Zhongli Talesun Solar Financial Due Diligence Report · Zhongli Talesun Solar Financial Due...

Zhongli Talesun Solar

Financial Due Diligence Report

CLEAN ENERGY ASSOCIATES

September 15, 2015

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Table of Contents LIST OF ACRONYMS ............................................................................................................................ 4

1. TALESUN COMPANY INTRODUCTION .................................................................................... 5 1.1 Overview ............................................................................................................................................. 5

Graph A: Talesun Organizational Structure ............................................................................................... 6

Chart A: Talesun Top 6 Shareholders as of 2Q 2015 ................................................................................. 7

1.2 Leadership Team ................................................................................................................................. 8

Chart B: Executive Structure of Talesun Solar ........................................................................................... 8

2. COMPANY FINANCIAL OVERVIEW ........................................................................................ 11 2.1 Summary of Annual Reports ............................................................................................................. 11

Chart C: Talesun Solar Financial Indices (FY2014-FY2015) .................................................................. 11

Chart D: Talesun Solar Financial Indices (2Q 2014-2Q 2015) ................................................................ 13

Chart E: Zhongli Talesun Financial Budget (FY2015E-FY2017E) ......................................................... 14

2.2 Accounts Receivable and Accounts Payable ..................................................................................... 15

Chart F: Talesun Solar Business AR as of 2014 ....................................................................................... 15

Chart G: Talesun Business Top AR as of 2Q 2015 .................................................................................. 16

Chart H: Talesun Solar Polysilicon Business AP as of 2014 .................................................................... 16

Chart I: Talesun Solar Wafer Business AP as end of 2Q 2015 ................................................................ 17

2.3 Profitability ........................................................................................................................................ 17

Chart J: Talesun Solar Profitability Trends (FY2012-FY2014) ............................................................... 17

Chart K: Talesun Profitability Trends (2Q 2014-2Q 2015) ...................................................................... 18

2.4 Financing Solvency and Operating Capacity .................................................................................... 18

Chart L: Talesun Solar Bank Loans as end June 2015 ............................................................................. 19

Chart M: Solvency Ratios ......................................................................................................................... 19

Chart N: Operating Ratios ........................................................................................................................ 20

3. PRODUCTION AND SALES ......................................................................................................... 21 3.1 Production Capacity .......................................................................................................................... 21

Chart O: Talesun Solar Cell Capacity Production and Sales (FY2012-FY1H2015E) ............................. 21

Graph B: Talesun Solar Cell Capacity Production and Sales (FY2012-FY1H2015E) ............................ 21

Chart P: Talesun Solar Module Capacity Production and Sales (FY2012-FY1H2015E) ........................ 22

Graph C: Talesun Solar Module Capacity Production and Sales (FY2012-FY1H2015E) ....................... 22

3.2 Sales Overview .................................................................................................................................. 23

Chart Q: Talesun Solar Sales (USD) by Region (FY2013-FY2015E) ..................................................... 23

Graph D: Talesun Solar Sales (USD) by Region (FY2013-FY2015E) .................................................... 23

Chart R: Talesun Solar Shipment (MW) by Region (FY2012-FY2015E) ............................................... 24

Graph E: Talesun Solar Shipment (MW) by Region (FY2012-FY2015) ................................................. 24

Chart S: Talesun Solar Sales Percentage by Region (FY2011-FY2016E) ............................................... 25

Graph F: Talesun Solar Sales Percentage by Region (FY2011-FY2016E) .............................................. 25

Chart T: Talesun Solar Downstream Projects ........................................................................................... 26

Chart U: Talesun Solar Top 10 Customer (FY2012-FY2014) ................................................................. 26

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4. WARRANTY .................................................................................................................................... 27

4.1 Warranty Claims Terms and Procedures ........................................................................................... 27

4.2 Warranty Claims Record ................................................................................................................... 32

Chart V: Warranty Claims (FY2012-1Q 2015) ........................................................................................ 32

5. SUMMARY ....................................................................................................................................... 34

6. DISCLAIMER .................................................................................................................................. 35

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List of Acronyms

AR – Account Receivable

CAPEX – Capital Expenditure

Co. – Corporation

EBIT – Earnings before Interest and Taxes

EBITDA – Earnings before Interest, Taxes, Depreciation and Amortization

EU – European Union

FY – Fiscal Year

GmbH – Gesellschaft mit beschränkter Haftung

GW – Gigawatt

Inc. – Incorporated

Ltd. – Limited

MW – Megawatt

N/A – Not Applicable

PV – Photovoltaic

Q – Quarter

RMB – Chinese Renminbi

ROA – Return on Assets

ROE – Return on Equity

ROW – Rest of the World

USA – United States of America

USD – US Dollar

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1. Talesun Company Introduction

1.1 Overview

Zhongli Talesun Solar (Zhongli Talesun, Talesun, or Talesun Solar) is a wholly owned subsidiary of

Zhongli Sci-Tech Group, (SZ: 002309) which is a national high-tech key enterprise located in Changshu,

Jiangsu. Zhongli Sci-Tech Group has been awarded “China Top 500 Private Enterprises,” “China Top

10 Independent Innovation Enterprises” and “National AAA Enterprise of Quality, Service and Credit.”

Zhongli Sci-Tech Group has six (6) national high-tech companies, the main products of which are

HV/LV cables, flame-retardant and fire-resistant cables series; optical fiber preform and optical fiber

cables series; solar PV industrial chain series; 3D printing series and electronic information products

series.

Zhongli Talesun was established in 2010 with a total investment of RMB five billion (元 5 billion). With

a one point five gigawatts (1.5GW) cell capacity and a two point five gigawatts (2.5GW) module

capacity, Zhongli Talesun has built a fully-automated production line. As of the end of 2014, Zhongli

Talesun had cumulatively invested and developed more than two gigawatts (2GW) PV power plants in

the downstream PV market.

