Final_Winning Combination_SCMHRD (1)

Team : Winning Combination
Institute : SCMHRD, Pune

1. Indian Energy Scenario
2. Indian Photovoltaic Sector: Present and Future Potential
3. Dow’s Entry Strategy
4. Dow’s Value Proposition
5. Financial Analysis
6. Conclusion

Key Statistics
• 2nd most populous country, ranking 5th in terms
of primary energy consumption
• Accounts for 3.5% of world’s commercial
energy demand
•A low per capita primary energy consumption of
25% of the world’s average
•Energy requirement pegged to grow at 5.6% -
6.4% p.a. over the next few years
•India faces a four fold increase in energy
requirement over the next 25 years
2% 2%
9%
51%
36%
Nuclear Hydro Gas Coal Oil
Heavy reliance on fossil fuels to meet
the current energy demand
*Source : Planning Commission of India statistics (2007)
Primary Energy Sources*

Year on year increasing demand supply mismatch
India’s share of global oil demand set to rise to 10% by
2030- A huge economic strain
• India has the 2nd highest industrial electric tariff in the world
• The country currently faces energy shortage of 8%
Indian Coal Estimates*
*Source : Planning Commission and Min of Coal estimates (2006)
Year Total Production Demand
2002-03 341 366
2003-04 361 381
2004-05 382 404
2005-06 407 449
2006-07 432.2 (Target) 474
2011-2012
(estimated) 680 731

• India is the first country to have a dedicated ministry for developing and
promoting non-conventional energy sources in the country (MNRE)
• Green energy to account for 25% of power generation by 2030.
1. Wind: Ranked 4th in wind energy
potential
2. Solar: 300 clear sunny days, equaling
to over 5,000 trillion kWh/year
3. Biomass: Benefit of huge agro base
4. Bio Fuels (Bio diesel, Ethanol): Active
government encouragement
India’s renewable potential

Indian Green Energy Potential*
*Source : MNES Projections (2006)

• 300 clear sunny days
• 7 summer months
Even Capacity
• Quick installation
• Low maintenance
• A higher individual (retail) customer acceptance – eg:
customized rooftop solutions
Least disruptive to
current users
• No need for backup generators vis a vis Wind
• Multiple uses : Electricity, Thermal
Least Backup
requirement
Greentech Energy : Selection Criteria

PV System Efficiency* PV System Capital Cost*
PV Cost of Energy*
*Source : U.S. Department of Energy Report (2007)

• Estimated potential of PV power generation is
about 20 MW / Sq.km
• There are 9 manufacturers of solar cells and 19
manufacturers of PV modules
• 60 companies are engaged in assembly and
supply of PV systems
• 100% FDI is allowed in solar PV technology
• Concessional or nil duty import of raw material,
balance of system components is permitted
• Most PV products are exempted from excise duty
Key Statistics
Photovoltaic Module

Segment to
have a
sufficient size
Dow can take
a significant
share
Profitable
Industry Indicators
1. MNRE’s focus areas for future R&D investment
2. Competitor activities
3. State level initiatives to promote greentech
4. New technological developments

•
•LEED certified
Buildings
•Solar street light
control systems
and Industrial
thermal systems
•Rural Village
electrification, Telecom
towers
•Demonstration
Projects and State
level projects
Grid Interactive
Electrification
Rural Areas
Green BuildingsUrban Areas

Potential Utilised
18000
150
100
30%
81MW
Not
Applicable
Power requirement per home (in W) (C )
Portion of solar power funds out of the total renewable pie(as per the
11th plan) (D)
Potential (A*B*C*D)
Rural Electrification
Remote villages where conventional electricity has still not reached
and meant to be powered by greentech (A) (As per CII report)
Homes per villages(B)
Potential Utilised
50MW 2.12MW (MNRE stats)
Grid Interactive Electrification
MNRE planned target for demonstration projects
Potential Utilised
350000
40
120
17MW NA
Solar powered telecom towers for rural India
Power requiremenr in Watt per tower (C )
Estimated number of towers by 2015 (A)*
Estimated rural market share of telecom market by 2015 (%) (B)
Total potential (A*B*C)
*Source : GTL Infra (2007)

Potential Utilised
25000
1800
1941
1585
2
30 Lakhs 59000 (MNRE stats)
74Wp
222MWp 4.4 MWp
Street Lights
Number ofstreet lights per 20m road length (E)
Potential number ofStreet lights being solarized considering the 4 major metros only
Power requirement per light
Total potential in Wp
MNRE target for 2012 -100% coverage ofall cities with street light solar control systems
Road Length for Delhi (in Km) ( as per Maps ofIndia) (A)
Road Length for Chennai (in Km) ( as per Maps ofIndia)(B)
Road Length for Mumbai (in Km) ( as per Maps ofIndia)(C )
Road Length for Kolkatta (in Km) ( as per Maps ofIndia) (D)
Potential Utilised
140 1 .
Industrial Thermal systems for Hotels and Hospitals
Potential of collector area (in Mn. sq. mtr.)

