Sanjeevani

Team Phoenix
October 2008

Table of contents
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. EXECUTIVE SUMMARY ...........................................................................................................................................3 BRIEF BUSINESS OVERVIEW .................................................................................................................................5 THE CONTEXT ........................................................................................................................................................9 THE MARKET OPPORTUNITY ...............................................................................................................................11 THE EXECUTION AND IMPLEMENTATION PLAN ...................................................................................................15 THE RISKS AND REWARDS ..................................................................................................................................18 THE PEOPLE ........................................................................................................................................................20 OPERATIONAL AND FINANCIAL PROJECTIONS ...................................................................................................21 EXIT STRATEGIES FOR INVESTORS.....................................................................................................................25 DATA SOURCES ...............................................................................................................................................26

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1. Executive summary
Industry Technology Company Solar Tech Limited, to be incorporated in Hyderabad, India. Business summary The Company will assemble, package and sell nano material based anti-reflection coated highly efficient Bio-mimetic solar panels. The Bio-mimetic panels will be sourced from an OEM vendor (Dyesol Inc,) and these panels will be coated with nano materials based on technology licensed from RPI (Rensselaer Polytechnique University), New York, USA. Concept Develop and provide an affordable, efficient, reliable, solar energy based photosynthetic (biomimetic) panels made using recent advances in nano-technology materials with unparalleled energy conversion architecture which will function as internal electricity generating sources in several commercial buildings across India Our product has less than 2 years of payback period for the end customer and our overall investment in the venture has a payback period of less than 3 years. The product will be assembled and packaged in fab-city, Hyderabad. The proposed BWT technology has over 65% efficiency as compared to 12% efficiency in regular PV panels:

dyesol cell augmented with AR coating 40 % efficiency

Effective 6 hour efficiency = 53 %

Basic dyesol cell 15 %

Effective 6 hour efficiency = 20 %

a-si PV cell 8%
Effective 6 hour efficiency = 6.5 %

1 hr
(Figure not to scale)

8 hr Time

12 hr

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Management Member-1, Technology & innovation: Member-1 has a PhD from Cornell University in the area of nano-technology and about 4 years of work experience with several start-ups in nanotechnology area and across several functions like technology development, technology transfer, product development and manufacturing scale-up. Member-2 Marketing & customer analysis: Member-2 is an expert in the hi-tech industry with over 5 years of experience in senior level positions responsible with business strategy and several aspects such as marketing, research & development and HR management. He has been involved in designing and developing hi-tech products with leading organizations. Member-3, Finances & corporate affairs: Member-3 is a chartered accountant with over 8 years of client facing experience in business advisory, financial analysis, fund raising and entrepreneurial strategies. He has strong understanding of capital markets and financial reporting frameworks. Member-4, Operations: Member-4 has worked as a works manager for several years in a large Government of India corporation and is well acquainted with running operations, team motivation and alignment with corporate goals. Status Several drafts of proposed patents (four) are at an advanced stage ready to be submitted for formal approval process both at national and international level (through Brainleague Inc). Detailed market research, investor presentations, small enterprise owner interviews for comments on attractiveness of the technology, commercial builders/ owners about their interest in adopting this technology are already conducted.

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2. Brief Business Overview

Problem statement: It is well known that inspite of the incremental developments over long period in PV technology for solar cells, the adoption rate of this technology is insignificant (except in dedicated solar farm/villages which consume enormous amount of space incurring huge opportunity costs). The primary reason has been the lack of cost benefit associated with this technology and very low energy efficiency (about 6% for a-Si based PV cells and 14% for single crystal based PV cells). In addition, these PV based solar panels work only under direct sun-light and out-door conditions, which are crippling drawbacks. Problem resolution by our product: We propose to develop an affordable, efficient, reliable, solar energy based photosynthetic (biomimetic) panels made using recent advances in nano-technology materials with unparalleled energy conversion architecture which will function as internal electricity generating sources in several office buildings across India. These Breathing Wall Technology (BWT) panels will be available as finished glass panels and a small portion of office buildings will be constructed with these panels (instead of passive glass material currently used). The BWT panels will look very similar to solar panels made of photo-voltaic (PV) cells available in market today, though made of a radically new energy efficient architecture able to generate electricity under low and diffused light settings and indoor environment as well. In addition, the technology is amenable to roll-to-roll manufacturing on plastic adhesive sheets in future with more investment in R&D. Our technology USP: The technology presented here is based on combination of nano-technology and biomimetics to artificially simulate photo-synthesis and hence work not only under diffused light conditions but also in-doors. The efficiencies to be achieved using BWT are more than 60% (10 times the current industry standard), unheard of in the solar panel industry made of PV cells (even the most advanced PV cells made of exotic and expensive materials like Cd have about 25% efficiencies). BWT is based on the most recent advances in nano-technology and bio-mimetic materials to achieve order of magnitude higher efficiencies than current PV based solar panels, making it an economically viable option for businesses to adopt as an alternate revenue stream. The

