Dear Robert, Carl, Mallory, Eleanor, and Quentin,
What an inspiring study hall! What outstanding work! Thank you so very much for all your fabulous research that is now a part of the first TechniTrader® case study.
Sincerely, Adrienne

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DARK CLOUD STUDY HALL - WEEK 5 REVIEW

Excellent job on Week 5 summary. I liked that several of you voiced your conclusions.

A couple of key areas for ENER are:

The diversity of alternative energy products could work for or against ENER. It could dilute funds for R&D which is a negative.

The roller coaster price action on the long term scale indicates that institutions were buying more on speculation than on fundamentals in the past for ENER.

ENER needs to influence not only customers but investors that will see it as a stable growing concern that can challenge its competitors.

Size is important but marketing is even more critical.

I am very proud of your efforts.

Martha
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Classmates,

Quentin, thanks for contributing to Week 5. What you contribute is very thought provoking and I sense your manufactuing background in what you write. Appreciate your perspective!

Eleanor, hope your eye is healing and that you are doing well. Let me know if I can do anything regarding Week 3.

To all...I feel ENER has lots of potential in the alternative energy sector despite my personal conclusions based on the past 4 weeks process. It will be very interesting to continue to follow this company and see where their solar ventures take them.

I've learned so much and enjoyed working the case study with each of you regardless of how brief our connections may have been. Thank you all!

I'll keep checking back for new comments regarding our most recent posts...

mallory

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DARK CLOUD STUDY HALL - WEEK 5 ASSIGNMENT

Perspective #1. Quentin
Conclusion:
ENER primary business is production and selling thin film BIPV energy system. They are embarked on an aggressive expansion plan to increase output 500%, to 300 MW per year by 2010. They are in a joint venture to produce and sell NICH batteries. They are in a joint venture to produce and sell phase shift non volatile memory chips. These chips have the advantage of using less power and have faster read and write cycles, compared to many of it's competitors

ENER IPO in 1995 @+- 15. It's line chart looks like a roller coaster, mainly with higher highs and higher lows. It is currently searching for a bottom. If IPO price does not hold may drop down to around $9.

ENER latest quarterly report of 12-31-08 shows a nice ramp up of both revenues and net income for past 4 quarters. Receivables and accounts payable are ok. Inventory shows a larger percentage increase this latest quarter compared to previous. May be some excess production or a slow down in sales.Has enough cash on hand pay off total liabilities. In all, numbers show ENER has capable management team in place.

I feel ENER solar system is superior over silicon glass solar panels. The glass panels need to be put into a frame then that framework is attached to the roof. Care must be used in the installation process to prevent glass breakage and also making sure no water seepage into structure at multiple points of contacts, with roof. ENER process of embedding PV solar cells directly into the roofing material eliminates both of those problems. A huge advantage. Also the roofing material is flexible and pliable so it is less likely to be damaged during hail storms and other adverse weather conditions. Another huge plus.

All energy systems have advantages and disadvantages but ultimately will need to be competitive.

Various typical production costs.
Fossil fuel grid. +- 11 cents per kw.
Wind +- 8 cents per kw.
Geothermal +- 7 cents per kw.
Solar PV +- 45 cents per kw.

Over the past few years, solar has become more competitive but still needs to improve. Currently needs government subsidy to be viable.

DOE has awarded ENER a $19 million grant for R&D. If ENER can increase solar cell efficiency to 50
% plus range, it would have a huge advantage over competitors

All energy systems have the common problem of how to store excess energy during periods of weak demand for use during periods of peak demand.

If ENER R&D can develop a system to convert energy into a form that can be readily available on demand, they would have a very bright future.(not batteries, they have there own problems)

In all I think ENER is a well managed, forward looking company. My only concern is that their expansion plan may be a bit to aggressive for right now.
Quentin

Perspective #2. Carl
With the thin film PV market rapidly expanding, as stated in the quote below, ENER is situated perfectly as one of the leading thin film suppliers on the market.
“Although still lagging behind crystalline silicon in the maximum efficiency stakes, as costs per Wp fall, thin-film technologies are rapidly taking up a significant share of the PV market. Industry figures give a compound annual growth rate of 60% between 2002 and 2007, and production capacity could reach more than 10 GW in 2010 and 16 GW in 2012. Although uncertainty remains over the timescale, the European Photovoltaic Industry Association (EPIA) nonetheless expects about 4 GW of thin-film production capacity to be operational in 2010. Based mainly in Europe, China, Taiwan, the USA and Japan, this will represent about 20% of total PV module production, up from 10% in 2007. “ David Appleyard, Renewable Energy World Magazine. Vol 12 Issue 1 January/February 2009