Potential Utilised
154
58
20%
1.8MW NA
Green Buildings
Number of LEED certified green buildings by 2012 (A)*
Proportion of power met by solar power (%) (C )
Power Potential (A*B*C)
Average power requirement of a mid sized building (Kw) (B)
Estimate Coherence
EPIA estimates (till 2012) : PV potential in India -> 430 MW
As per our estimates : PV potential in India -> 370 MW
*Source : Extension of LEED estimates

RAJASTHAN
Declared 35,000
square kilometers
as a "solar energy
enterprise zone.”
GUJARAT
Encouraging
setting up of
suitable solar
power stations in
north Gujarat and
Kutch/Saurashtra.
WEST BENGAL
Initiated
mandatory use of
solar power in
new multi-storied
buildings.
UTTAR PRADESH
14200 MW
requirement by
2009 as against
the present level
of 8650 MW
ASSAM
Targets to achieve
generation level of
4360 MW by 2025 from
the present 500 MW

Previous segmental analysis led us to following targets
Grid
Electrification
Urban-
Industrial
Thermal
and street
lights
Green
Buildings
Rural
Estimated tower growth (2011)

Grid
Electrification
(Demonstration
and state level)
Rural
Electrification
Telecom
Towers for
rural India
VNL India

Street Lights
Industrial
Thermal
Systems

Cells
development
and R&D
• Involves research in higher efficiency silicon cell and
manufacture of the same
Module
Assembly
• Involves assembly of individual components into a PV
module
Installation
and Service
• Involves installation and after sale service of modules
Value chain for a Silicon module business

Cell
Development
and R&D
• In-house 80
MW cell line
• Stakes in
Solfocus and
Solaris
• In - house
cell setup
• DPVS India to
offer technical
know-how
• PV lab for
R&D
• Plans for R&D
setup in India
• In-house
crystalline cell
facility
• 1500 cr tie
up with BEL
• In-house 80
MW cell line
• Stakes in
Solfocus and
Solaris
• In - house
cell setup
• DPVS India to
offer technical
know-how
• PV lab for
R&D

Module
Assembly
• Existing
capacity: 40MW
• Expansion to
500 MW by
2010
• Existing
capacity:
50MW
• Expansion
to 300 MW
by 2010
Not Applicable • 2000 cr
investment for
1 GW setup
• Limited range
of modules
• Plans for R&D
setup in India
• In-house
crystalline cell
facility
• 1500 cr tie
up with BEL
• In-house 80
MW cell line
• Stakes in
Solfocus and
Solaris
• In - house
cell setup
• DPVS India to
offer technical
know-how
• PV lab for
R&D
Cell
Development
and R&D

Installation &
Service
•Not Applicable • Integrated
supply chain
with In-
house BOS
•Not
Applicable
•Not Applicable • PV
installation in
Hyderabad
and Andamans
Module
Assembly
• Existing
capacity: 40MW
• Expansion to
500 MW by
2010
• Existing
capacity:
50MW
• Expansion
to 300 MW
by 2010
Not Applicable • 2000 cr
investment for
1 GW setup
• Limited range
of modules
• Plans for R&D
setup in India
• In-house
crystalline cell
facility
• 1500 cr tie
up with BEL
• In-house 80
MW cell line
• Stakes in
Solfocus and
Solaris
• In - house
cell setup
• DPVS India to
offer technical
know-how
• PV lab for
R&D
Cell
Development
and R&D

Installation &
Service
Module
Assembly
Cell Development
and R&D
Plant Operation
through PPA’s
Competitor Intensity

For gaining a position of strength in the silicon cell and module
manufacturing stage it needs to enter into strategic alliances
Module Assembly Process
Cell sorting
and Tabbing
Glass
Cleaning
Lay up and
Lamination
Framing and
Junction box
fixing
Partners Involved
1. Silicon Cells
2. Anti Reflective Glass
3. Encapsulation
4. Back
5. Aluminum frame
6. Connector

Voices from the industry
‘Polysilicon Shortage’
A booming solar industry is competing for the chip industry's
wafer supply
- Electronic Business (Jan’2006)
‘Polysilicon shortage feared until 2012’
- EE Times India (Feb’2007)
‘Polysilicon shortage real’
- BNET
‘The Silicon Shake-up’
Solar Companies That Dealt With Shortage Early Prosper
- WSJ ( Sep’2007)
Silicon Cells
Modules
Systems
Technical Knowhow

