bingaman for edits.
• Expect Senate Leadership to Make Significant Changes to Break Filibuster; White House Support Crucial: Mr.
Stanton estimated the current reliable total for "Ayes" on the bill at 53 votes, 7 short of the 60 needed to break a
filibuster.
• He predicted that Senate leadership, under Majority Leader Reid, would do rewrites of the bill as necessary to ensure
60 votes. Mr. Stanton expects a flurry of leadership activity in September, October, and possibly November to
complete the bill, and predicted that a House-Senate conference agreement before Copenhagen would be possible if
the Senate can pass its version in September.
• Mr. Stanton expressed his belief that a climate bill is unlikely to pass without strong White House leadership. He said
that the U.S. needs to pass a conference agreement in order to have necessary credibility at Copenhagen, and that
leadership both at the White House and the State Department understand this.
• Mr. Stanton also noted that the Administration is working toward a bilateral agreement with China that could be a good
predictor both of legislative passage and of a deal getting done at Copenhagen. He expects much of this agreement to
reflect recent announcements by China, such as a $10 billion commitment to deploy solar and new efficiency
standards for autos and industrial processes.
• Solar Provisions in the Senate: Positive on Transmission and PPAs, Potential to Strengthen RPS
• The Senate Energy Committee has already passed out an energy title, and Mr. Stanton highlighted several provisions in
the title, including federal government PPA terms and stronger federal transmission siting authority, as being highly
favorable to solar. He expressed a belief that the transmission provisions would eventually be included in a compromise
agreement between the Senate and the House, as transmission access for renewables is a high priority for Senators
Reid and Bingaman but less so for House leadership.
• On the RPS, Mr. Stanton noted that the low non-compliance penalties (~$0.02/kWh) might not move solar markets,
although utilities would likely get pushback from regulators and shareholders if they opted simply to pay penalties rather
than develop renewable energy. He predicted that a number of Senators, including Dorgan, Udall (NM), and Udall (CO),
would introduce strengthening provisions as amendments that would include the RPS target to 20% by 2025 and could
potentially increase the ACP.
• On the provisions to set up a Clean Energy Deployment Administration (CEDA), Mr. Stanton noted that there is debate
over whether the agency should fund mature or only innovative technologies. The solar industry is pushing for broadly
inclusive project authority and would like to see the funding cap raised.
• Stimulus Funding: Industry Seeks to Extend Program
• Mr. Stanton predicted that the Treasury online application program would be available by August 15 and anticipated first
funding flow by November 1. He noted that Treasury has no history with grant programs and predicted that the process
would become more efficient with time.
• Under the timeline above, the industry would lose 11 out of 24 months in which to claim the grant. Therefore, the solar
industry will be seeking a one-year extension of the grant program as part of the Senate Finance title in the climate bill.
Mr. Stanton predicted that Senate Finance would take up the climate bill in September, but not until it completes
consideration of the health care bill.
• Section 1705 Loan Guarantee Program: Interagency Bottlenecks Holding Up Implementation
• According to Mr. Stanton, the Office of Management and Budget has been the major roadblock to implementation of the
Section 1703 loan guarantee (part of EPACT 2005), and appears reluctant to commit government authority to loan risk.
DOE had sent OMB proposed guidance for loan applicants early in 2009, but OMB persuaded DOE to withdraw the
rulemaking proposal. It now appears that applications will be reviewed on a case-by-case basis without preceding
guidance to applicants.
• Furthermore, Mr. Stanton noted that in order to participate in Section 1705 (part of the American Reinvestment and
Recovery Act of 2009), applications have to go through National Environmental Policy Review (NEPA) review overseen
by the Council on Environmental Quality, which takes 12-18 months. Indications are that NEPA review will not
commence until the application is perfected and has initial acceptance. The deadline for projects to commence
construction under the loan program is September 30, 2011. Thus, Mr. Stanton predicted that few, if any, projects would
be able to take advantage of the loan guarantee program due to the elongated environmental review process. Solar
Energy Industries Association (SEIA) will lobby Congress to extend the deadline to commence construction.
• In addition, while there is strong support at the Department of the Interior (DOI) for renewable deployment on public
lands, the agency is still understaffed.
• Mr. Stanton anticipated that the first solicitation would go out in early fall and would likely be for a transmission project.

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Industry Report

He said that DOE is envisioning a bifurcated application process wherein larger projects will be vetted and cleared by
private banking partners with experience in issuing loans for power projects. DOE is working with these banks to get in
position for applications. On smaller projects, DOE is hiring 10 senior personnel, primarily legal experts, to review and
get the projects approved quickly. However, the interagency bottlenecks at OMB, Council on Environmental Quality
(CEQ), and DOI must be addressed.

Valuation And Risks To Price Targets For Companies Under Coverage And Mentioned In This Report
First Solar (FSLR): We rate the shares Buy with a $180 price target, based on 20x our 2010 EPS estimate of $8.99. Risks:
global macro risk, financing risk, customer concentration risk, subsidy risk, technology risk, and increased competition.
Energy Conversion Devices (ENER): We rate the shares Source of Funds with a $16 price target, based on 1x Book
Value. Risks: Global macro risk, financing risk, customer concentration risk, subsidy risk, technology risk, and increased
competition.
Real Goods Solar (RSOL): We rate the shares Accumulate with a $3 price target, based on .8x our EV/2010 revenue
forecast. Risks: Global macro risk, financing risk, corporate governance risk, credit risk, supply risk, customer risk, subsidy
risk, and increased competition.
SunPower (SPWRA, SPWRB): We rate the shares Source of Funds with a $21 price target, based on 18x our 2010 EPS
estimate of $1.15. Risks: Global macro risk, financing risk, customer concentration risk, subsidy risk, technology risk, and
increased competition.
RISKS:
See above.

