LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

The non-cancelable purchase obligations relating to raw materials in the above table included an
aggregate amount of $729.6 million relating to a supply contract under which we would purchase raw
materials from Technischer Warenhandel Heller and NCA Fortin Inc., as co-sellers, from 2006 to 2011.
Pursuant to the terms of the contract, we have agreed to prepay each monthly shipment 15 days in advance.
Under the contract, the purchase price will be renegotiated every six months. The $729.6 million included
above was determined based on the annual quantities we agreed to purchase and the purchase price effective
as of December 31, 2006. Pursuant to the contract, we were required to pay an aggregate of $7.2 million in
October and November 2006 for the first shipment of silicon feedstock in November 2006. For each
subsequent monthly shipment between December 2006 and October 2007, we are required to pay $12.0 million
each month at least 15 days before the shipment. Technischer Warenhandel Heller and NCA Fortin Inc.
have not commenced delivery of any polysilicon as required and have informed us that delivery under this
contract will be delayed. We have paid an aggregate of $3.0 million to date under this contract, as our partial
prepayment with respect to the first shipment of silicon feedstock scheduled for delivery in November 2006.
We have not made any additional payments under this contract. We are currently re-negotiating this contract
with Technischer Warenhandel Heller and NCA Fortin Inc. and we expect to enter into a new agreement by
the end of July 2007. There can be no assurance that we will be successful in negotiating a new agreement or
as to the timing of any new agreement. In addition, the terms of any new agreement could be materially less
favorable to us than the current agreement, including a material reduction in the amount of the committed
polysilicon supply. We believe, however, that the outcome of this contract re-negotiation will not have a
material adverse effect on our overall polysilicon supply situation.
The $212.3 million of non-cancelable purchase obligations relating to equipment in the above table
included an aggregate amount of $99.3 million in purchase obligations to HCT Shaping for wafering wire saws
and squarers to be delivered during 2007 and 2008, $91.4 million in purchase obligations to GT Solar primarily
for DSS furnaces to be delivered in 2007 and $19.3 million in purchase obligations to Meyer Burger for
wafering wire saws to be delivered in 2007.
As of March 31, 2007, while our long-term debt obligations and short-term debt obligations were
approximately $29.8 million and $61.5 million, respectively, our non-cancelable purchase obligations for raw
materials and equipment were $896.7 million and $197.9 million, respectively. Our non-cancelable purchase
obligation relating to the raw materials supply contract with Technischer Warenhandel Heller and NCA
Fortin Inc. was $726.6 million.
We intend to use a portion of our net proceeds from this offering to purchase raw materials and
equipment. See ""Use of Proceeds.''
Quantitative and Qualitative Disclosure about Market Risks
Foreign exchange risk
A significant portion of our sales is denominated in Renminbi. Our costs and capital expenditures are
largely denominated in U.S. dollars and euros. Fluctuations in currency exchange rates, particularly among the
U.S. dollar, Renminbi and euro, could have a significant impact on our financial condition and results of
operations, affect our gross and operating profit margins and result in foreign exchange and operating losses.
We incurred a foreign currency exchange loss, net, of approximately $1.3 million and $0.5 million for the
year ended December 31, 2006 and the three months ended March 31, 2007, respectively. We currently do not
plan to enter into any hedging arrangements, such as forward exchange contracts and foreign currency option
contracts, to reduce the effect of our foreign exchange risk exposure. Even if we decide to enter into any such
hedging activities in the future, we cannot assure you that we would be able to effectively manage our foreign
exchange risk exposure.
Our financial statements are expressed in U.S. dollars but the functional currency of our principal
operating subsidiary, Jiangxi LDK Solar, is Renminbi. To the extent Jiangxi LDK Solar holds assets
denominated in foreign currencies, any appreciation of Renminbi against such foreign currencies could result
in a charge to our income statement and decrease the value of our foreign currency denominated assets. See
note (2)(c) to our audited consolidated financial statements for more information on foreign currency
translations for our financial reporting purposes.
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