One area of the thin film market ENER is concentrating on is the BIPV market, with there several product agreements in place with several roofing materials manufacturers, such as Certain Teed and Carlisle Energy, ENER is positioning itself for the expected growth in this sector of the solar energy market. The future growth of BIPV can be seen from the following quote. “Advocates say BIPV technology could dramatically cut costs of manufacturing and installing solar power and could expand the solar market. The BIPV market in Europe, the biggest market for the technology, grew 43.8 percent last year to reach €142.6 million [US $186.4 million], according to an October report from research firm Frost & Sullivan, which predicted that the "explosive growth rate" would continue.
Another research firm, NanoMarkets, has forecast that the BIPV market will make up about US $800 million in 2011, exceed US $4 billion in global revenues by 2013 and surpass US $8 billion in 2015. While most BIPV products today are based on traditional crystalline silicon, with companies such as Sharp, Kyocera, General Electric, BP Solar, SunPower and Suntech Power involved in roofing tiles, advocates say that thin-film materials could revolutionize the market, enabling differently shaped products for new applications that crystalline panels can't address and potentially reducing building costs. “ Jennifer Kho, renewableenergyworld.com January 16 2009.
With it’s several agreements with distributors for it’s factory produced standard PV panels and it’ strategic use of BIPV with several roofing materials suppliers/installers. ENER is poised to take full advantage of thin film market growth. To keep up with present demand and expected future growth ENER has been building and opening up several new factories. ENER August 28 2008 10K “ We have embarked on an expansion plan to reach 1GW of production capacity by 2012.We believe this expansion is necessary to accommodate the rapidly growing demand for our products and to align with our customers’ needs. We currently operate four manufacturing lines in Michigan, two in Auburn Hills and two in Greenville, totaling 118MW of nameplate capacity. We are
installing additional manufacturing lines in Greenville, Michigan that will bring our nameplate capacity to 178MW. We expect these lines to be operating at full capacity before the end of fiscal year 2009.”

Ener’s solar products are cutting edge and they are some of the best products on the market today. Mallory captured the scope of ENER’s product advantages in here week 4 summary as quoted below.
• ENER “manufacturers and sells solar modules based on our proprietary thin-film triple junction amorphous silicon technology. Our solar panels are flexible, lightweight and rugged and generate up to 20% more electricity than conventional crystalline products for the same investment (stated at company website, current Message to Investors).” Conventional PV products, which currently represent over 90% of the solar modules sold globally, are made of crystalline or polycrystalline silicon and are covered in glass enclosed by a metal frame.
• The company’s strategy has been to develop products that have technological advantages over available alternatives and that are capable of being produced commercially on an economically competitive basis. In the area of solar product manufacture, ENER PV modules are typically 18’ laminates w/out a frame. They pioneered a low-cost, proprietary, roll-to-roll process that requires much less energy to produce. The cell thickness is 100 times thinner than that of the conventional crystalline silicon solar cells, resulting in lower material cost. Ultimately ENER’s manufacturing advantage has the potential to make solar energy cost competitive with traditional energy sources.
• Installation costs are lower compared to competition because of a light weight, flexible, abuse tolerant, and easy to install product ideal for low-load bearing roof applications. ENER’s thin film laminates are generally three-to-five times lighter than conventional solar modules which use glass.
• ENER has established their products credibility with more than 10 years of field tested installations of PV laminates on commercial rooftops. Lenders see UNI-SOLAR products as forming the foundation of a bankable PV system on rooftops. Information from 2Q2009 conference call on 2/9/09. With access to financing for commercial projects worldwide being the greatest challenge in the current global economy this is an important advantage.
• ENER’s product is sold through distributors in the building industries who combine their strengths with ENER’s solar product. These distributors are manufacturing roofing products that have many construction/installation advantages because of the inherent value proposition of ENER’s solar product discussed above. Here’s an example from partner Carlisle Energy Services who Carl discussed in Week 2.
According to John Altmeyer, CEO of Carlisle Construction Materials, "UNI-SOLAR® products are a natural fit for both our EPDM and TPO single-ply roof systems and our extensive network of certified installers, as they can be readily adhered to the rooftop without the need for special equipment. Furthermore, these products contain no glass, operate in low-light situations and offer excellent performance in high temperatures, allowing Carlisle to offer an ideal solution for regions where traditional rooftop PV systems have been prohibited or excluded due to inclement climatic conditions."