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technology is particularly suited for dummy glass panels used in modern commercial buildings. The underlying technology is made of two recent advances in technology which are: 1) Artificial photosynthesis (Bio-mimetics) This technology enables power generation in all lighting conditions and can be applied on many surfaces like glass, plastic etc. Essentially, this technology is based on the natural photosynthesis process used by plants. 2) Nano material based anti-reflection (AR) coating - This allows the incoming light to be fully absorbed by BWT panel across the entire spectrum of light (ultraviolet, infrared and visible spectral ranges) emitted by the Sun. In order to optimize the energy provided by the Sun, we want to ensure zero energy reflection by the solar cell surface. The nano-material AR coating developed by RPI is perfectly suited for this reason.
Breathing-w all Technology Regular photo-voltaic (PV) Cell
Technology developed at Rensselaer Polytechnic Institute In may 2007 (To be licensed)

Sunlight

Metal strips Nano layer (Si, a-Si etc) Metal coated glass Electricity

Nano anti-reflection coating

Nanotech materials

Transparent Coating Nano-porous titanium layer eGreat-cell technology

Dye layer

Electricity
Biomemetics

Transparent Coating Nano-porous titanium layer eDye layer Electricity

Biomemetics

I-/I3- Electrolyte Metal coated glass Fabrication Procedure

1. 2. 3. 4. 5. 6. Metal evaporation on borofloat glass (For ground). Deposit electrolyte. Spray deposit dye layer. Deposit nano-porous titanium layer. Evaporate transparent metal layer (For metal contact). Nano AR coating (For efficiency enhancement).

I-/I3-

Electrolyte

Metal coated glass

Figure-1: Schematic of Breathing-wall technology (in comparison to other technologies) In the above diagram, the top right corner depicts a regular PV cell. The bottom right corner illustrates the BWT technology based on artificial photo-synthesis. The manufacturing process for fabricating BWT panel is shown on the left hand side. ITO (Indium-tin-oxide) will be used to get metal contact through the transparent glass panel of energy generating cell.

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Product Advantages: 1. BWT can be used in any solar conditions-haze, shade, cloud, glare and smog. Classical semi conductor solar cells lose voltage in variable light. 2. BWT outperforms all other solar cells for indoor and low light applications. 3. BWT can come in a wide range of colors, particularly attractive for decorative purposes. 4. Order of magnitude cost effective for kWh/SqM/annum compared to PV based solar panels. 5. BWT can utilize any shape or form--its simply a matter of materials engineering--flexible or rigid--metal, polymer, glass or ceramic substrate.
6.

Technology uses processes which are a superset of PV process and can be mass produced in current solar panel manufacturing plants with addition of some equipment.

Business opportunity: The initial target market for this product will be the office buildings across whole of India as a cheaper alternative to sourcing the firms electricity power needs. We will specifically target the large number of existing office buildings in metropolitan areas that have glass panels / facades. Most sections of buildings are exposed to ample sunlight and hence are apt for using BWT panels. The primary focus will be towards domestic consumption across all of India and subsequently non-Indian markets will be pursued as technology and manufacturing process matures. Our products innovation quotient can be measured on the 3 dimensions depicted below:

N = New E = Existing

Proposed Companys position

Product

E E Market E Business Model N

Companys position in the Innovation Matrix

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It must be pointed out that individual elements of technology considered in our product are already commercialized across different products and this is the first known application integrating them into a single product line. Investment rationale and payback period: Consider Infosys incurs electricity costs of Rs 40 crores annually for ~17 mn sqft office facility area. This power consumption is equivalent to usage of 10,000 MW of electricity annually. BWT panels of 137,000 sqft (which is 0.7% of Infosys office facility area, preferably distributed across few buildings) will be sufficient to generate this electricity. This would incur a cost of Rs 123 crores, yielding a payback period of roughly three years to Infosys. In comparison, the current solar panels based on PV cells have a pay back period of about 18 years while the panels lose more than 25% of their power generating capacity in about 15 years, making it a negative NPV investment. This also explains the lack of adoption of this technology except in Government sponsored solar villages). The PV based solar panels are not suitable for commercial buildings and are mostly located in dedicated solar villages which incur opportunity costs of the land (not accounted in the above calculation), thereby making this a much inferior investment compared to an investment in the BWT panel technology. The cost and efficiency comparison can be summarized in the figure below:

