final assignment indonesia
TRANSCRIPT
Sunpower and Indonesia
Prepared for Global Business CapstoneTaught by Professor Stefan Lippert
Steven Locorotondo
Temple University Japan, Summer 2015
Table of Contents
1 Introduction.........................................................................2
2 Market Analysis....................................................................2
2.1 Overview..................................................................................................................................2
2.2 Current Energy Market.............................................................................................................3
2.2.1 Energy Mix...........................................................................................................................3
2.2.2 Electrification rate................................................................................................................5
2.2.3 Electricity consumption........................................................................................................7
2.2.4 Installed Solar Capacity and Potential..................................................................................8
2.2.5 Key players...........................................................................................................................8
2.2.6 Regulations, Feed in Tariffs, and Subsidies...........................................................................9
2.3 General Conditions for Solar...................................................................................................10
2.3.1 Environmental Conditions..................................................................................................10
2.3.2 Grid Parity..........................................................................................................................11
2.3.3 Grid Structure.....................................................................................................................12
2.4 Trends and projections...........................................................................................................12
2.5 Concluding remarks................................................................................................................14
3 Sunpower Company Analysis...............................................14
3.1 Value Chain.............................................................................................................................14
3.2 Market segmentation.............................................................................................................15
3.3 Technology.............................................................................................................................16
3.4 Production Facilities...............................................................................................................17
3.5 Financial Assessment..............................................................................................................17
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3.6 Concluding remarks................................................................................................................18
4 Feasibility..........................................................................19
5 Financial projections...........................................................19
6 Risks and Uncertainties......................................................21
7 Conclusion.........................................................................22
8 Appendices........................................................................23
9 Works cited........................................................................24
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1 Introduction
Sunpower Corporation (Sunpower) is a technology company established in 1985. The
company is headquartered in San Jose, California, and is engaged in designing and
manufacturing of solar panels and other solar related equipment, as well as installing and
monitoring of solar plants. The company, today, has operations in Africa, Asia, Australia,
Europe, North America and South America. Total S.A., the French multinational oil company,
has been the majority shareholder since 2011. As the company’s footprint becomes larger it
is forced to look at new markets for expansion. This report will analyze the attractiveness of
the Indonesian market in order to determine if Sunpower should enter. The report will
begin with an extensive analysis of the Indonesian energy market. This will be followed be
an analysis of Sunpower. These analyses will allow to determine the feasibility of Sunpower
setting up operations in Indonesia. Finally, the report will discuss risks and uncertainties
surrounding an entry and conclude with a plan of action for Sunpower.
2 Market Analysis
2.1 Overview
The Republic of Indonesia (Indonesia) is an archipelago comprised of thousands of
islands. Its central location in Southeast Asia makes it a valuable hub for companies seeking
easy access to surrounding countries. Indonesia is a founding member of the Association of
South East Asian countries (ASEAN), which was formed in 1967 to promote economic
cooperation and political stability (“Association of Southeast Asian Nations“ n.d.) as well as a
member of the G20. The country has vast natural resources including natural gas, coal and a
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variety of metals and minerals and much biodiversity (Henstridge, Sourovi, and Jakobsen
2013).
In 2014, the country had a population of 249.9 million, making it the fourth most
populated country in the world (“OECD Data Indonesia” n.d.). GDP for the same year was
$2.674 trillion. This makes Indonesia the largest economy in Southeast Asia and the 16th
largest economy in the world. In Asia, only China, Japan, India, and South Korea have larger
economies. Since 2005, GDP has grown at an annual rate of 5% and is expected to continue
growing at 5.2% through 2017 (“Indonesia Data”). Despite having the such a large GDP, per
capita income lags behind countries such as Thailand and Malaysia ("Asia: GDP per Capita").
The biggest contributors to GDP growth in Indonesia are the industry and services sectors
with the latter becoming the largest contributor to GDP at over 50% (Henstridge, Sourovi,
and Jakobsen 2013).
2.2 Current Energy Market
2.2.1 Energy Mix
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20110%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coal Hydroelectric sources Natural GasOil Renewables
4
Figure 1. Indonesia’s energy mix from 1995 to 2011. Source: World Bank.1
Indonesia has seen great changes in its energy mix (see Figure 1). In 1995, natural
gas, which was abundant, provided 42% of the nation’s energy supply. The second most
prominent source of energy for the same year was coal with 24.7%. Surprisingly, oil and
hydroelectric sources accounted for an almost equal percentage of energy at around 16%.
Combining the 3.5% of other renewables in that same year put Indonesia at a total of almost
16% of its total power generation by renewables, a percentage that puts developed nations
to shame today. Unfortunately, this energy mix was not sustained over the years. In 2011,
the last year reliable data could be found, the share of renewables (including hydroelectric
sources) declined to less than 12%. Power generation by coal and oil have increased to
44.4% and 23.25% respectively while power generation by natural gas has declined to
20.3%. This represents a 87.9% share of energy production derived from fossil fuels.
CO2 development
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20110
100000
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500000
600000
CO2 emissions (kt) CO2 emissions from gaseous fuel consumption (kt)CO2 emissions from liquid fuel consumption (kt) CO2 emissions from solid fuel consumption (kt)
CO2
emiss
ions
in k
t
1 Renewables include electricity generated from Solar, Wind, Biomass, Biofuel, Geothermal, and Nuclear.
5
Figure 2. CO2 emissions in Indonesia from 1995 to 2011. Source: World Bank.2
Indonesia’s increasing dependency on fossil fuels has not come without problems.