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Graph A: Talesun Organizational Structure

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Chart A: Talesun Top 6 Shareholders as of 2Q 2015

Shareholders Share Volume

(RMB Million)

Percentage of Total

Talesun Shares

Zhongli Science and Technology Group Co.,

Ltd. 2,218.04 74.81 %

China Development Finance Co., Ltd. 533.55 17.99 %

Agricultural Bank(Suzhou) Investment

Management Co., Ltd. 22.87 0.77 %

Wuxi National League Venture Capital Fund

(Limited Partnership) 60.98 2.06 %

Agricultural Bank Wuxi Equity Investment

Fund (Limited Partnership) 91.47 3.08 %

Agricultural Bank League of Nations Wuxi

Investment Management Ltd. 38.11 1.29 %

Total 2,965.01 100%

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1.2 Leadership Team

Chart B: Executive Structure of Talesun Solar

Title Biography

Mr. Baixing Wang

Chairman of Board

/President

Mr. Baixing Wang, male, born in October 1956, Chinese nationality, college

degree, Senior Economist, Communist Party member; former Assistant Director

(of Changshu Wire and Cable 2nd Plant); Director (of Changshu Wire and Cable

3rd Plant); Chairman and General Manager (of Changshu Zhongli Cable Co.,

Ltd.); Chairman and General Manager (of Jiangsu Zhongli Cable Co., Ltd.);

Chairman and General Manager (of Jiangsu Zhongli Optical Group Ltd.);

Chairman and General Manager (of Zhongli Science and Technology Group Co.,

Ltd.).He currently is Chairman of the Board (of Changshu Zhonglian

photoelectric New Materials Co., Ltd.); Chairman (of Changshu Zhongli

Optoelectronics Technology Research Center Co., Ltd.); Chairman (of Shenzhen

Zhongli Technology Co., Ltd.); served as Chairman (of Jiangsu Changfei Zhongli

fiber optic cable Co., Ltd.); Chairman of the Board (of Jiangsu Zhongding real

estate development Co., Ltd.); Chairman (of Jiangsu Zhongji Automobile New

Material Technology Co., Ltd.); Chairman of the Board (of Changshu Municipal

Zhongsheng Investment Management Co., Ltd.); Chairman (of Jiangsu

Zhongding Advertising Media Co., Ltd.); Chairman (Zhongli Talesun Solar Co.,

Ltd.).

Mr. Weichang Yu

Member of the

Board of Directors

Mr. Weichang Yu, male, born in July 1952, Chinese nationality, without a

Residence-abroad right, Bachelor degree, Senior Engineer; former engineer,

Senior Engineer (of Wuhan Post and Telecommunications Research Institute);

Secretary, Chairman (of Changfei Optical Fiber and Cable Co., Ltd.); Materials

Manager, Marketing Manager, Quality Assurance Manager, Marketing Director,

Commercial Director; General Manager (of Jiangsu Changfei Zhongli fiber optic

cable Co., Ltd.); Vice Chairman (Jiangsu Changfei Libya fiber cable Co., Ltd.);

General Manager (of Zhongli Science and Technology Group Co., Ltd.).

He currently is a member of the Board of Directors (of Zhongli Talesun Solar

Co., Ltd.).

Mr. Zhoujian Xin

Member of the

Board of Directors

Mr. Zhoujian Xin, born in November 1966, Chinese nationality, without a

Residence-abroad right, College degree, Senior Economist, member of the

Chinese Communist Party; former Director (of brick and tile planting Tang Town

/Changshu City); Party Secretary (Zhanghu Village of Tang Town /Changshu

City); Assistant General Manager (of Jiangsu Zhongli Optical Group Ltd.);

Deputy General Manager (of Zhongli Talesun Solar Co., Ltd.). He currently is a

member of the Board of Directors (both for Zhongli Talesun Solar Co., Ltd. and

Zhongli Science and Technology Group Co., Ltd.).

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Title Biography

Mr. Changqing Hu

Member of the

Board of Directors

Mr. Changqing Hu, male, born in December 1979, Chinese nationality, no right

of abode abroad, Undergraduate degree, Intermediate Accountant; former Fixed

Asset Accountant and Tax Accountant, Financial Officer, Vice President of

Finance, Financial Manager, and Assistant General Manager (of Zhongli Science

and Technology Group Co., Ltd.). He currently is a member of the Board of

Directors, Secretary of the Board, Chief Financial Officer (of Zhongli Science

and Technology Group Co., Ltd.); Director (of Zhongli Talesun Solar Co., Ltd.).

Ms. Zeying Wang

Member of the

Board of Directors

Ms. Zeying Wang, female, born in June 1988;

Working Experience:

2013.08 ~ 2014.3: China Development Finance Co., Ltd., Equity Investment

Manager;

2014.04 - present: CDB Capital Co., Ltd., an Equity Investment Manager

Working Responsibilities:

1. Understanding the potential investment targets and financing needs, conduct

field visits for research; for the investment industry, corporate finance and

operation for analysis, report writing assessment and due diligence work;

2. To do routine work for the invested company after an investment has been

made.

Ms. Chengzhi Zhong

Member of the

Board of Directors

Ms. Chengzhi Zhong, female, born in January 1974, Chinese nationality,

graduate degree, Mid-Level Accountant;

Working Experience:

09-1999.10, the Agricultural Bank, the Bank for International Settlement Clerk /

Market Development Commissioner;

1999.10-2005.10, Sinar Mas Paper, China headquarters, Financial Manager

concurrently Subsidiary Financial Manager;

2005.10-2007.10, St. Mark Paper, Chief Financial Officer CFO;

2007.10-2012.05, Hanson Financial Leasing Companies, Minister of Market

Development and Business Development Director;

2012.05-2014.05, Shanghai New Energy Co., Ltd., China Xuan, Deputy General

Manager;

2014.07- present, the League of Nations CAF Wuxi Investment Management

Limited; (Limited Partnership) General Manager of CAF Wuxi Equity

Investment Fund Business.

Mr. Zhang Ling Jun

Chief Executive

Officer

Mr. Zhang Ling Jun, male, born in December 1966, Chinese nationality, with a

Residence-abroad right; He graduated from Tsinghua University in Beijing in

1986, and in 1992 obtained a PhD in semiconductor physics, CAS. From 1993 to

1996, he was a Project Manager in Chinese Hi-Tech Group; from Jan.1997 to

May 2003, he was an Operation Manager in Shanghai Wei Xu Semiconductor

Co., Ltd.; from June 2003 to July 2014 year, served as the Technology Vice

President and General Manager of Suzhou Canadian Solar Power Technology

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Title Biography

Co., Ltd.; in August, 2014 he came into Zhongli Talesun Solar Co., Ltd. and

began serving as Chief Executive Officer.

Mr. Ni Zhi Chun

Vice President of the

Technology

Research &

Development

Department

Mr. Ni Zhi Chun, male, born in October 1977, Chinese nationality, without a

Residence-abroad right; obtained Doctor Graduate degree; from2003 to 2015,

served as Technology Executive in Suntech Power Co., Ltd.; from 2007to 2013,

served as the Director of R & D Center of CEEG (Nanjing) New Energy CO.,

Ltd.; in June, 2012 he came into Zhongli Talesun Solar Co., Ltd. and began

serving as the Vice President of the Technology Research & Development

department.