With the expected exponential growth of the thin film PV industry, ENER is situated very well being one of the few companies specializing in thin film PV. This with a combination of a superior product, aggressive partnerships with key distributors and roofing materials manufactures/installers, and the building of several key factories throughout the world to keep up with the expected demand, leaves ENER with a strong strategic advantage among it’s solar competitors.

From a technical point of view ENER is looking very attractive. Information from Mallory and Eleanor’s week 3 and week 4 summary’s sums things up very nicely as follows.
6 QQ of accelerating revenue growth. 6 QQ of accelerating EPS growth in line with revenue growth. Most recent 4 quarters profitable. ENER shares outstanding = 46M
No splits in company history. Stock price $17.49. ENER’s solar products are at Market Introduction phase and ready to move into Market Penetration as the company invests heavily in plants and equipment to expand capacity. Like most stocks ENER is being pulled down with the current bear market, which is great as it provides a better buy in point when things turn around. Definitely a stock to put on a watch list.
Carl

Perspective #3. Mallory
Week 5 Conclusions:
After completing Week 4, I let everything sink in and thought about the past 4 weeks of research. I am surprised at my own conclusions.

Based on the 12 Prerequisites and recent LT emails I have concluded that I do not feel ENER has the potential to be THE dominate contender as a solar stock.

When I compared ENER annual revenues to some of the competitors listed in their 10K I realized ENER is a small company when compared to FSLR, STP and SPWRA. ENER’s capacity goal for 2012 is 1GW compared to FSLR current capacity of 1GW. This is a perspective I didn't have until today. So I asked myself what is special about this small company.

Reviewing the 12 prerequisites the areas that I feel ENER is lacking are the two areas Martha discussed in her LT emails, Innovative Sales & Marketing and Management that Leads. I just couldn’t find it. They have recently hired Sales & Marketing executives. But I didn’t find anything extraordinary in my research.

Leadership is focused, has a 3 part strategy, and is implementing their plan. But I didn’t get a sense of enormous talent, highly motivating and inspiring. The founders of the company might have had that spirit; but the new management was brought in to execute on operations. They are doing that very well. But they are not doing it with the spirit Martha describes.

I see lots of common sense in how this company conducts their business. They pursue markets where the incentives are best; they target markets that fit their products strengths; they build plants in states that offer them incentives and have a ready workforce. What I don’t see ENER doing is creating markets. They rely heavily on their partners and on the value proposition of their product. The value proposition of their product isn’t going to last forever because something new will come along.

ENER is not solely focused on the solar market. They have several emerging technologies which they are seeking to bring to full-scale commercialization. Some of these technologies have big blue chip partnerships including GE and Intel. In the solar market they do not have such a partnership.

ENER has the potential to do well in the solar sector especially if their product cycle timing proves to be ideal in relationship to the U.S. market and incentives. I am just not convinced they will be THE dominate solar contender. ENER is a company I will continue to watch. Mallory

Quentin, Carl and Mallory
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Classmates,
I re-read the case study Week 4 assignment that I had posted and felt I had not adequately addressed Martha's LT email prerequisites. So I added to #2 and #3. Originally #2/3 were combined. When the original post is replaced #2 and #3 are separated;that's where I added what I felt I had learned about leadership.

There is so much research to share and try to put into words! When I was formulating my thoughts for Week 5 I realized I had discovered aspects about leadership in doing general research that impact my opinion of ENER's potential as a dominant contender. I tried to share that in the rewrite of Week 4.

I'm not sure how Adrienne will do the replacement. But it's a long submission so it might put our recent interaction back a page or so.

Note from Adrienne: The cut and paste has been done.