Efficiency

BWT Panel

Size of circle indicates future growth potential

PV Panel

Cost
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3. The Context
Since the advent of the industrial revolution, the worldwide energy consumption has been growing steadily. It has grown from 3,827 mn tons of oil equivalent in 1965 to 11,099 mn tons of oil equivalent in 2007 (annual growth rate of 2.5%). The electricity generation has been growing at a much faster rate, i.e., at 3% annually over the last 15 years. The major sources continue to be oil and coal contributing respectively 36% and 28% to the global energy needs. Assuming that our current rate of usage remains constant, and the remaining fossil fuels totaling an estimated 0.4 YJ (1 YJ = 1024J), we will run out of conventional oil in 35 years and coal in 200 yrs. It is a fact that the energy consumption is directly related to the growth rate of an economy. As a result of pro-business policies initiated in the 1980s, the Indian economy has recorded impressive GDP growth. In the medium term, the International Monetary Fund is projecting India to grow its GDP at a rate of 8%. If India is to meet or beat its GDP growth targets, it is safe to anticipate a significant shift in energy consumption patterns in both industrial and consumer markets Among the hydrocarbon fuel sources, coal remains by far the largest source of energy in India. Oil and natural gas are the other two fuel sources for thermal power production. Hydropower contributes 25% of the energy demand while renewable sources contribute approximately 4% of the countrys demand. However, with only 6% of worlds coal reserves, 0.6% of oil and 0.6% of gas, Indias energy endowments are very limited. Worldwide, there has been a lot of awareness and about the use of renewable sources of energy. A number of countries are taking action as a result of the Kyoto Protocol, and further steps in this direction are proposed. The European Parliament noted in its Resolution on climate change (14 February 2007) that energy policy is a crucial element of the EU global strategy on climate change, in which renewable energy sources and energy efficient technologies play an important role. The use of obligatory targets was widely supported. Similarly US and China have framed or in the process of framing regulatory measures to increase the percentage use of renewable energy. In India, a number of fiscal incentives and facilities are available for the manufacturers and users of RE systems. India has the distinction of being the only country with a separate Ministry

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for Non-Conventional Energy Sources, now renamed as Ministry for New and Renewable Energy (MNRE), dedicated to oversee renewable energy initiatives. The new government policy is of moving away from direct subsidies to indirect fiscal and promotional incentives such as soft loans. A dedicated government funded financial institution called India Renewable Energy Development Agency (IREDA) Limited has been set up to aid non conventional energy industries and administer these innovative financial packages. The government also offers financial support for R&D efforts in RE industries. Other promotions include 80% accelerated depreciation for tax purposes in the first year of the installation of RE projects and systems, five year tax holiday for power generation projects, no excise duty on manufacture of most of the finished products and low import tariffs for capital equipment and most of the materials and components are some of the promotional incentives available to RE entrepreneurs. Among the renewable and environment friendly energy sources, solar energy is the most abundantly available resource. The worldwide available solar energy potential is 3.8 YJ/yr (120,000 TW). Less than 0.02% of available resources are sufficient to entirely replace fossil fuels and nuclear power as an energy source. The major technology available for converting solar energy to electric energy is photovoltaic cell. The main problem with this technology is the poor conversion ratio (about 10%) which gets worse, at an increasing rate, with use. Moreover, this technology is not proprietary.

Indian Solar Industry

Expected domestic growth rate of 10-12% annually. Current growth drivers High emphasis for search for methods to decrease cost/ KwH Increasing cost of non-renewable sources Regulatory pressures for Greener technologies Power purchasing services

Corporate Social Responsibility initiatives have enhanced the green awareness. For eg, Leading Corporate houses such as Bharti, ITC, HLL, etc are embracing emission disclosures voluntarily.