Mr. Chen Jie

Vice President of the

Quality Control

Department

Mr. Chen Jie, male, born in September 1964, Chinese nationality, without a

Residence-abroad right; obtained Bachelor's degree, Intermediate Engineer; from

1993 to 1996, served as a manager in several foreign companies such as Siemens,

Fujitsu, and Celestica (Suzhou) Technology Co., Ltd.; from 2006to 2010, was the

Quality Director in Trina Solar; from2010to 2011, was the Product-Quality Vice

President in GD Solar; in Oct., 2011, he came into Zhongli Talesun Solar Co.,

Ltd. and began serving as the Vice President of the Quality-Control department.

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2. Company Financial Overview

2.1 Summary of Annual Reports1

The section below will analyze Talesun’s consolidated financial indices and development from FY2012

to FY2014.Also included are the previous five (5) quarter’s financial indices for the company.

Chart C: Talesun Solar Financial Indices (FY2014-FY2015)

Financial Indices Unit FY2012 FY2013 FY2014

Percentage

Change

FY2013/FY2014

Income

Statement

Revenue Million

RMB 2,946.23 4,921.13 4,071.94 (17.26%)

Cost of

Goods Sold

Million

RMB 2,228.37 3,560.63 2,911.83 (18.22%)

Gross Profit Million

RMB 717.86 1,360.50 1,160.11 (14.73%)

Management

Costs

Million

RMB 159.26 236.41 306.44 29.62%

EBIT Million

RMB 608.46 1,088.82 819.01 (24.78%)

Finance Costs Million

RMB 210.84 405.22 408.06 0.70%

Tax Costs Million

RMB 62.13 108.68 55.55 (48.88%)

Net

Profit/Loss

Million

RMB 335.49 574.92 355.39 (38.18%)

Assets

Cash and

Cash

Equivalents

Million

RMB 918.95 375.92 1,996.71 431.15%

Account

Receivable

Million

RMB 2,008.91 4,570.23 5,558.76 21.63%

Inventory Million

RMB 540.77 340.12 481.17 41.47%

1Figures provided by Talesun Solar’s finance team

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Financial Indices Unit FY2012 FY2013 FY2014

Percentage

Change

FY2013/FY2014

Current

Assets

Million

RMB 4,004.25 5,781.01 8,579.85 48.41%

Fixed Assets Million

RMB 1,927.51 2,065.18 1,932.29 (6.43%)

Total Assets Million

RMB 6,869.47 8,732.86 12,101.80 38.58%

Liabilities

and

Equity

Short Term

Borrowings

Million

RMB 437.08 1,135.00 150.00 (86.78%)

Account

Payable

Million

RMB 1,500.81 2,491.81 2,692.38 8.05%

Liabilities Million

RMB 5,498.78 6,937.76 7,663.41 10.46%

Equity Million

RMB 1,370.69 1,795.11 4,438.39 147.25%

Cash

Flow

Net Cash

Inflow from

Operating

Activities

Million

RMB (531.08) 839.20 (87.94) (110.48%)

Net Cash

Inflow from

Investment

Activities

Million

RMB (1,123.23) (404.72) (743.23) (83.64%)

Net Cash

Inflow from

Financing

Activities

Million

RMB 2,063.89 (804.76) 1,954.18 342.83%

Net Change

in Cash and

Cash

Equivalents

Million

RMB 486.63 107.00 1,226.88 1042.62%

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Chart D: Talesun Solar Financial Indices (2Q 2014-2Q 2015)

Financial Indices Unit 2Q2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015

Income

Statement

Revenue Million

RMB 700.20 907.98 2,323.78 796.49 684.18

Cost of

Goods Sold

Million

RMB 539.67 641.19 1,588.01 550.70 549.87


RMB 160.53 266.80 735.77 245.80 134.31

Manage-

ment Costs

Million

RMB 50.67 71.74 115.75 83.22 69.92

EBIT Million

RMB (29.47) 197.37 718.68 170.07 (5.81)

Finance

Costs

Million

RMB 88.61 108.35 130.89 75.20 52.76

Tax Costs Million

RMB (41.21) 13.12 82.14 14.18 (21.29)

Net

Profit/Loss

Million

RMB (76.88) 75.90 505.65 80.69 (37.29)

Assets

Cash and

Cash

Equivalents

Million

RMB 1,427.28 1,321.93 1,996.71 1,701.33 1,558.01

Account

Receivable

Million

RMB 4,617.72 4,533.94 5,558.76 4,743.82 4,208.60

Inventory Million

RMB 674.13 891.19 481.17 562.77 771.57

Current

Assets

Million

RMB 7,321.04 7,312.16 8,579.85 7,507.00 6,898.42

Fixed

Assets

Million

RMB 1,979.00 1,935.86 1,932.29 1,887.58 1,840.19

Total Assets Million

RMB 10,861.78 10,801.71 12,101.80 11,100.88 10,525.58

Liabilities

and

Equity

Short Term

Borrowings

Million

RMB 1,276.00 766.00 150.00 340.00 155.00

Account

Payable

Million

RMB 2,394.66 2,170.07 2,692.38 2,442.27 2,343.74

Liabilities Million

RMB 7,984.94 7,848.97 7,663.41 6,581.79 6,043.78

Equity Million

RMB 2,876.84 2,952.74 4,438.39 4,519.09 4,481.80

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Financial Indices Unit 2Q2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015

Cash

Flow

Net Cash

Inflow from

Operating

Activities

Million

RMB (429.66) N/P (87.94) 475.39 N/P

Net Cash

Inflow from

Investment

Activities

Million

RMB (735.02) N/P (743.23) (173.01) N/P

Net Cash

Inflow from

Financing

Activities

Million

RMB 1,880.04 N/P 1,954.18 (550.39) N/P

Net Change

in Cash and

Cash

Equivalents

Million

RMB 822.20 N/P 1,226.88 991.82 N/P

Chart E: Zhongli Talesun Financial Budget (FY2015E-FY2017E)

Financial

Indices Unit FY2015E FY2016E FY2017E

Revenue Million

RMB 6,000 7,400 7,906

Cost of Goods

Sold

Million

RMB 4,467 5,701 5,897


RMB 1,533 1,803 2,008

EBITDA Million

RMB 997 1,162 1,297

CAPEX Million

RMB 4.10 4.10 4.10

After completing a comprehensive financial audit of Talesun Solar, CEA has come to the following

overarching conclusions:

Talesun Solar’s revenues increased by sixty seven and three hundredths of one percent (67.03%)

between 2012 and 2013, from RMB two point nine billion (元 2.9 billion), to RMB four point nine

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billion (元 4.9 billion). Revenues then decreased slightly to RMB four point one billion (元 4.1 billion)

in 2014. Talesun’s revenues have increased from RMB zero point seven billion (元 0.7 Billion) in 2Q

2014, to RMB zero point nine billion (元 0.9 billion) in 3Q 2014, and then jump to RMB two point three

billion (元 2.3 billion) in 4Q 2014, but then decreased slightly in 1Q 2015, to RMB zero point eight

billion (元 0.8 billion). Revenues also decreased slightly in 2Q 2015, to RMB zero point seven billion

(元 0.7 billion). According to Talesun’s next three (3) year plan, the company estimates that revenues

will increase from 2015 into the future, and plans to reach revenue levels of RMB seven point nine

billion (元 7.9 billion) in 2017.

