MANUFACTURING SERVICE PROVIDER

MSP (Manufacturing Service Provider)

Update

16 March, 2007
MSP team and SESI

1
Preamble - Module Manufacturing

• The supply strategy of BP Solar envisages expansion of manufacturing

capacity in wafer, cell & module manufacturing facilities to provide a
leading edge to BP Solar in the market
• The supply strategy envisages the need for module assembly plants to
be closer to Market
• The drivers for the above is reduced logistics, better product pricing and
faster time to market among others
• The module assembly capacity expansion can happen through the
following optional routes:
− Captive investments (Brown & Green fields)
− Third party manufacturing service providers
− Tolling agreements

• The Manufacturing Service Providers route for expansion of module

assembly capacity is discussed in the slides below

2
Context – What are MSP’s

• MSP are Mass manufacturer companies (10b$) with an excellent

track record in Manufacturing, Operation excellence, quality,
customer responsiveness and cost reduction.
• They will set up and operate PV module assembly line capacity in
its own facilities with its own people to supply BP customers
• Most of World Class companies use MSP to manufacture their
products. See list of MSP customers in the back up Slides. (SESI
to include)
• Manufacturing Service Providers are specialized in providing
from pure manufacturing or assembly to full supply chain offer to
OEM.
• Market leaders in MSP are:
− Solectron. Flextronics, Celestica, Jabil, Sanmina

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Corporate overview short list candidates

JABIL CELESTICA FLEXTRONICS

REVENUE 7.5 M $ 9.8 M $ 15.2 M $

EMPLOYEES 40.000 98.500 100.000

HEAD QUARTER USA (FL) CANADA SINGAPORE

(Toronto)

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 Model - MSP End game: Who is doing
what?
Supply & buy
machines Have ready a building:
licence to operate
all services & infrastructure
Provide training:

machines installation,
ramp up & operation
Installation, commissioning
& ramp up all machines
Define:
HSSE spec
BP Solar MSP
Acceptance test procedures
BOM and preferred suppliers
Run, operate and maintain
the plant
Supply PV cells

Procure the BOM

Boundaries: & assembly modules
Modules BP branded
Sites: TBD Ship modules to BPS
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 Factors to be considered

• Pioneering effort in Photovoltaic Industry

• Traditional financial metrics
• Definition of the operational and economic design criteria (during the
Pilot Project)
• Fear of losing intellectual capital, expertise
• Difficulty attracting good contract manufacturers for less desirable
programs
• Necessity of managing risk exposure (see next slide)
• Management of relationship / contract (such as parts shortages,
changes in orders)
• Exit Strategy

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Risks & Mitigation
Risk
• Lack of Supplier
competitiveness
• Leak of strategic BP Solar
information to competitors
through partner
• Lack of performance of the
supplier
• Lack of local presence of the
MSP in the areas of interest
resulting in impractical
solutions being proposed
• Underestimate timeline to
deliver partnership vehicle
Mitigation
• Yearly review of competitiveness process to be agreed
with supplier
• A NDA design by our legal department is already signed
as part of our RFI process to protect adequately against
this possibility. MSP’s as part of their strategy protect IPR
and information of their partners to have credibility in
OEM market
• Objective criteria based selection process exercised by
multifunctional network. The existing track record in
Quality give us enough assurance against this Risk
• Local presence in the sites of interest to be included in
the decision criteria. Multiple MSP agreement can be
signed if all our strategic areas are not covered by only
one partner.
• Create an internal multifunctional team tasked with
landing the agreement by H1 2007. An Implementation
Plan is requested under our current RFI process.
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Strategic Fit: Value added for each party

− BP Solar:
• Switch fixed cost to variable cost
• Reduce capital investment (50%+)
• Accelerate time-to-market & time-to-volume
• Optimize and reduce time for MODCO implementation
• Reduce product and total landed costs
• Achieve world class metrics
• Lower manpower liability & easier exit strategy

− MSP:
• Big opportunity to apply manufacturing excellence to a new business
• Secured material turn over
• PV Market knowledge and entry door to material renewable energy

