Dear Jacquie, Harry, David and Haichow,
Congratulations on a job very well done! This study hall is a fine example of leaders coming together to work as a team. Thank you so very much for participating in the first TechniTrader® case study. Sincerely, Adrienne

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HURDLE STUDY HALL - WEEK 5 REVIEW

You have all worked very hard and have done a superb job on every assignment. Week 5 in particular stands out as it brings all of the issues into the final summary.

Jackie as the written voice for this study hall has done one of the best jobs I have seen yet.

Martha
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Hi Jacquie:

In reading your Summary of 3/11, I realized that your 5 facilitator qualifications is far from enough to match your performance, at a minimum, two more should be added:
..
6. Insightful integrator.
7. Faster than a bullet, can jump over tall mountains and walk on stormy seas.

Some editorial comments:

You wrote: ". . . $423 million to $676 million, a ratio of 0.63:1. This is less than the ideal of 1:3."

Do you mean less (desirable) than the ideal of 1:3?

Some speculative thought worth about 2 cents:

The (low cost) organic materials in organic PV are typically (far) less durable than that in other PV. The organic PV technology may first be applied to low cost, portable applications such as solar backpack (or briefcase) to re-charge the laptop, cell phone, or similar devices, or such thing as umbrellas for outdoor tables.

Some simple observation:

In week 1, 12 solar stocks were suggested for selection, six of them traded below their Nov 08 low sometimes in Mar 09, they are: ENER, CSIQ, STP, LDK, HOKU, ESLR. The other six include the two largest U.S.-based solar companies: SPW and FSLR.

Some profound observation:

". . . we have to remember that what we observe is not nature in itself but nature exposed to our method of questioning." - Werner Karl Heisenberg of Heisenberg uncertain principle.

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HURDLE STUDY HALL - WEEK 5 ASSIGNMENT

While there is increasing awareness and demand globally to solve the issues of green house gas emissions on the one hand, and the desire to limit the dependency on foreign oil for energy and its inherent exposure to petro-terrorism on the other, there are still significant barriers to overcome before we see the Solar industry really become the dominant new global economic star. The current worldwide economic recession will limit the ability of any one company to take ownership of the market: demand has been reduced dramatically, and many smaller companies are unlikely to survive this economic downturn. Until such time credit has eased we may see only very slow growth in this industry despite growing grassroots support.

Europe has lead the way for solar to at least compete with traditional sources of energy with aggressive government incentives, and it is recognized that there is huge potential worldwide with perhaps the US being the fastest growing market. China has a huge domestic market and manufacturing economies which provide advantages for global commercialization, and the current US administration has made it clear that it will support the expansion of this industry and provide both the financial commitment to R+D and the incentives to bring this technology into the mainstream. However government support alone will not be sufficient and companies will vie for global investments dollars and financing for projects in this tentative market.

Hurdle Study Hall discussed Chinese companies and worked our way towards STP as a selection, but finally choose ENER for our case study. ENER is a company that is clearly on the cusp as far as the New Technology Cycle is concerned and there are elements that suggest the ENER has a competitive edge based on the remarkable pioneering work on the science of amorphous and disordered materials by the founder Stanford R. Ovshinsky and his wife, the late Dr. Iris M. Ovshinsky, in the 60’s. This has been enhanced by Dr Subhendu Guha, Senior Vice President and Chairman of United Solar Ovonic, who has been named the winner of the PVSEC Award for R&D on Solar Photovoltaics. The award honors individuals for outstanding contributions to the development of science and technology of photovoltaic solar energy conversion. The citation noted Dr. Guha's innovative contribution in the development and production of multi-junction amorphous silicon-based materials, devices and products.

Conventional silicon modules had undergone substantial advances of the years and are more widely used than thin film technologies, yet ENER have favored a-Si technology not only because of its reduced material costs, increased flexibility and durability primarily though the use of stainless steel substrate, but also because a-Si alloy absorbs light more efficiently. While amorphous silicon is the best developed of the thin film technologies, it is premature to say this will be the dominant technology given that there are other new technologies now in their infancy, such as organic photovoltaic materials which will offer even more flexibility and low costs. It may be that organic photovoltaic such as the gcell technology may well become dominant in remote areas and third world countries that do not have the financial capacity to invest in larger scale technologies that may dominate in the developed world. The emerging thin film technologies are starting to make significant in-roads in to grid connect markets, particularly in Germany and thin films have long held a niche position in low power (<50W) and consumer electronics applications, and ENER offer particular design options for building integrated applications. But it should be noted that during this time of financial crisis and economical recession, the next generation PV technologies will still be advancing in Laboratories, Universities and company sponsored R+D. This difficult economic time provides some breathing space for new technologies to evolve which can ultimately compete with incumbent technologies.