In summary of the above, Talesun Solar’s financial indices indicate that the company experienced a big

increase in revenues from 2012 to 2013, before decreasing slightly in 2014. Gross profits and EBIT

increased between 2012 and 32013, and then decreased again in 2014, and net profits slightly fluctuated

in the past three (3) years, but the overall trend is in an upwards direction. Regarding the company’s

balance sheet, the company cash and cash equivalents also slightly fluctuated in the past years, but the

overall trend is also that in a rising direction.

Finally, revenue increases in 2013 were due partially to the rapidly increasing short term borrowings in

that year; revenues then decreased with the loan reductions in 2014.Total debt levels increased over the

past three (3) years, as did the total asset levels.

2.2 Accounts Receivable and Accounts Payable

The following tables summarize Talesun Solar’s Accounts Receivable (AR) as of 2014 and 2Q 2015.

Chart F: Talesun Solar Business AR as of 2014

Customer Name Amount (RMB in Million) % of Total

Jinchang Newsun Solar Power Co., Ltd. 620.27 14.66%

Ningxia Talesun New energy source Co., Ltd. 541.67 12.80%

Talesun Power (Hongkong) Co., Ltd. 514.74 12.17%

Hainan Talesun Power Co., Ltd. 513.28 12.13%

Baotou Talesun Power Co., Ltd. 278.80 6.59%

Yumen Newsun Solar New energy Power Co., Ltd. 243.51 5.76%

Hami Solar Power Co., Ltd. 235.67 5.57%

Talesun Solar Germany GmbH 187.14 4.42%

Moss Electrical Co., Ltd. 77.29 1.83%

Jiayuguan Talesun Solar Power Co., Ltd. 74.35 1.76%

Total Top Ten (RMB) 3,286.73 77.68%

Total Amount (RMB) 4.122.93 100%

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Chart G: Talesun Business Top AR as of 2Q 2015

Customer Name Amount (RMB in Million) % of Total

Jinchang Newsun Solar Power Co., Ltd. 621.46 14.95%

Talesun Power (Hongkong) Co., Ltd. 583.49 14.04%

Hainan Talesun Power Co., Ltd. 333.28 8.02%

Hainan Yahui New energy source Power Co., Ltd. 316.39 7.61%

GCL integrated Polytron Technologies Inc. 309.31 7.44%

Tulufan Talesun Solar Power Co., Ltd. 303.76 7.31%

Baotou Talesun Solar Power Co., Ltd. 291.13 7.00%

Yumen Talesun New energy source Power Co. ,Ltd. 235.67 5.67%

Ningxia Talesun New energy source Co., Ltd. 208.55 5.02%

Gonghe Talesun New energy source Co., Ltd. 198.42 4.77%

Total Top Ten(RMB) 3,401.46 81.84%

Total Amount (RMB) 3,961.36 100%

As of 2014, Talesun Solar held total AR of approximately RMB four point twelve billion

(元 4.12 billion). Of this amount, seventy eight and seventy eight hundredth of one percent (78.78%) is

from companies associated with Talesun. As of 2Q 2015, Talesun Solar held total AR of approximately

RMB three point ninety six billion (元 3.96 billion). Of this, sixty three and thirty three hundredth of one

percent (63.33%), is from companies associated with Talesun.

The following tables summarize Talesun Solar’s Accounts Payable (AP) as of 2014 and 2Q 2015.

Chart H: Talesun Solar Polysilicon Business AP as of 2014

Supplier Name Amount

(RMB in Million)

% of

Total AP

Zhongli Science and Technology Group Inc. 84.85 6.93%

Changshu Zhongli Talesun Material Co., Ltd. 84.74 6.92%

Taicang GCL Solar science and Technology Co., Ltd. 50.76 4.14%

Suzhou Shenteng Metal Material Co., Ltd. 49.90 4.07%

Beijing Panda International Information Technology Co., Ltd. 44.87 3.66%

CTIE Group Information Technology Co., Ltd. 42.37 3.46%

Changzhou Almaden Inc. 25.89 2.11%

Wexi Ruxing technology development Co., Ltd. 25.85 2.11%

Hubei Yongheng Solar Inc. 24.56 1.98%

Suzhou JOLYWood Inc. 23.28 1.90%

Total Top Ten (RMB) 456.77 37.28%

Total AP (RMB) 1,225.15 100.00%

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Chart I: Talesun Solar Wafer Business AP as end of 2Q 2015

Supplier Name Amount

(RMB in Million)

% of

Total AP

GCL System Integration Technology Co., Ltd. 100.36 8.32%

CSLC CSSC Guangzhou Co., Ltd. 81.76 6.78%

Changshu Talesun Solar Material Co., Ltd. 61.28 5.08%

GCL Taicang Solar Technology Co., Ltd. 57.92 4.80%

GCL Suzhou New Energy Co., Ltd. 34.57 2.87%

Hainan Tax Bureau 29.26 2.43%

Shenzhen Spaceflight Ouhua Technology Development Co., Ltd. 27.96 2.32%

CTIE Group Information Technology Co., Ltd. 25.10 2.08%

Henan Ancai Hi-Tech Inc. 24.35 2.02%

Zhejiang Gerui New Material Co., Ltd. 23.83 1.98%

Total Top Ten (RMB) 466.38 38.68%

Total AP (RMB) 1,205.82 100%

As of 2014, Talesun Solar held total AP of approximately RMB one point twenty two billion

(元 1.22 billion). Of this, forty six and forty hundredths of one percent (46.40%) is from companies

associates with Talesun. As of 2Q 2015, Talesun Solar held total AP of approximately RMB one point

twenty one billion (元 1.21 billion). Of this, approximately eighteen and fifty two hundredths of one

percent (18.52%) is from companies associates with Talesun.

2.3 Profitability

The section below will isolate and compare the net sales results and net profit results from2012 to 2014

of Talesun Solar and the previous five (5) quarters which is Talesun Solar’s wafer, cell and module

businesses.