8
Draft structure of the agreement

• Type of contract: Manufacturing agreement

• Pilot plant site: Spain, Italy or Germany
• Commercial arrangement:
− Price: per module conversion cost or per W
− Finished good will be delivered EX-WORKS
− Subsidies should be part of the agreement
− NCM to be procured by MSP in accordance with BPS AVL
− BPS PV cells shall be delivered DDP, MSP site
− Guarantee: workmanship
− Duration of the pilot contract: 1 to 5 years
• Reporting and management of the contract: Technical Officer and
Contractual Officer
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 MSP price example (Conversion Cost)
1€=1,3$ ANNUAL 100.000.000 200.000.000 300.000.000

TOTAL $/Watt TOTAL $/Watt TOTAL $/Watt

Unit Percent
Selling Price $ 69.938.454 0,70 $ 130.299.816 0,65 $ 189.221.340 0,631
Material 62% $ 43.700.000 0,44 $ 83.030.000 0,42 $ 120.808.650 0,403
MVA 38% $ 26.238.454 0,26 $ 47.269.816 0,24 $ 68.412.690 0,228
Direct Expenses: 22% $ 15.466.456 0,15 $ 29.091.807 0,15 $ 42.533.048 0,142

Direct labor: Persons $ 9.025.021 0,09 $ 16.245.038 0,08 $ 23.284.554 0,078

Consomables % D.L $ 180.500 0,00 $ 324.901 0,00 $ 465.691 0,002

Scrap Material cost $ 4.000.000 0,04 $ 8.000.000 0,04 $ 12.000.000 0,040
Warranty Material cost $ 2.260.934 0,02 $ 4.521.869 0,02 $ 6.782.803 0,023

Indirect Expenses: 5% $ 3.633.080 0,04 $ 5.802.498 0,03 $ 8.271.538 0,028

Indirect labor $ 1.869.687 0,02 $ 2.534.414 0,01 $ 3.163.041 0,011
Technical services Persons
Receiving+Warehouse Persons
SCM Persons
Inbound Freight Material cost
Depreciation* $ 46.134 0,00 $ 92.269 0,00 $ 138.403 0,000
Building lease Rent $ 468.000
Occupancy (building
improvement invest) $ 258.494 0,00 $ 461.818 0,00 $ 560.618 0,002
Indirect expenses
(Facilities&machinery) Electricity $ 1.458.764 0,01 $ 2.713.997 0,01 $ 3.941.476 0,013
SG&A Persons 0% $ 227.435 0,00 $ 341.153 0,00 $ 454.870 0,002
Allocations $ 3.607.427 0,04 $ 5.793.671 0,03 $ 7.981.122 0,027
Corpor./Reg. allocation V.A 4% $ 2.823.427 0,03 $ 4.304.071 0,02 $ 5.793.762 0,019
Mat.Management corpor Materia cost $ 784.000 0,01 $ 1.489.600 0,01 $ 2.187.360 0,007
EBIAT 5% $ 3.304.056 0,03 $ 6.240.687 0,03 $ 9.172.112 0,031

Outbound $ 1.214.277 0,01 $ 2.428.553 0,01 $ 3.642.830 0,012

* Not included machinery depreciation (0,9 c$)

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 MSP price example (Logistic Center)

LOGISTIC CENTER (60 Stock days 72 cells) VOLUMES(W) 100.000.000 200.000.000 300.000.000

Selling Price $ 2.100.959,63 $ 3.099.219,48 $ 4.121.751,60

$/W 0,02 $/W 0,02 $/W 0,01
MVA $ 2.100.959,63 $ 3.099.219,48 $ 4.121.751,60

Total Expenses: $ 1.570.127,72 $ 2.315.223,44 $ 3.078.896,69

Indirect labor $ 509.200,84 $ 907.251,68 $ 1.305.302,53
Logistic Headcount(invoicing) 2,00 2,50 3,00
Receiving 5,00 10,00 15,00
Warehouse 5,00 10,00 15,00
12,00 42.433 22,50 33,00
Freight
Depreciation/Investment $ 73.954,40 $ 125.288,80 $ 194.420,72
Building lease $ 468.000,00 $ 468.000,00 $ 468.000,00
Utility $ 240.032,00 $ 256.802,00 $ 274.352,00
Movement between warehouse(B2 to B3) $ 218.400,00 $ 436.800,00 $ 655.200,00
Insurance(exemption 100000 $ ) $ 60.540,48 $ 121.080,96 $ 181.621,44