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4. The Market Opportunity

Target market: With the advent of several multinational companies in India and proliferation of modern commercial buildings and shopping malls, the energy demand in India is already overloaded. Electricity spending is a significant cost for most of these companies. At the same time, with the depletion of natural resources and conventional forms of energy sources, it is becoming difficult to balance the growing demand of energy. Our product will play a major role in filling this gap. The target market for the product consists of all the cities which are witnessing exponential growth in terms of real estate properties, office space, special economic zones, etc. Real estate giants such as DLF, Unitech, etc are leading the modernization of commercial buildings using ergonomic designs and contemporary materials such as glass. The increasing awareness for green buildings make the macro factors more attractive. We aim to use this as an opportunity to provide an affordable, reliable and efficient energy solution to such commercial buildings. Our BWT panel will target to replace the ordinary glass from the faade of the building and also use the roof-tops. The amount of energy generated by these panels is sufficient enough for a commercial building. Potential market size and growth: We have used a top-down approach in order to size the market and its growth potential. We started with the total modern commercial carpet area and estimate that 60% of such area will use glass facades in Metro and Tier 1 cities. Market research estimates the total modern commercial space to be 175 million sq ft.). The ratio of BWT Panel to carpet area was estimated by our team to approximate 1:25.

Our expected Solar Panel area = Using the ratio of solar panel : total carpet area = 1:25 Our penetration into the glass building segment

% of glass buildings out of total modern office space Total modern office space (mn sqft)

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Initially, our product will satisfy the energy needs of the commercial buildings in India, specifically the metros and tier-1 cities. We plan to move towards a model of exporting the solar panels to other countries in the medium term. With favorable regulatory environment, we will consider the option of energy transmission and distribution.

Market size estimate Total commercial area (Mn square feet) Buildings with glass exteriors % Total target market (Mn square feet) Expected market penetration % Expected penetration area (Mn square feet) Solar panel area in 1:25 ratio (Mn square feet)

Year 1 175 60% 105 8% 8 0.32

Year 2 189 60% 113 20% 23 0.91

Year 3 204 60% 122 25% 31 1.22

Year 4 218 60% 131 30% 39 1.57

Year 5 234 60% 140 30% 42 1.68

Competition: We are targeting clients that would prefer to become energy independent and lead users of end to end energy solutions. Hence, we need to evaluate this market closely, focusing on nearest competitor and potential market entrants. Although the photovoltaic cell technology is a proven technology and is the most prevalent form of solar energy today, but at the expense of high installation cost and high payback period. One of the most threatening competitors can be the conventional energy sources used by the companies such as electricity generation through diesel generators (DG sets), furnace oil, biomass, etc. DG sets are typically the preferred alternate source of energy for commercial buildings since they have a low acquisition and maintenance cost. However, BWT panel maximize the higher efficiency to deliver lower effective cost even over DG sets. Other options such as furnace oil and bio-mass have not seen much traction in commercial buildings. Moreover, with the carbon credit system gaining ground, these alternatives can almost be ruled out. The product faces indirect and direct competition from the generation and distribution houses respectively such as the state electricity board and the likes of Tata power, NTPC, etc. The competition from these companies might be considerable given that they are already established players and have infrastructure in place for distribution. The resources used for generation of conventional grid power are fast depleting, giving us a chance to establish our product towards a sustainable future.

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Potential competitors such as wind energy companies such as Suzlon, Vestas, etc are growing rapidly and pose direct threat to us since wind is another viable source of renewable energy source. However, our product aims to provide energy to the end customer in an affordable manner without the problems of transmission and distribution losses that the grid usually faces. In summary, other sources of energy are not affordable, reliable or efficient for an end user to achieve independence from the grid. Hence, our biggest competitor would be an energy source that is available at the end user site with a low cost and high reliability factor. Critical analysis of our product and business:
Strengths Weaknesses

Very efficient production of electricity BWT panels conversion factor is very high. Cost of production will be very low - almost 1/3rd of the cost of production with photo voltaic cells. The technology can be patented (or licensed to other parties to get royalty) - entry barriers. BWT combines 2 existing technologies, which have been proven to be very effective potential for extracting higher margins.

No prior experience in solar panel production. High dependency on OEM supplier. Technology licensing may not be exclusive The business model is relatively new, compared to the existing solar cell based businesses. Lack of adequately trained selling agents, distributors and maintenance teams.