Chart J: Talesun Solar Profitability Trends (FY2012-FY2014)

Financial Indices FY2012 FY2013 FY2014 Audit Opinion

Revenue

(Million RMB) 2,946.23 4,921.13 4,071.94

Increased and then

cut down

Change in Revenue 285.34% 67.03% (17.26%) Decreased

Gross Margin

(Million RMB) 717.86 1,360.5 1,160.11

Increased and then

slightly decreased

Change in Gross Margin 453.65% 89.52% (14.73%) Decreased

Net Profit/Loss

(Million RMB) 355.49 574.92 355.39

Increased and then

slightly decreased

Change in Net Profit 799.53% 71.37% (38.18%) Decreased to

negative

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Financial Indices FY2012 FY2013 FY2014 Audit Opinion

ROA (Return on Assets) 11.73% 13.96% 7.86% Positive year by year

ROE (Return on Equity) 32.08% (36.32%) (11.40%) Negative equity

ROA: EBIT / Average of Year Beginning Total Assets and Year Ending Total Assets

ROE: Net Profit / Average of Year Beginning Total Equity and Year Ending Total Equity

Chart K: Talesun Profitability Trends (2Q 2014-2Q 2015)

Financial Indices 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015

Revenue

(Million RMB) 700.20 907.98 2,323.78 796.49 684.18

Change in Revenue 400.21% 29.68% 155.93% (65.72%) (14.10%)

Gross Margin

(Million RMB) 160.53 266.80 735.77 245.80 134.31

Net Profit/Loss

(Million RMB) (76.88) 75.9 505.65 80.69 (37.29)

Change in Net

Profit/Loss (48.50%) (198.73%) 566.20% (84.04%) (146.21%)

Talesun Solar’s gross margin levels were four hundred fifty three and sixty five hundredths of percent

(453.65%) in 2012, and then rapidly decreased to eighty nine and fifty two hundredths of one percent

(89.52%) in 2013. For the year 2014, Talesun’s gross margin was negative fourteen and seventy three

hundredths of one percent (-14.73%) from 2013 levels, but was still at a high level overall.

Return on assets (ROA) was at a positive level from 2012 to 2014, and was positive seven and eighty six

hundredths of one percent (7.86%) in 2014. It is expected that Talesun will continue to get positive ROA

in 2015.

2.4 Financing Solvency and Operating Capacity

As of the end of June 2015, Talesun Solar held banks loans of RMB one and ninety two hundred billion

(元 1.92 billion). This includes middle to long term loans, which total RMB one and eighty eight

hundred billion (元 1.88 billion), and short term borrowings of RMB one hundred eighty five million

(元 185 million).

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Chart L: Talesun Solar Bank Loans as end June 2015

Banks

Middle to Long

Term Loans

(RMB in Million)

Short Term

Borrowings (RMB

in Million)

Net Amount

(RMB in

Million)

Agricultural Bank of China

(Syndicated) 360.00 N/A 321.44

China Construction Bank


Bank of China


Agricultural and

commercial Bank

(Syndicated)

70.00 N/A 62.50

Import & Export


China CINDA Asset

Management 280.00 N/A 280.00

Kunlun Trust 500.00 N/A 500.00

China Development

Finance 100.00 N/A 100.00

Huaxia Bank N/A 50.00 20.00

Industrial and Commercial

Bank of China N/A 45.00 45.00

Suzhou Chengtou N/A 90.00 90.00

Total 1,880.00 185.00 1,914.38

Chart M: Solvency Ratios

FY2012 FY2013 FY2014 Audit Opinion

Flow Ratio 0.74 0.88 1.81 Increased, high level

Quick Ratio 0.64 0.83 1.71 Increased, high level

Debt / Assets

Ratio 80.05% 79.44% 63% Decreased, high level

Time Interest

Earned Ratio 2.89 2.69 2.01

Decreased, still in

control

Flow Ratio (CR): Current Assets / Current Liabilities

This indicates the company’s ability to convert its liquid assets into cash in order to pay off debt.

Quick Ratio(QR): (Current Assets – Inventory) / Current Liabilities

The larger the ratio, the more liquid a company’s assets are. This does not include inventory, which

of 35

takes longer to liquidate.

CR<1 and QR < 0.5, bad funding liquidity

1.5<CR<2 and 0.75<QR<1 middle funding liquidity

CR>2 and QR>1 Good funding liquidity

Debt / Assets Ratio: Proportion of Total Debt to Total Assets. Index < 1, high level

This is another measurement of a company’s health. In a worst-case scenario where the company

must liquidate its assets to pay back its debt holders, one can use this ratio to indicate the likelihood

that shareholders will be paid back.

Time Interest Earned Ratio: EBIT/ Interest Expense Index > 1, high level

This ratio is also called interest coverage, and indicates the ability to pay the interest.

Chart N: Operating Ratios

FY2012 FY2013 FY2014 Audit Opinion

Receivables Turnover

Ratio 2.16 1.50 0.73

Decreased, and then

increased

Inventory Turnover

Ratio 7.50 11.17 8.46

Increased, and then

decreased

Accounts Payable

Turnover Ratio 1.81 1.78 1.12 Decreased

Long-term Assets to

Equity Ratio 0.70 0.85 2.25 Increased

Receivables Turnover Ratio: Ratios of return of receivables, calculation by Revenues / Average

Account Receivables, Index: The higher, the better.

Inventory Turnover Ratio: Revenues/ Average Inventory

Accounts Payable Turnover Ratio: (COGS + Inventory Change)/ Average Accounts Payable

Long-term Asset Equity Ratio: (Equity)/(Fixed assets + Long-term Investment)

Talesun Solar’s flow ratio was zero point seventy four (0.74), and the company’s quick ratio was zero

point sixty four (0.64) in 2012. Both of these ratios increased in 2013, with the flow ratio rising to zero

point eighty eight (0.88), and the quick ratio rising to zero point eighty three (0.83). For the year 2014,

both the flow ratio and quick ratio increased together; the flow ratio increased to one point eighty one

(1.81), and the quick ratio increased to one point seventy one(1.71).

Talesun Solar’s receivable turnover ratio was two point sixteen (2.16) in 2012 and the number decreased

to one point five (1.50) in 2013, and then continued to decrease to zero point seventy three (0.73) in

2014.

Talesun Solar’s debt to assets ratio has decreased in the previous three (3) years. The number was eighty

and five hundredths one percent(80.05%) at end of 2012, then decreased to seventy nine and forty four

hundredths one percent (79.44%) at the end of 2013,and continued to decrease to sixty three hundredths

one percent (63%) in 2014. This number is expected to continue decreasing until it reaches a stable level.

Thanks to this lowering number, it is predicted that in the future, Talesun will have improving long term

financial stability.

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3. Production and Sales

3.1 Production Capacity

Talesun’s manufacturing bases have a total of zero point nine gigawatts (0.9GW) of cell capacity,

and one point four gigawatts (1.4GW) of module capacity in 1H2015E. The company also had eight

hundred megawatts (800MW) of both cell and module capacity in Thailand.