Criticality Weights
Y 7
Y 4
Y 6
Y 5
Y 3
N 0
N 2
N 1
Financial Backing
Location
Credentials of the Promotors
Parameters for partner selection
Quality and Achievements
Cost
Technology and Ability to supply
Experience
Projects
Procedure
1. Exhaustive supplier Database:
www.solarbuzz.com
2. 6 suppliers satisfied all the 8
parameters
3. 2 out of 6 ( LDK and REC) already
supply to Moser Baer
4. Four were the final proposed players
5. 4 players evaluated on the 8
parameters (ranked 1-4)
6. Weighted evaluation score calculated
Proposed Partners
1. Global Solar- USA
2. E-Ton Solar- China
3. Q Cells- Germany
4. Suntech- China

Evaluation Results
Partner Rank Rider
Suntech 1 Lack of information about its commitments
Q cells 2 Huge commitment to US government
Global Solar 3 Lack of information about operational cost
E-Ton 4 Low cell efficiency
*Suntech has signed four sourcing arrangements and is silicon secured till 2020

1. Anti Reflective Glass:
The two probable suppliers are:
1. Rajshree Mining Pvt. Ltd., India
2. Schott Glass India (Schott AG subsidiary)
2. Encapsulation: Standard EVA
3. Back: Tedlar back by Global Wedge
4. Aluminum Frame: Jindal Aluminum Ltd., India
5. Connectors: Tyco SOLARLOK connectors

1) Inverters: Xantrex (biggest
manufacturer around the world)
2) Charge Controllers: Morningstar
3) Battery Bank: Deep cycle
batteries (Deka East Penn
Manufacturing Co. Ltd, Exide)
4) Linear Actuator: LAC Opto
Electronics Comp Ltd
PV Grid Setup
Balance of System suppliers

Project Selection Rationale
• Focus on handling small but highly credible projects
• Focus on establishing Dow as a respectable brand in the Indian market
• Dow to be perceived as an end to end supplier
• Capturing mindshare by differentiated service
1. Dow will open an Indian renewable venture arm
called Dow Renewable Ventures (DRV)*
2. Assembly plant to be set up in India: Chennai,
Visakhapatnam, Mangalore-Udupi belt: Proposed SEZ locations
as per Semiconductor Policy Notification 2007
Preliminary Decisions

Strategy 1: Dow as an end to end solution provider
Targets:
1. Demonstration projects
2. Rural Electrification
3. State requirements
Differentiator:
1. Above projects are capital intensive projects, so the player has to provide an
alternative to the high monetary entry barrier
2. Users would be keen for a solution provider which gives them clean energy at
the convenience level of conventional sources

Methodology
• DRV to tie up with balance of system suppliers (BOS) for a fixed price contract for
supply of components
• This prevents the tariff margins from getting disturbed
• DRV sets up the complete infrastructure (sans land) for the power project and enters
into a Power Purchase agreement (PPA) with the customer.
* Government subsidy: Rs. 12 a unit to solar plant developers that supply to grid
** DRV will follow Clean development mechanism as per the Kyoto protocol. USA has
not ratified the protocol; DRV can sell credits in open market. India on the other hand
being exempted from Kyoto gains through FDI and Technology transfer

Benefits and Offerings
1. Ease of conventional energy at a comparable price
2. Assurance of Stable Tariffs
3. Assured quality as the onus of performance is on Dow
People Element
Here DRV assumes the major responsibility
Managing Director: Handles overall management of the company
Operations Manager: Handles procurement of primary and BOS components
Financial Manager: Handles accounting, auditing and strategic investment planning

Strategy 2: Dow as a seller of PV modules
Targets:
1. Solar powered telecom towers projects for rural India
2. Metro street light projects
3. Green Buildings
4. Industrial solution
Differentiator:
1. Player to have an assured silicon supply, as these projects would extend to
pan India once successful
2. As these would not be state specific, the player must have a wide presence
3. Immediate redressal to be offered by the player

It is proposed to have a 3 tier structure as shown below:
Methodology
DRV
Regional
Office
(RO)
State Level
Motivators
State Level
Motivators
Sets up the RO; Enter into supply agreements;
Liaison to all component and installation suppliers
Motivator training; Scheduling installation;
Maintaining inventory, Promoting local
marketing, Signing potential customers
Marketing and demonstration; Coordinate after
sale service

People Element
State Level Motivator : Motivator should be an ITI graduate with good conversation skills. 3 levels of
training required:
(a) Installation techniques
(b) Servicing and Troubleshooting
(c) Basic Marketing Strategies
There will be monthly reviews with RO to get state level feedback
Regional Office
1. RO Manager: His role would be:
(a) Getting the client brief
(b) Formulating the cost and contract proposal
(c) Client Relationship at a higher level
2. Chief technician: Role would involve quality inspection and motivator and supply coordination