Opportunities

Threats

Huge demand for energy and tremendous potential for growth. Favorable market response for renewable energy sources. Favorable global regulatory provisions for the use of renewable energy Higher consumer awareness for benefits of renewable energy sources. Overall availability of energy very high - solar energy availability per day far exceeds the requirement.

Evolution of new, more efficient technology Regulatory reforms/ subsidy may make existing energy sources cheaper. Innovations in other renewable energy sources i.e. wind energy, tidal energy etc. Raw materials availability may be a problem in long term. Environmental concerns from use of nanotechnology materials. Integration with building/ state power grid.

Entry and exit barriers: As discussed above, patented technology, learning curve and customer lock in would act as strong entry barriers for any other player planning to venture into this industry. We plan to invest significantly in managing relationships with our customers. Our strong

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customer network can be used to promote other products from diverse industry. This would enable us to even sell newer solar technologies to them. Infact, this customer database is idle for cross selling other commercial products such as industrial air conditioner, interior decoration items, etc. The customer network is expected to create an intangible identity that can be considered to be of commercial value to many diverse industries. The market and regulations are expected to be more conducive to promote local generation and sale of electricity, either directly to market or through electricity board distribution network. In later years and post regulatory reforms, the technology will be used as a revenue generating source for commercial building owners who can lease out the exterior walls of buildings to third party sources, who could install additional BWT solar panels and generate electricity to be sold either to other firms or market Our Competitive Advantage: We realize the importance of operational knowledge and scalability to generate competitive advantage that is unique and unimitable. We expect to generate competitive advantage from the following elements of our business that will form a formidable system of business activities to generate sustainable competitive edge:

Product leadership

Operational Excellence

Market Access

The main source of our competitive advantage will be the patented technology that combines two pre-existing technologies to create an efficient green cell technology. Over a period of time, we expect to move down the learning curve because of path dependency and refinement of operational capabilities. Eventually, this would make the business unattractive for the potential new entrants. Leverage off existing operational knowledge, invest in further research and build interfaces to power grids or other storage devices. Moreover, being the first mover, we are likely to enjoy the advantages of capturing the market and establishing a customer lock in. The integrated end-to-end energy solutions will increase switching costs for the customers. Combined together, this system of business activities will provide us sustainable competitive advantage.

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5. The Execution and Implementation Plan

Technology (or R&D): This group will be responsible for effective implementation of the new integrated technology. It will also be responsible for co-ordinating with the owners of the individual technologies (RPI & Dyesol) used. This group will ensure that there is seamless integration of these two technologies and all the patent/ownership issues are taken care of before production begins. Related work includes dealing with any disputes regarding the ownerships/patents. The group will continuously try to improve upon the existing technology based on the performance of the initial system developed and customers feedback. It will also work to develop any related technologies based on the existing one. The recruitment for this group will be done from the premier institutions like IIT and IISc. Initially, we plan to hire people (3 numbers) having prior experience in solar energy field. Production: The manufacturing will be done in Fabcity Hyderabad, in collaboration with experienced manufacturers (i.e., NT-Silicon India, Signet Solar or Moser Baer Ltd). The Anti-reflection technology required for this product will be sourced from RPI under exclusive license (with the effort to eventually buy the technology). Our company is sourcing the glass panel (coated with the dye) from OEM supplier Dyesol. The production department will be responsible for putting the nano anti reflection coating on top of the panel. Other fabrication items such as assembly, wiring, etc will also be done by the production department. Since the production work does not involve a lot of technical knowledge, staffing of the department will be done from ITI training centers. For initial training of the staff, we expect to hire some experienced people and supervisors from the solar energy field. We estimate that for the level of production targeted, we will need 225 staff at the beginning. Gradually this will increase to 375 in the next 5 years. The production staff will be supported by the engineering team and the quality assurance team. The best strategy to entry the market will be to enter into an alliance with the existing players in