Chart O: Talesun Solar Cell Capacity Production and Sales (FY2012-FY1H2015E)

Year FY2012 FY2013 FY2014 FY1H2015E

Cell Capacity (MW) 500.00 500.00 1,000.00 900.00

Silicon (MW) 104.14 8.74 30.42 14.59

Polysilicon (MW) 354.03 388.20 750.02 450.29

Utilization 91.63% 79.39% 78.04% 25.83%

Graph B: Talesun Solar Cell Capacity Production and Sales (FY2012-FY1H2015E)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

FY2012 FY2013 FY2014 FY1H2015E

Cell Capacity (MW) Silicon (MW) Polysilicon(MW) Utilization

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Chart P: Talesun Solar Module Capacity Production and Sales (FY2012-FY1H2015E)

Year FY2012 FY2013 FY2014 FY1H2015E

Module Capacity (MW) 800.00 1,000.00 1,500.00 1,400.00

Silicon (MW) 115.04 28.78 35.47 12.90

Polysilicon (MW) 399.68 471.79 734.20 439.48

Utilization 64.34% 50.06% 51.31% 16.16%

Graph C: Talesun Solar Module Capacity Production and Sales (FY2012-FY1H2015E)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

FY2012 FY2013 FY2014 FY1H2015E

Modele Capacity (MW) Silicon (MW) Polysilicon(MW) Utilization

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3.2 Sales Overview

Sales from cell and module shipments were USD three hundred and seventy six million

(US$ 376 million) in 2013, with shipments of six hundred and forty eight megawatts (648MW) in that

year. Shipments increased to seven hundred and thirty one megawatts (731MW) in 2014, and Talesun

Solar’s revenues from cell and module sales thus increased to USD four hundred and sixty four million

(US$ 464 million) in 2014. Talesun Solar is expecting approximately one point five gigawatts (1.5GW)

of solar module sales in 2015. Cell and module shipment revenues are USD one hundred and seventy six

(US$ 176 million) actually in Q1 2015, and expect to catch a higher sales amount in 2015.

Chart Q: Talesun Solar Sales (USD) by Region (FY2013-FY2015E)

Region(USD) FY2013 FY2014 FY2015E

China 219,269,567 347,314,365 159,228,985

USA, Europe 120,323,415 78,991,065 2,345,026

Asia-Pacific 28,408,145 37,141,186 14,623,673

ROW 7,614,958 644,294 233,430

Total 375,616,086 464,090,909 176,431,114

Graph D: Talesun Solar Sales (USD) by Region (FY2013-FY2015E)

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

2013 2014 2015

China USA, Europe Asia-Pacific ROW

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Chart R: Talesun Solar Shipment (MW) by Region (FY2012-FY2015E)

Region (MW) FY2012 FY2013 FY2014 FY2015E

China 165.02 414.72 554.80 1,000.00

USA, Europe 272.06 174.96 116.80 335.00

Asia-Pacific 4.46 45.36 58.40 150.00

ROW 4.46 12.96 1.00 15.00

Total 446.00 648.00 731.00 1,500.00

Graph E: Talesun Solar Shipment (MW) by Region (FY2012-FY2015)

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

2012 2013 2014 2015E


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Chart S: Talesun Solar Sales Percentage by Region (FY2011-FY2016E)

Region % FY2011 FY2012 FY2013 FY2014 FY2015E FY2016E

China 69% 37% 64% 74% 67% 60%

USA, Europe 30% 61% 27% 16% 22% 28%

Asia-Pacific 0% 1% 7% 8% 10% 10%

ROW 1% 1% 2% 2% 1% 2%

Graph F: Talesun Solar Sales Percentage by Region (FY2011-FY2016E)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015E 2016E


of 35

Chart T: Talesun Solar Downstream Projects

Project Location Volume

(MW)

Investment

(RMB in

Million)

Situation

Talesun Solar (Thailand) Co., Ltd. 500 450.00 Under construction

Talesun Solar (Tulufan) New

Material Co., Ltd. 60 30.00 Under construction

Talesun Solar (Baotou) New

Material Co., Ltd. 60 30.00 Under construction

Total 201.688 510.00

Chart U: Talesun Solar Top 10 Customer (FY2012-FY2014)

Region Customer Watt (W) Value (USD)

Germany Axitec GmbH 20,095,875 12,134,520

Spain Table Trading SL 2,852,400 1,848,355

UK Egmanton Park Ltd. 9,680,600 6,269,281

UK Flit Solar Park Ltd. 8,510,625 5,511,591

UK

Gaultney Solar Park

Limited 21,662,500 14,028,915

UK Moss Electrical Co. Ltd. 41,138,400 28,544,741

UK Radstone P.V. Ltd. 5,246,625 3,397,782

UK Rowles Solar Park Ltd. 10,812,500 7,002,315

UK SPRIGGS SOLAR Ltd. 12,197,350 8,342,987

Japan Nice Corporation 25,000,000 15,740,000

Romania Tecnology Com SRL 4,000,220 2,628,625

Total 161,197,095 105,449,112

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4. Warranty

4.1 Warranty Claims Terms and Procedures2

Talesun Solar’s warranty for solar modules is shown as below:

1） Limited Warranty Statement

Talesun Solar Co., Ltd. (“Talesun”) warrants to the first customer installing (for its own use) (the

“Buyer”) its “Talesun”

brand crystalline SPV MODULES as：

1. 1. 72cell Module made with 125×125mm Monocrystalline Solar cells models consisting of TP572M-

170, TP572M-175, TP572M-180,

TP572M-185, TP572M-190, TP572M-195, TP572M-200&TP572M-205

2. 96cell Module made with 125×125mm Monocrystalline Solar cells models consisting of TP596M-

230, TP596M-235, TP596M-240,

TP596M-245, TP596M-250, TP596M-255, TP596M-260, TP596M-265，TP596M-270&TP596M-275


170, TP648M-175, TP648M-180,

TP648M-185, TP648M-190, TP648M-195, TP648M-200, TP648M-205, TP648M-210, TP648M-215&

TP648M-220

4. 48cell Module made with 156×156mm Polycrystalline Solar cells models consisting of TP648M-170,

TP648M-175，TP648P-180,

TP648P-185, TP648P-190, TP648P-195, TP648P-200, TP648P-205, TP648P-210, TP648P-215 &

TP648P-220


220, TP660M-225, TP660M-230,

TP660M-235, TP660M-240, TP660M-245, TP660M-250, TP660M-255,TP660M-260, TP660M-265&

TP660M-270

UL1000V certified: TP660M-225, TP660M-230, TP660M-235, TP660M-240, TP660M-245, TP660M-

250, TP660M-255, TP660M-260,

TP660M-265&TP660M-270

6. 60cell Module made with 156×156mm Polycrystalline Solar cells models consisting of TP660P-215,

TP660P-220, TP660P-225,

TP660P-230, TP660P-235, TP660P-240, TP660P-245, TP660P-250,TP660P-255, TP660P-260，

TP660P-265，TP660P-270，TP660P-275

UL1000V certified: TP660P-210, TP660P-215, TP660P-220, TP660P-225, TP660P-230, TP660P-235,

TP660P-240, TP660P-245,

TP660P-250, TP660P-255&TP660P-260


270, TP672M-275, TP672M-280,

2Warranty policies were publicly available and drawn from the company’s website and product spec sheet.