ENER has done much to tackle the barriers that the industry faces: it has improved efficiency of its sunlight to electricity conversion of its PV laminates, reduced production costs, utilized government funding for R+D, and has forged alliances with distributors, building material suppliers and roofing companies. Yet the industry still requires government incentives to compete with conventional energy and a healthy economy to move towards green energy. In just the few weeks that we have been engaged in this study hall we have seen ENER break through support levels and is now challenging its IPO price, with decreasing volume and a lack of significant investor activity. It may be some time before we see the GTC position trade of $30.70 with the current economic climate.
Moving from demand management to demand creation is the business model ENER are pursuing. Securing financing for projects is the biggest challenge according to Mark Morelli, President and CEO, but they are rolling out a more robust policy to identify those bankable projects. As yet the market is not reflecting success in this endeavor. The decreased ability to generate funding for projects and the competition for these funds from other solar energy companies is impacting its share price.

We have identified that the industry in general faces a huge hurdle (pardon the pun) in establishing consumer momentum which will rapidly move the industry from a market introduction phase to market acceptance. While ENER train and educate their distributors and ensure the total package of incentives is part of the pitch for bankable projects, there is still a wide gap between acceptance of their specific technology and consumer demand which would drive this company to market dominance. ENER continue to expand their management team to tackle this issue. It was announced on March 10th 2009 that Mr Ken Fox has been appointed as Chief Marketing Officer, who will be responsible for Global Marketing, Strategy and Business Development. He will also oversee Government Relations and Product Development. Mr. Fox joins ENER from United Technologies Corporation (NASDAQ:UTX) where he most recently served as Vice President/General Manager, Stationary Power Solutions for UTC Power, a business focused on distributed power generation. While there, Mr. Fox led the growth and commercialization of UTC Power's product and service offerings. "I am pleased to welcome Ken (Fox) to ECD," said Mark Morelli, president and CEO of Energy Conversion Devices (NASDAQ: ENER) "As we continue our focus on demand creation and sales efficiency, we are broadening our management team with experienced professionals that can help guide ECD to the next level of success. Ken's business acumen and experience in transforming research-oriented cultures to commercial focus within distributed power and renewable energy businesses will be an immediate benefit to ECD as we expand our business."

ENER has not been significantly increasing the number of shares outstanding within recent years which is a good sign. ENER currently has 46 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. Cash and cash equivalents is healthy at $502M, and its inventory and accounts receivable relative to sales has improved in the last year. However ENER’s total liabilities to equity, as of December 31 2008 are $423 million to$676 million, a ratio of 0.63:1. This is less than the ideal of 1:3.

It should be noted that Energy Conversion Devices, Inc. (NASDAQ: ENER) also pioneers other alternative technologies, including a new type of nonvolatile digital memory technology that is significantly faster, less expensive, and ideal for use in a variety of applications including cell phones, digital cameras and personal computers. At this time this sector is only a small part of ENER’s overall revenue stream.

The entire alternative energy industry is still in a state of infancy and the current global recession will seriously challenge all but the strongest companies. No one technology has closed out competitors at this time and there is plenty more research and important marketing needed to bring any one company to the head of the class. Social networking sites such as Twitter, and Google’s Lat Long blog, to name just two sites, are already bringing the issue of alternative energy into this fast growing interactive environment and the impact of such sites could well tip the balance in finding the winning technology.

ENER does have a lot to offer, appears to be searching for a bottom in the current market, and even though the indicators are not yet in positive territory, we feel that it is one that should be on a position watch list at this time. Its commitment to research, management that addresses commercialization issues and its ability to generate revenue from its IP are all positive indicators that ENER could be a contender.

Jacquie
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I feel like the truant come back to school. I have had a lot on my plate the past two weeks and am so thankful that the three of you have done such a good job. Harry, I think your week 4 summary was excellent and Jacquie I agree with Harry that you can go with the report as written.
Technicals look lousy as I’m sure you all know, but the 2005 ENER support did manage to hold (at least so far).