SG&A 0,50 $ 37.905,83 0,75 $ 56.858,75 1,00 $ 75.811,67

Corpor./Reg. allocation $ 234.913,49 $ 346.531,39 $ 460.863,23

Mat.Management corpor

EBIAT $ 258.012,59 $ 380.605,90 $ 506.180,02

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Value added for each party: Strategic fit

• BP Solar:
• Switch fix cost to variable cost
• Reduce capital investment
• Accelerate time-to-market & time-to-volume
• Optimize and reduce time to MODCO implementation
• Potential Reduce product and total landed costs
• Potential better response to Changes
• Achieve world class metrics

• MSP:
• Big opportunity to apply manufacturing excellence to a new business
• Secured material turn over
• PV Market knowledge and entry door to material renewable energy
• Huge support from senior management

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 Conclusions – MSP Option

• The MSP option is found to be a viable and feasible business model

• Better definition through a pilot and possible up scaling based on

demonstration of the pilot.

• BP Solar to retain governance and management control in initial years with

the MSP’s till relationship stabilizes

• Established product range to be outsourced to MSP’s

• High volume to be ensured to derive better costs

• New product introduction till stabilization to be through Captive

manufacturing facility of BP Solar

13
RFI Process & Outcome

14
RFI Selection Process

• Objective of RFI:
− Explore the potential to consider an agreement with a MSP
company as part of the MODCO implementation strategy.
• Broad Scope:
− MSP to set up and operate PV module assembly line capacity in its own facilities with
its own people to supply BP Solar customers
− Use BP Solar owned manufacturing equipment in a first phase, potentially transitioning
into its own equipment for further expansions
− Manufacture BP Solar branded modules under BP Solar designs and manufacturing
process definition, potentially transitioning into its own manufacturing process
definition in the future

• Approach
− Initiate a 40 MW pilot Project to understand & define the business model
− On success of pilot, initiate large scale deployment of MSP approach

15
RFI Status

• Process:
− Capabilities meeting to select short list of candidates. Done
− Preparation and submission of RFI’s. Done.
− Definition of selection criteria and evaluation matrix. Done.
− Visit to MSP sites. Last one concluded week 7.
− Visit to SSR with all MSP candidates. Last one concluded week 9.
− Dead line to receive final information. Week 11
− Evaluation of information. Expected week 12

16
Key Indicators for MSP evaluation

• Business proposal with economic model

• Pilot proposal: scope and liabilities/exit gates
• Technical capabilities & business improvement plan
• MSP end Consumer satisfaction
• Strategic fit for MSP and BPS
• Financial capabilities
• Geographical deployment
• Factory visit to MSP site

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 Flextronics – Summary of Offer

Highlights

Drawbacks

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 Operations map

Define Execute Audit Observations

At least for the pilot.
Supply & buy process machines BPS BPS BPS BP asset.
BPS BPS
Machines FAT BPS

Plant design BPS MSP BPS Factory Planning

Vendors/BPS to
Machines HOOK-UP and installation procure support
BPS MSP BPS & training

Machines SAT BPS MSP BPS

PV lines ramp up BPS MSP BPS

Supply PV cells BPS BPS MSP

Integrity management & HSSE BPS MSP BPS

Acceptance Test Procedures: Modules BPS MSP BPS

BOM and preferred suppliers BPS MSP BPS

Engineering
company to be
Building and facilities BPS MSP BPS considered

Permitting and licences MSP MSP BPS

Operation of the MODCO assembly plant MSP MSP BPS

Shipping modules to BPS/Customers BPS MSP BPS

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 Celistica – Summary of Offer