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TP672M-285, TP672M-290, TP672M-295, TP672M-300, TP672M-305,TP672M-310 , TP672M-315,

TP672M-320&TP672M-325

UL1000V certified: TP672M-275, TP672M-280, TP672M-285, TP672M-290, TP672M-295, TP672M-

300, TP672M-305,TP672M-310,

TP672M-315, TP672M-320&TP672M-325

8. 72cell Module made with 156×156mm Polycrystalline Solar cells models consisting of TP672P-260,

TP672P-265, TP672P-270,

TP672P-275,TP672P-280,TP672P-285,TP672P-290,TP672P-295,TP672P-300,TP672P-305,TP672P-

310,TP672P-315,TP672P-320,

TP672P-325&TP672P-330

UL1000V certified: TP672P-260, TP672P-265, TP672P-270, TP672P-275, TP672P-280, TP672P-285,

TP672P-290, TP672P-295,

TP672P-300, TP672P-305&TP672P-310

(the product), when shipped in its original container, will be free from defecve workmanship and

materials under normal applica on, installa on, use and service condions, and agrees that it will, at its op

on, either repair the defect or replace the defecve Product or part thereof with a new or remanufactured

equivalent at no charge to the purchaser for parts or labor for the period(s) set forth below.

This warranty does not apply to any appearance items of the Product nor to the addional excluded item(s)

set forth below nor to any Product the exterior of which has been damaged or defaced, which has been

subjected to misuse, abuse, abnormal service or handling, or which has been altered or modified in

design or construc on. In order to enforce the rights under this limited warranty, the purchaser should

follow the steps set forth below and provide proof of purchase to Talesun.

The limited warranty described herein is in addi on to whatever implied warranes may be granted to

purchasers by law. All impliedwarranes including the warran of merchantability and fitness for use are

limited to the period(s) from the date of delivery set forth below. Neither the sales personnel of Talesun

nor any other person is authorized to make any warran other than those described herein, or to extend

the dura on of any warran s beyond the me period described below on behalf of Talesun.

The warran described herein shall be sole and exclusive warran granted by Talesun and shall be the sole

and exclusive remedy available to the purchaser. Correc on of defects, in the manner and for the period

of me described herein, shall constute complete fulfillment of all liabilies and responsibilies of Talesun

to the purchaser with respect to the Product and shall cons tute full sasfac on of all claims, whether

based on contract, negligence, and strict liability otherwise. In no event shall

Talesun be liable, or in any way responsible, for any damages or defects in the Product which were

caused by repairs or empted repairs performed by anyone other than Talesun or authorized service

providers. Nor shall Talesun be liable or in any way responsible for any incidental or consequen al

economic or property damage. Talesun´s aggregate liability, if any, in damages or otherwise, shall not

exceed the invoice value as paid by the purchaser, for the single unit of SPV MODULE.

2）10 Year Limited Product Warranty

Page 1 of 3

Talesun warrants for the Product(s) for a period of 10 years commencing on the Warranty Start Date ，Product(s) shall be free from defects in materials and workmanship that have an effect on module

functionality under normal application, installation, use and service conditions as specified in Talesun’s

standard product technical specification.

of 35

Talesun guarantees that the Product(s) will maintain the mechanical integrity and stability in accordance

with approved operation methods described in its installation instructions; the glass of a module will

maintain its integrity provided there are no indications of localized impacts or external forces; and that

the cable and connector plug of a module will remain safe and operational provided modules are

professionally installed. Any damages caused by abrasion, improper installation or animals are exempt

from this warranty.

Claims under the warranty can only be accepted if the Buyer can provide proof that the malfunctioning

or non-conformity of the Product(s) results exclusively from defects in materials and/or workmanship

under normal application, installation, use and service conditions specified in Talesun’s standard product

specification. Any color change on module or any other changes on module appearance do not represent

defects, insofar as the change in appearance does not stem from defects in material and/or workmanship,

and does not cause degradation of functionality of the module.If the Product(s) fails to conform to this

warranty, Talesun will, at its option, either repair or replace the defective Product(s), or refund as per the

market price of the Product(s) at the time of the claim submission, or provide an appropriate residual

market value of the Product(s) at the time of the claim submission as compensation.

3）25 Year Limited Performance Warranty

Talesun guarantees that for a period of twenty-five years the module will maintain a performance as set

forth below:

Monocrystalline Solar Cell Modules:

a) During the first year, Talesun guarantees the nominal power output of the Product will be no less than

97% of the labeled power output.

b) From year 2 to year 24, the nominal power decline will be no more than 0.7%; by the end of year 25,

the nominal power output will be no less than 80% of the labeled power output.

Polycrystalline Solar Cell Modules:

a) During the first year, Talesun guarantees the nominal power output of the Product will be no less than

97.5% of the labeled power output.

b) From year 2 to year 24, the nominal power decline will be no more than 0.7%; by the end of year 25,

the nominal power output will be no less than 80.7% of the labeled power output.

The actual power output of the Product shall be determined for verification using Standard Testing

Conditions only. The actual power output measurement is either carried out by a Talesun facility or by a

Talesun recognized 3rd party testing institute. Testing equipment tolerances will be applied to all actual

power output measurements.

In the event, power falls below the appropriate warranted amount, Talesun will replace, repair, or

provide additional Product(s) to compensate for the loss, or will provide a refund prorated to the amount

of power loss below the warranty.

