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

BUSINESS
Overview
We manufacture multicrystalline solar wafers. Solar wafers are thin sheets of crystalline silicon material
primarily made by slicing multicrystalline ingots or monocrystalline boules. Wafers are the principal raw
material used to produce solar cells, which are devices capable of converting sunlight into electricity. We sell
multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar
modules. We produce and sell solar wafers between 180 and 240 microns in thickness. In addition, we provide
wafer processing services to both monocrystalline and multicrystalline solar cell and module manufacturers.
We manufacture multicrystalline ingots from polysilicon feedstock in our DSS furnaces as an interim
step in producing wafers. In addition to using solar-grade virgin polysilicon, we also use other polysilicon
materials from various sources in our ingot manufacturing process. We have developed proprietary production
processes for the use of polysilicon scraps and recyclable polysilicon in manufacturing our ingots while
maintaining our product quality and performance. We use substantially all of our ingots for production of our
own wafers, and also sell a portion of our ingots directly to our customers.
As of March 31, 2007, we had an annual multicrystalline wafer production capacity of approximately
215 MW. We intend to increase our annual multicrystalline wafer production capacity to approximately
400 MW by the end of 2007 and approximately 800 MW by the end of 2008.
Despite the current industry-wide shortage of polysilicon, we have inventory and commitments from
suppliers that we believe will satisfy over 90% of our estimated requirements through the end of 2007 and
approximately 50% of our estimated requirements for 2008. Many of our polysilicon supply agreements are
subject to fluctuating market prices or price negotiations with our suppliers. The majority of our polysilicon
feedstock consists of polysilicon scraps and recyclable polysilicon. In addition to polysilicon scraps and
recyclable polysilicon, we also use virgin polysilicon as polysilicon feedstock. We have purchased polysilicon
scraps and recyclable polysilicon from semiconductor materials trading companies, including Komex, Kunical
and Prime. We have also purchased virgin polysilicon from virgin polysilicon manufacturers including MEMC
and Wacker Chemie AG, or Wacker. In addition, some of our major customers, including CSI and Q-Cells,
also have supplied us with polysilicon feedstock. We also source polysilicon feedstock from the spot market
from time to time depending on the price and our requirements.
Our principal customers have included CSI, Chinalight, Solarfun, Solartech Energy, Solland Solar and
Suntech. We also sell our wafers to BP Solar, E-Ton, GE Energy, Motech, Q-Cells, and other customers.
Historically, the majority of our sales have been in China. We are enhancing and broadening our revenue and
customer base to target other leading global photovoltaic cell and module producers.
Our increasing scale of operations and continuous cost reduction program have reduced our unit
production cost since our inception. We have a dedicated research and development team, whose primary
objectives are to enhance our product quality and achieve a more efficient manufacturing process by
improving production yield and lowering production costs.
We were incorporated in the Cayman Islands on May 1, 2006. Our principal operating subsidiary, Jiangxi
LDK Solar, was incorporated in China on July 5, 2005. Since we made our first commercial sale of our
multicrystalline wafers in April 2006, we have experienced significant growth. Our net sales increased from
$12.1 million for the three months ended June 30, 2006 to $31.5 million for the three months ended
September 30, 2006, $61.9 million for the three months ended December 31, 2006 and $73.4 million for the
three months ended March 31, 2007. Our net income increased from $1.3 million for the three months ended
June 30, 2006 to $5.0 million for the three months ended September 30, 2006, $24.3 million for the three
months ended December 31, 2006 and $24.5 million for the three months ended March 31, 2007.
Our Industry
Solar power is one of the most rapidly growing renewable energy sources in the world today. The
photovoltaic industry has experienced significant growth over the past decade. Despite the rapid growth,
according to the International Energy Agency's estimates, solar energy constituted less than 0.4% of the
world's total primary energy supply in 2004. According to Photon International, global crystalline solar cell or
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