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the area of Solar Power like Moser Baer Photo Voltaic and Solar Semiconductor. These companies already have a lot of experience in photovoltaic technology. Moreover, they have future plans to install solar power plants of significant sizes. For example, Moser Baer Photo Voltaic plans to boost its capacity to 500 MW and increase its revenues ten-fold in the next four years. Solar Semiconductor has planned an initial investment of $40 million to set up two production units in the state of Andhra Pradesh. Construction of a 30MW per annum solar plant near Pochampalli, and a 40 MW plant in Fab city, Hyderabad is already underway. The alliance will also be helpful in sending a credible signal to the market about the viability of the technology. The alliance can also act as a source of better negotiating power with the suppliers. The established companies have a number of reliable vendors who can supply the quality material. Even for the items unique to the technology like nano anti reflection coating, the alliance will help negotiate better raw materials prices. The proposed technology is considered as the most efficient among all other available solar cell technologies and is expected to provide most value to the customer. We expect that this situation will limit the consumers bargaining power for our products. Finance: This team will be responsible for finances and corporate affairs, i.e, transactions involving purchase of rights to use the technologies (from the patent owners). It will also overlook the capital financing for the project. If it is decided that the technology is to be licensed on a royalty basis, the department will negotiate royalty payment terms and conditions. Sales and Marketing: The sales and marketing work includes convincing the companies to use the solar glass panels in their offices in place of normal glass panels. The initial success of this group will define the future of the business. Once the critical number of customers has been reached, the credibility of the product will increase which will help in further sales. Hence sales and marketing departments role is very important. We plan to staff the department with the people who have extensive knowledge of the technology, good with numbers and excellent communication technology. Initially we plan to have 22 people in the department that will support our sales efforts in Metros and Tier 1 cities.

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Gradually, we plan to increase the strength to 44 in 5 years. Field Maintenance and Support: We plan to have separate department for field maintenance and support. When the technology and the product both are new, even small problems can dissatisfy the customer. If not rectified immediately, this will weaken the future prospect of our Company. Hence, we will have a dedicated group of field maintenance staff available for customer service and support. They will be responsible for immediate rectification of any problem raised by the customer. They will also act as feedback mechanism for reporting the effectiveness of the system. Based on their reports, R&D department can work for improving the quality of the product. We plan to hire about 35 staff in the beginning. (Based on our market research, the maintenance does not require significant technical knowledge and hence can be partly outsourced.) We will hire them from ITI training centers and provide basic training before their field responsibilities commence:

Proposed value chain

Procurement
Source glass panels with dye from suppliers Establish alternate vendor base

Manufacturing
Facility at Fabcity Coating of Nanotech film

Sales & distribution

Target modern buildings Deployment of sales and marketing workforce Relationship management with real estate agents, Tech Parks

After sales service

A combination of in sourcing and outsourcing Alliances for long term maintenance contract Customer feedback

Maintain licensing agreements with RPI Strike contracts & bulk and Dyesol (green wall deals technology)

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6. The Risks and Rewards

Demand risk: A downturn in the demand for solar energy or availability of alternate cheaper sources of energy photovoltaic cells may impact the prospects of the industry and thus stagger growth. However, the prospects appear remote as solar energy represents an inexhaustible energy source with an annual average growth of 35%. The global demand for solar photovoltaic products and services is expected to grow from USD 14 billion in 2006 to over USD 100 billion by 2015. [Source: The Economic Times, September 2007]. OEM supplier risk: The technology is dependent on the OEM supplier to provide the unpackaged material stack for assembly and packaging by Solar Tech Inc. This creates a risk of forward integration by OEM manufacturer. We propose to eliminate this by keeping the markets segregated and use of multi-year contractual terms to avoid it. Technology risk: Technological expertise is indispensable for the manufacture of solar panels. There is risk of a completely new and efficient solar or alternate technology being introduced in the market. This may be mitigated due to the time it takes to penetrate the market by any new technology once Solar Tech is entrenched in the market. Financial risk: Aggressive expansion in the business requires substantial funds, any failure in the mobilization of which could affect the firm adversely. We propose to tie up with several investment banks and PE firms for alternate sources of funding. Further, in the initial years, significant patience is required from investors, while the Company goes through teething troubles. Hence, we aim to raise money from investors with expert domain knowledge. Geographical risk: The market is currently concentrated locally and this lack of geographical diversity can be harmful during downturn in the economy. We propose to develop new international markets to diversify this risk. Regulatory risk: The Kyoto Protocol requires 10% of the energy requirements of all countries to be drawn from non-conventional sources. India is a signatory to Kyoto Protocol, thereby minimizing the risk of a change in their regulatory stance. Besides, more countries are signing the Kyoto Protocol, widening the market for the Company.

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Competition risk: Imitators and competitors can affect margins. To reasonably insulate we propose stepping up yield and efficiency and traveling down the learning and innovation curve. Project implementation risk: A delay in project implementation either by OEM supplier of other factors can affect the firm in several dimensions severely affecting cash flow. This will be mitigated by contractual terms and late delivery fines.