4）Warranty Effective Date

The warranty effective date shall be defined as the date of sale with the certifiable invoice (SALES

DATE) to the Buyer or 90 (ninety) days after the delivery by Talesun, whichever date is earlier.

of 35

5）Additional Item(s) Excluded from Warranty Coverage:

Warranty coverage does not apply when:

a) The Product is improperly installed or abused or misused;

b) The Product is installed in a mobile or marine environment, subjected to improper voltage or power

surges or abnormal environmentalcondions (such as acid rain or other pollu on);c) The components in

the construc on based on which the module is mounted are defecve;

c) The components in the construc on based on which the module is mounted are defecve;

d) External corrosion, mold discolora on or the like occurs;

e) Defects caused by the Product being subjected to any of the following: extreme thermal or

environmental condions or rapid changes in such condions, corrosion, oxida on, unauthorized

modificaons or connecons, unauthorized opening or repair, repair by use of unauthorized spare parts,

accident, force of nature (such as lightning strike), influence from chemical product or other acts beyond

Talesun reasonable control (including but not limited to damage by fire, flood, etc.);

f) Death or injury to personsresulng from any cause other than negligence of Talesun, its employees or

representaves;

g) Incidental, consequen al or special damages such as loss of use, loss of profits, revenues, business,

goodwill, damage to reputa on or expensed payable to a third party.

h) Module failed, such as pid (potential induced degradation) and snail trail, which worse system design,

worse installation and worse system components mismatch induced.

6）Various

The repair or replacement of the SPV MODULES or the supply of addional SPV MODULES does not

cause the beginning of new warranty terms, nor shall the original terms of this “Limited Warranty for

SPV Module” be extended. Any replaced SPV MODULES shall become the property of Talesun made

for their disposal. Talesun has the right to deliver another type (different in size, color, shape and/or

power) in case Talesundisconnue producing the replaced SPV MODULES at the me of the claim.

Page 2 of 3

7）Force Majeure

Talesun shall not be responsible or liable in any way to the purchaser or any third-party arising from any

nonperformance or delay in performance of any terms and condions of sale, including this “Limited

Warranty for SPV Module” , due to acts God, war, riots, strikes, unavailability of suitable and sufficient

labor, material, or capacity or technical or yield failures and any unforeseen event beyond its control,

including, without limitaons, any technological or physical event or condi on which is not reasonably

known or understood at the me of the sale of the SPV MODULES or the claim.

8）What to do to claim warranty

If the purchaser feels a jus fied claim covered by this “Limited Warranty for SPV Module”, an

immediate no fica on directly to Talesun at the address shown below shall be filed. Together with the no

fica on, the purchaser should enclose the evidence of the claim with the corresponding serial number of

the SPV MODULE(s) and the invoice on which the SPV MODULES have been purchased.

of 35

Be sure to have Proof of Purchase available such as the receipt. The return of any Products will not be

accepted unless prior written authorization has been given by Talesun. If the Buyer ship the Product, be

sure it is insured and packaged securely, Talesun will not be responsible for any transportation charge,

customs clearance or any other costs for return of the Product(s), or for reshipment of any repaired or

replaced Product(s), or costs related to installation, removal or reinstallation of the Product(s).

In case of any discrepancy in a warranty-claim, a first-class internaonal test-ins tute such as TUV

Rheinland in Cologne, Germany or Arizona State University, USA shall be involved to judge the claim

finally. The final explana on right shall be borne by Talesun.

Warranty claims will not be honored if the type or serial number of the SPV MODULES have been

altered, removed or made illegible.

9）Severability

If a part, provision or clause of this “Limited Warranty for SPV Module”, or the applica on thereof to

any person or circumstance, is held invalid, void or unenforceable, such holding shall not affect and

shall leave all other parts, provisions, clauses or applicaons of this “Limited Warranty for SPV Module”,

and to this end such other parts, provisions, clauses or applicaons of this “Limited Warranty for SPV

Module” shall be treated as severable.

Page 3 of 3

Control No.: TS-AT-123

Revision: A6

Issue Date: Jue. 2015

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4.2 Warranty Claims Record3

The following table lists the past customer claims recorded by Talesun Solar.

Chart V: Warranty Claims (FY2012-1Q 2015)

3As per the manufacturer

Claim

ID Client Country

Feedback Date

Module Type

Problem Type

Pieces Result Suggestion Corrective

Action Progress

CR

1210001 ReisSolar Germany 2012/10/12 TP572M

Appearance

problem

5 Replacement Replace

for customer

Strengthen

Staff management OK

CR

1303002

Buyer

World

B.V.

EU 2013/3/6 P660M-

250- Siliconpotting 1 Replacement

Replace

for customer

Increase

Curing time OK

CR

1304003 Actensys

Germany

Bavaria 2013/4/18 TP660

Appearance

problem

2 Replacement ELok Explain to

customer OK

CR

1306004 Enalco Italy 2013/6/12 TP660P

Appearance

problem 1 Replacement Powerok

Explain to

customer OK

CR

1403005 JKBEnergy USA 2014/3/14 672P Glass breakage 1 Replacement

Replace

for customer

To inform the

supplier to improve

and strengthen the

supervision.

OK

CR

1412006 G3 JAPAN 2014/12/29 672P

Appearance

problem 1 N/A N/A N/A OK

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CR

1505007 Gtree JAPAN 2015/24/5 TP672P Glass breakage 1 Replacement

Replace for

customer

Supplier

improvement OK

CR

1505008

Nice JAPAN 2015/5/11 TP660P VOCis too low 1 Replacement Replace for

customer

Strengthen staff

management OK

CR

1506009

NihhonEco

Solar JAPAN 2015/6/30 TP660P

Jbbox

displacement 1 Replacement

Replace for

customer

Strengthen the

workshop

temperature and

humidity control

OK

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5. Summary

The CEA Financial Manager Lucia Zhu visited the Talesun Solar factory in Changshu, Jiangsu, China

on September 15, 2015. During the financial audit, the CEA auditors met a number of employees at

Talesun Solar, including members of the finance, sales, marketing, production, after service and human

resource departments.

The CEA auditing team was able to collect documents from the factory to evaluate the company’s

financial and operating health. Among the detailing material were key financial statements, management

biographies, production and sales figures, bank loan information, insurance policies and previous

customer claims records. Furthermore, the CEA financial audit team conducted further research and

collected information from other channels in order to properly assess the financial risk of the company.

In summary, CEA concluded that although Talesun Solar has faced a higher level of debt to assets ratio

in the past, the company will continue to stay in operation and has a very low probability of falling into

bankruptcy over the next twelve (12) months. Reasons that led to this conclusion are the increasing

revenues, increasing gross profit and EBIT levels, stable net profits, the increasing cash and cash

equivalents, and finally the strong support from banks in the form of loans.

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6. Disclaimer

The information in this document is confidential and may be legally privileged. The report is provided

by Clean Energy Associates Limited and is intended solely for the use of Solar Insurance & Finance,

and other related parties who may need to refer to this financial analysis. Access to this document by

another entity is strictly unauthorized. If you are not the intended recipient, please advise us

immediately and delete this document. No representation, warranty or undertaking, express or implied,

is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness

of the information or the opinions contained herein. Neither CEA nor any of its affiliates, advisors or

representatives will be liable (in negligence or otherwise) for any loss howsoever arising from any use

of this document.

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