Highlights

Drawbacks

20
 Jabil – Summary of Offer

Highlights

Drawbacks

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Source of Value - Assessment
Flextronic Observatio
Source of Value s Celestica Jabil n

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Selection Criteria

MSP SELECTION CRITERIA MATRIX

Score 1= bad
Score 5=excellent
Score 1-5 Score 1-5 Score 1-5 Assumption
Item DESCRIPTION FLEXTRONICS CELESTICA JABIL COMMENTS Weight(1 to 3)
1 Business proposal with economic model 2
2 Pilot proposal: scope and liabilities/exit gates See High Level Plan 3
3 Technical capabilities & business improvement Plan 1
4 MSP end customer satisfaction 3
5 Strategic fit for MSP 2
6 Strategic fit for BP 3
7 Financial Capabilities 1
8 Geographical deployment 2
9 Factory visit and questionnaire See High Level Plan 3

FINAL SCORE (No weight) 0% 0% 0%

FINAL SCORE(weighted) 0% 0% 0%

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Conclusion of the selection Process

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Draft structure of the agreement I

• Type of contract: Manufacturing agreement

• Pilot plant site: Spain, Italy or Germany
• Commercial arrangement:
− Price :per module conversion cost
− Finished good will be delivered EX-WORKS
− Subsidies should be part of the agreement
− NCM to be procured by MSP in accordance with BPS AVL
− BPS PV cells shall be delivered DDP, MSP site
− Guarantee: workmanship
− Duration of the pilot contract: 1 to 5 years
• Reporting and management of the contract: Technical Officer and
Contractual Officer
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Draft structure of the agreement II

• Volumes:
− Products: Only for big modules with ARC glass (72 or 60
cells)
− Quantities: 2 lines, 40 MWp

• IPR: specific clause will be considered.

• Management of changes & improvements: specific clause will be
considered
• Exit gates:
− Termination by convenience 90 days
− Hand over to a replacement third party will be considered
• Exclusivity: Not a standard practise but could be considered
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Backup Slides

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MSP Technical Assumptions

Appendix II MSP TECHNICAL ASSUMPTIONS

Cases 1 to 5 Cases 6-10 Cases 11-15

MWp 100 200 300
Production Area(m2) 2400 TBD TBD
Clean Room NO NO NO
Facilities (HVAC, Power, Compresssed Air) YES YES YES
Indirect Service Area 2400 TBD TBD
Number of Modules per year 570,000 1,140,000 1,710,000
PV Modules Dimesions (aprox) 1000x1750mm 1000x1750mm 1000x1750mm
PV Module weight (kg) 15 15 15
Number of PV cells per module 72 72 72
Cost of Machinery(m$) 10 20 30
Electrical Power needs (MVA) 1.2 2.4 3.6
Direct Labor (people) 250 TBD TBD
Production days 350 350 350
Working Hours per day (multiple shift) 24 24 24
Module conversion cost:
* Cells (supply by BP Solar in boxes of 50u) - - -
* Non Cell materials (<20) 60% 60% 60%
* Manufacturing Added Value 40% 40% 40%
Prefered Locations & sites California, Germany, Spain, California, Germany, Spain, California, Germany, Spain,
Prefered Locations & sites China, India China, India China, India

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BOM Non Cell Material for MSP

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 Schedule

Group Activities Status Feb. Mar. Apr.

5 6 7 8 9 10 11 12 13 14 15 16 17

12-18
19-25

12-18
19-25

16-22
23-29
Manufacturing Service Provider

29-4
5-11

26-4
5-11

26-1

9-15
2-8
Preparation Expression of Interest + Confidential Agreement
Appraise & define list of candidates + capabilities meeting
Send Confidential Agreement to all candidates
Check Autorization To Negotiate is signed
Send RFI package
Preparation of proposal for RFI 
Evaluation of proposal
RFI Post Tender Clarification + Site survey
Agree short list
Final negotiation with 2 Final candidates
Stakeholders meeting to agree awarded company
Contract preparation +  negotiation
Due diligence + Financial Memorendum signed
Legal clearance
Contract signature + first Purchase Order

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