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7. The People
The team is composed of four members with diverse and complementary skills to deal with challenges involved in this venture. Member-1 has a PhD and MS from Cornell University in the area of nano-technology and B.Tech from IIT Madras. He has about four years of work experience with several start-ups in nano-technology area. He has first hand entrepreneurial experience of building, managing and leading team of 6 engineers spread across locations in delivering services for customers in micro and nano technology areas. He has been involved in research, prototype design and development of various technology products. He is fluent in Telugu and French. Member-2 is an expert in the hi-tech industry (semi-conductor and defence R&D) with nearly five years of experience in designing, developing and testing hi-tech products. He has led a team for design and development of validation suite for an Ethernet chip family and low cost chip software. He also developed novel communication security equipment which is currently deployed at the international borders. He is fluent in Assamese, Bengali and is currently learning French. Member-3 is a chartered accountant with over eight years of client service experience in business advisory, financial analysis, financial reporting and entrepreneurial strategies. Having closely interacted with Chief Financial Officers and Audit Committee members, he has gained key insights into their decision making process and understands the significance of stakeholder relationships. During his two year deputation to the US, he was exposed to international best practices. He has traveled extensively (USA, CIS countries, SE Asia & Middle East) & is currently learning Spanish. Member-4 graduated from IIT Kharagpur and has operational experience of over five years in a large Government of India corporation. He is well versed with bureaucracy and regulatory procedures. He has effectively led three different teams (total members - 300) in heavy engine maintenance, machines purchase and maintenance and bio diesel production. He introduced new machine maintenance and failures reporting system that resulted in a reduction of machine down time by about 50%. His innovative recommendations regarding efficient maintenance created savings of Rs 2.25 million per month.

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8. Operational and Financial Projections

Team Phoenix Solar Tech - business plan Exhibit I - Financial assumptions and analysis Employee strength Senior Management team Production/ engineering/ quality Field maintenance and customer support Sales and marketing Research and development Admininstrative Year 1 11 225 33 22 6 7 304 Year 2 16 250 51 34 6 7 364 Year 3 16 300 57 38 6 8 425 Year 4 16 350 60 40 6 10 482 Year 5 17 375 66 44 6 10 518

Financial assumptions Annual growth rate of commercial area Proposed sale price per square feet Materials cost as % of sales Manufacturing costs as % of sales Income tax rate Royalty rate Estimated useful life of assets (straight line)

Year 1 8% 9,000 32% 12% 34% 10% 10 years

Year 2 8% 9,400 32% 12% 34% 10% 10 years

Year 3 8% 10,500 35% 14% 34% 9% 10 years

Year 4 7% 11,000 36% 15% 34% 8% 10 years

Year 5 7% 11,500 36% 15% 34% 7% 10 years

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Team Phoenix Solar Tech - business plan Exhibit II - Balance sheet Description Assets Current assets Cash Accounts receivable Inventories Other receivables Year 1 Year 2 Year 3

(Rs in millions) Year 4 Year 5

98 691 269 288 1,346 3,600 350 5,296

290 2,132 810 364 3,596 4,550 475 8,621

300 3,215 1,350 400 5,265 4,990 500 10,755

400 4,324 1,881 350 6,955 4,870 430 12,255

450 4,838 2,104 368 7,760 4,600 400 12,760

Fixed assets (net) Other assets Total Assets Liabilities and shareholders' equity Current liabilities Accounts payable Accrued expenses Statutory liabilites/ dues payable Other liabilities Working capital loan

759 750 169 296 1,125 3,099 2,500 400 (703) (303) 5,296

1,874 954 394 598 1,500 5,320 3,000 400 (99) 301 8,621

2,540 1,251 542 687 1,450 6,470 3,000 400 885 1,285 10,755

2,495 1,475 860 862 1,440 7,132 2,500 400 2,223 2,623 12,255

2,471 1,450 560 670 1,460 6,611 2,000 400 3,748 4,148 12,759

Long term loan Shareholders' equity Retained earnings/ (loss)