•Land
acquisition
•Balance of
system
components
procurement
Initiation
Contracts
(Procurement and
PPA)
•Research &
Development
•Component
Manufacturing
Technology
Development
•Installation &
Erection
Installation
•After-sales
service
Maintenance
End to end
solution
provider
Seller of PV
modules

1 1 1
1 1 2
0.85
3 4 3 3.5
10 10
1 4 6 13.85 16.5
Village Electrification**
20132012201120102009Target Contracts (Mw)
Demonstration*
Total
State captive requirements*****
Street Lights****
Solar powered telecom towers***
* A maximum of 5 MW demonstration projects allowed per developer
** 1 village contract each in Bihar/Jharkhand and Orissa
*** Telecom tower contracts for the above villages
**** Street light contract for a metro (e.g. Chennai)
***** In line with Videocon, who plans to set up a 20 MW plant for West Bengal

Revenue Streams: There will be two major heads of revenue:
1 Contracts ( as mentioned earlier)
2 Carbon Credits
Expense Heads: The two major expense heads are:
1 Operational Expenses: Raw material, Labor and Depreciation
2 Miscellaneous Expenses: Sales support and service
DRV’s Capital Expansion Plan
Years > 2009 2010 2011 2012 2013
Capacity Addition (MW) 10 10 10
Total investment required in a 5 year span ~ USD 90 mn (30 MW plant)

2009 2010 2011 2012 2013
Grid revenues 3 6 12 43 83
Telecom tower revenues 6
Street light revenues 28 37 28 33
Total Contract Revenues 3 34 49 77 116
All figures in USD mn
Contract Revenue Head
Contract Revenues
Carbon Credit Revenues (First 4 years indicative figures)
Carbon Credit Calculation 2009 2010 2011 2012
Power Generation through Renewables (Mw) 1 3.5 5.5 13.85
Oil Proportion @32% 0.32 1.12 1.76 4.432
Units in KWh/year 2803200 9811200 15417600 38824320
Units in Terajoule (TJ) 10 35 56 140
Carbon Content@19.9 tonnes per TJ (In tonnes) 201 703 1105 2781
Coal Proportion@54% 0.54 1.89 2.97 7.479
Units in KWh/year 4730400 16556400 26017200 65516040
Units in Terajoule 17 60 94 236
Carbon Content@25.4 tonnes per TJ (In tonnes) 433 1514 2379 5991
Total tonnes of Carbon saved (in tonnes per year) 633 2217 3484 8772
Carbon Credit Revenue@US$29 per tonne 18368 64287 101022 254393
If fossil fuels were used,

2009 2010 2011 2012 2013
2.2 23.9 34.7 53.7 80.8
34.7 23.1 8.9 5.9 8.9
36.8 47.0 43.6 59.6 89.7
0.1 1.2 1.7 2.7 4.0
All figuresin USD mn
Miscellaneous(Includessalessupport and services)@5%of COGS
Total Operational Cost
Total Depriciation
COGS (IncludesRaw material and Labour)
Expense heads

Item 2009 2010 2011 2012 2013
Total Revenue 3 34 50 77 115
Total Cost 37 48 45 62 94
PAT -34 -14 3 9 14
All figures in USDmn
Profit & Loss A/c
Cash Flows
Item 2008 2009 2010 2011 2012 2013
NetCashFlow -58 1 -6 9 -1 20
All figuresinUSDmn

Assumptions
Revenue to grow at CAGR of 7%* (conservative)
Item 2014 2015 2016 2017 2018
Total Revenue 123 132 141 151 162
Total Cost 97 97 104 111 119
PAT 18 23 25 26 28
Profit & Loss A/c
Cash Flows
Item 2014 2015 2016 2017 2018
Net Cash Flow 22 23 25 26 28
* Indian power sector growth- Reuters

1. Net Present Value (10 year period)
• Invested Capital ( Initial 5 yrs.):
USD 90 mn
• Cost of Capital for Dow: 10%
• NPV (in US $): USD 13.94 mn
2. Discounted Pay Back Period
• 9 years And 45 days
-40
-30
-20
-10
0
10
20
30
40
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18
PAT in USD mn
Trend of PAT

•Renewable energy potential in India is huge
•The high capital investment and usage cost is a barrier
towards its penetration
• Dow’s in-house expertise, low manufacturing cost together
with subsidies will be a step forward in making green
energy accessible
•Dow should enter Indian PV market with a long term
perspective
•The future of Dow photovoltaic's holds immense potential

Final_Winning Combination_SCMHRD (1)

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