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Industry Report

COMPANIES MENTIONED IN THIS REPORT:

Company Exchange Symbol Price Rating Price Target
Energy Conversion Devices, Inc. NASDAQ ENER $12.98 SoF $16.00
First Solar, Inc. NASDAQ FSLR $151.36 Buy $180.00
Real Goods Solar, Inc. NASDAQ RSOL $2.21 Acc $3.00
SunPower Corporation NASDAQ SPWRA $24.03 SoF $21.00
SunPower Corporation NASDAQ SPWRB $21.19 SoF $21.00

Important Research Disclosures

Analyst Certification
I, Colin Rusch, hereby certify that all of the views expressed in this research report accurately reflect my personal views about the subject
securities and issuers. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.

The analyst(s) responsible for preparing this report has/have received compensation based on various factors, including the firm's total
revenues, a portion of which is generated by investment banking activities.

ThinkEquity LLC makes a market in Real Goods Solar, Inc., First Solar, Inc., SunPower Corporation, SunPower Corporation, and Energy
Conversion Devices, Inc. securities; and/or associated persons may sell to or buy from customers on a principal basis.

Rating and Price Target History for: Real Goods Solar, Inc. (RSOL) as of 07-22-2009
06/18/08 11/05/08 05/29/09
I:B:$10.00 B:$7.50 A:$3.00
10

0
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

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Industry Report

Rating and Price Target History for: First Solar, Inc. (FSLR) as of 07-22-2009
12/27/06 02/05/07 02/14/07 04/02/07 05/04/07 07/03/07 07/17/07 11/09/07 05/01/08 07/31/08 10/30/08
I:B:$35.00 B:$38.00 B:$50.00 B:$68.00 B:$80.00 B:$115.00 B:$145.00 B:$310.00 A:$340.00 B:$350.00 B:$175.00
320

240

160

80

0
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

12/12/08 02/25/09 05/29/09 07/08/09

SoF:$105.00 S:$60.00 A:$188.00 B:$180.00

Created by BlueMatrix

Rating and Price Target History for: SunPower Corporation (SPWRA) as of 07-22-2009
04/02/07 04/27/07 07/18/07 10/19/07 11/12/07 09/16/08 01/28/09 05/29/09 07/08/09
B:$60.00 B:$70.00 B:$85.00 B:$120.00 B:$155.00 B:$89.00 A:$35.00 SoF:$24.00 SoF:$21.00
160

120

80

40

0
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

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Industry Report

Rating and Price Target History for: SunPower Corporation (SPWRB) as of 07-22-2009
01/30/09 05/29/09 07/08/09
I:B:$35.00 SoF:$24.00 SoF:$21.00
100

80

60

40

20

0
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

Rating and Price Target History for: Energy Conversion Devices, Inc. (ENER) as of 07-22-2009
05/29/09
I:SoF:$16.00
100

80

60

40

20

0
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

Rating Definitions
The ThinkEquity LLC rating system is based on a stock's expected total return over a 12-month investment horizon. Ratings on coverage
are defined as follows:

Buy: Appreciation potential of 20% or more over the next 12 months. Analyst has a high level of conviction that the company's business
fundamentals are intact and that the company will meet or exceed earnings projections. Valuation is considered reasonable considering
the company's potential.
Accumulate: Appreciation potential greater than 0% and less than 20% over the next 12 months. Typically good companies, with
fundamentals and earnings visibility intact, but current valuation limits upside potential.

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Industry Report

Source of Funds: Stock is expected to decline as much as 20% over the next 12 months, due to a single or combination of factors
including excessive valuation, negative sector sentiment, and/ or reduced earnings expectations.
Sell: Stock expected to decline 20% or more over the next 12 months. Company fundamentals are deteriorating, leading to material
downward revisions in earnings projections and valuation.

Distribution of Ratings, Firmwide

ThinkEquity LLC

IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [B] 105 52.50 14 13.33
HOLD [Acc] 70 35.00 5 7.14
SELL [S/SoF] 25 12.50 0 0.00

This report does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. The
information provided, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable. The
opinions expressed reflect our judgment at this time and are subject to change without notice and may or may not be updated. Past
performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or
implied, is made regarding future performance. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any state in which said offer, solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. This research report was originally prepared and distributed to institutional clients
of ThinkEquity LLC. Recipients who are not market professionals or institutional clients of ThinkEquity LLC should seek the advice of their
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subject companies), ThinkEquity LLC may choose to provide specific disclosures for the subject companies by reference. For more
information regarding these disclosures, please send a request to: Director of Research, ThinkEquity LLC, 600 Montgomery Street, San
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the FINRA and SIPC. Copyright 2009 ThinkEquity LLC, A Panmure Gordon Company

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