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Team Phoenix Solar Tech - business plan Exhibit III - Income Statement Description Revenue from sale of solar panels Less: discounts Net sales Cost of goods sold Materials Manufacturing costs Royalty Depreciation Production / Engg salaries 74% Gross Profit Operating expenses Selling, distribution and marketing Maintenance, support, service (field) General administrative expense Research and development Others 48% Earnings before interest & tax Interest Earnings before tax Income tax expense Net income/ (loss) -22% -39% -25% 26% Year 1 2,835 71 2,764 100% Year 2 8,528 8,528 Year 3 Year 4

(Rs in millions) Year 5

100%

12,860 17,298 19,350 100% 12,860 100% 17,298 100% 19,350

907 340 276 400 135 2,059 705

62% 38%

2,729 1,023 853 550 159 5,314 3,214

65% 35%

4,501 1,800 1,157 660 202 8,321 4,539

6,227 2,595 1,384 720 252 65% 11,178 35% 6,120

6,966 2,903 1,355 770 289 63% 12,283 37% 7,068

365 308 162 306 175 1,317 (611) 453 (1,065) (362) (703)

21% 17% 11% 7%

491 413 217 405 233 1,759 1,455 540 915 311 604

20% 16% 12% 8%

700 591 306 581 335 2,514 2,025 534 1,491 507 984

21% 14% 12% 8%

1,006 851 438 840 486 3,621 2,499 473 2,026 689 1,337

22% 14% 12% 8%

1,206 1,021 524 1,007 583 4,341 2,726 415 2,311 786 1,525

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Team Phoenix Solar Tech - business plan Exhibit IV - Cash flow statement Description Net income/ (loss) Add: Depreciation Interest Adjust working capital changes Accounts receivable Inventories Other assets Liabilities Cash from/ used in operations Investing activities Purchase of fixed assets Cash used in/ (provided by) investing activities Financing activities Long term debt proceeds Short term debt proceeds Issue of equity Payment of interest Cash used in/ (provided by) financing activities Increase / (Decrease) in cash and cash equivalents Add:beginning cash and cash equivalents Ending cash and cash equivalents Year 1 (703) 400 453 (691) (269) (638) 2,274 826 Year 2 604 550 540 (1,441) (541) (201) 2,046 1,557 Year 3 984 660 534 (1,083) (540) (61) 1,332 1,826

(Rs in millions) Year 4 1,337 720 473 (1,110) (531) 120 (350) 660 Year 5 1,525 770 415 (513) (223) 12 (541) 1,446

(4,000) (4,000)

(1,500) (1,500)

(1,100) (1,100)

(600) (600)

(500) (500)

2,500 825 400 (453) 3,272 98 98

500 175 (540) 135 192 98 290

(182) (534) (716) 10 290 300

(500) 1,012 (473) 39 99 300 400

(500) 20 (415) (895) 50 400 450

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9. Exit Strategies for Investors

The following section discusses the exit strategies commonly used by investors. Proposed exit strategy Public offering (IPO) - List
equity shares on national stock exchange

Advantages
Equity shares convert to cash for investors. Major shareholders continue to control the company and exiting investors see potentially high returns.

Disadvantages
Company needs high growth to generate earnings and investors interest. Being a public company is a costly process, with external pressures to often sacrifice long term goals. The valuation outcome is largely dependent on prevailing market sentiment and hence is uncertain.

License/ sale of intellectual property (IP)

Can sell, license or franchise the IP generating continuing income with limited risk. Owner / investors may receive cash immediately or over time.

Risk of technological obsolescence makes value forecasting difficult and may limit the utility of IP. It may be difficult to find the right buyer at the right price and changes in ownership may be difficult for employees.

Sale to strategic investor

Merger with another company in similar domain

Owner may receive cash and/or stock, resources of both companies are combined, and some of the management may remain constant.

Negotiating a transaction value is one of the key roadblocks in mergers. New owners or managers may have different philosophies or ways of doing business. The existing staff may have less control, and integrating the two cultures to derive synergies may be difficult.

A public offering is the preferred option for exit of our seed investors since we believe that this business can generate significant value in the long term. Further, this option has a huge potential to create and enhance shareholder wealth and we consider it to be an exciting and challenging option.

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10. Data sources

Rodman and Renshaw ALTERNATIVE ENERGY, INDUSTRY REPORT, March 17, 2008 Business Insights Ltd Report Green Energy in Europe, Strategic Prospects to 2010 http://eur-lex.europa.eu DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL COMMISSION OF THE EUROPEAN COMMUNITIES BP Statistical Review of World Energy June 2008 along with the statistical reviews

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