Extensive use of fossil fuels for energy generation have caused a severe rise in CO2 emissions
(see Figure 2). In 2011, CO2 emissions from solid fuel consumption, which include coal, made
up 44% of the countries total emissions. This represents an annual growth rate of 5.9% from
1995 to 2011. These high levels of CO2 emissions could become a severe problem for
Indonesia in the future. High levels of CO2 emissions are the primary cause of human
induced climate change and could impact temperature, rainfall, sea-levels, and be a threat
to local food security (Measey 2010).
In 2006, the Indonesian government passed a presidential regulation supposed to
make the country’s energy mix less dependent on coal. The policy states that the country
will reduce its coal consumption to 33% by 2020. The target ratios for oil and natural gas are
set at 20% and 30% respectively. The remaining 17% are to be supplied by renewable
sources such as biomass, biofuel, hydropower, nuclear, geothermal, solar, and wind power
(Government of Indonesia 2006).
2.2.2 Electrification rate
Despite being the largest economy in the Southeast Asia, Indonesia has low
electrification rates.3 The country being made up of thousands of small islands makes the
task of central energy distribution very difficult. Electrification rates vary greatly across the
different regions of Indonesia with Jakarta, Aceh, and Bangka having electrification rates of
2 Includes CO2 emissions from the burning of fossil fuels and the manufacture of cement.3 Electrification rates describe the percentage of households with access to electricity.
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around 90% while less fortunate regions such as Papua, and East and West Tenggara see
rates of around 40% (Sakya 2015).4
2005 2006 2007 2008 2009 2010 2011 2020*0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
electrification rate poverty rate
Figure 3. Average electrification and poverty rate in Indonesia from 2005 to 2011 and
electrification target for 2020. Source: BPS, World Bank.
Indonesia has neverhtless made substantial efforts to improve access to electricity.
From 2005 to 2011, the average electrification rate increased from 62% to 73.7% (see Figure
3). As made clear in the previous section, the country’s electrification is driven by fossil
fuels, with coal being the most prominent source. The increased electrification is a result of
the governments commitment to provide electricity to 90% of all households by 2020
(Syrantoro n.d.). The same figure displays an additional interesting point. Poverty rate has
been on a constant decline since 2005.5 While passing the poverty threshold does not imply
an immediate increase in energy demand it indicates demand for energy will keep climbing
as quality of life improves in Indonesia.
4 See Appendix 1 for a map of Indonesia. 5 Percentage of people below poverty line. Indonesian poverty line set at $24.4 per month.
7
2.2.3 Electricity consumption
19951996
19971998
19992000
20012002
20032004
20052006
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20092010
20112012
20132014
0%2%4%6%8%
10%12%14%16%18%20%
0
50
100
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200
250
Share of renewables in energy production (% of total)Share of wind and solar in energy production (% of total)Energy production in TWh
TWh
Figure 4. Energy production, share of renewables, and share of wind and solar from 1995 to
2014. Source: Enerdata.6
As expected, Indonesia’s energy production has increased with the country’s
electrification (see Figure 4). Total energy production reached 227TWh in 2014. The increase
in production has, however, outpaced the electrification rate from 1995 to 2011.
Electrification has increased at an annual rate of 2.9% from 1995 to 2011 while production
increased at an annual rate of 7.3% for the same period. Energy production has also
outpaced population growth rates which stood at 1.4% from 1995 to 2011. This indicates
that the increase in production is not only driven by an increase in electrification but also by
a general increase in demand.
6 Share of renewables includes energy produced by wind and solar.
8
2.2.4 Installed Solar Capacity and Potential
Indonesia had a total power generation capacity of around 40000MW at the end of
2012 (PWC 2013). At the end of 2013, the total installed solar capacity was believed to have
reached 59MW (“80 Solar Power Projects” 2013). Those 59MW of installed capacity include
on-grid and off-grid installations. Assuming that total power generation capacity increased
by 5.2% through 2013 (projected GDP growth rate), power generation capacity by solar
represented a mere 0.1% of total generation capacity for that same year. Indonesia’s solar
capacity also stands in stark contrast to leading nations such as Germany, China, and Italy,
which have installed solar capacities of 35500MW, 18300MW, and 17600MW respectively
(Locorotondo 2015). The minister for Energy and Mineral resources, Jero Wacik, is on record
saying that he believes Indonesia’s solar potential to be 50000MW (“80 Solar Power
Projects” 2013). At these levels, Indonesia would be one of the leaders in solar.
2.2.5 Key players
One of the key players in the Indonesian energy market is undoubtedly Perusahaan
Listrik Negara (PLN). The government owned electricity provider dominates the energy
market and owns and runs the electrical grid. As of March 2012, the company’s energy
portfolio had a cumulative capacity of 32000MW and included power plants on all major
islands in Indonesia.7 PLN’s energy portfolio relies heavily on fossil fuels with 83.5% of its
capacity coming from the latter. Coal is the most dominant source with 42% followed by oil
and natural gas with 24% and 23% respectively. With this capacity, PLN has roughly 80% of
the market share. The remaining 20% of power generating capacity is held by independent
7 See Appendix 2 for a detailed description on PLN’s energy portfolio.
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power producers (IPP), which have entered the market since 2009 after Indonesia passed a
new regulation allowing them to begin generating and selling electricity (Sonal 2013).
An additional key player in the Indonesian energy market is the current president
Joko Widodo, who assumed office in October 2014. He is a member of the Indonesian
Democratic Party of Struggle. Before his election, the Indonesian government had voted a
policy in 2006 to reduce its dependency on fossil fuels and increase its share of renewables
to 17% (Government of Indonesia 2006). Unfortunately, the previous government was slow
at triggering change, which resulted in an increased dependency on coal. The situation is
likely to improve as the new president has pledged to direct significant resources to energy
infrastructure (Tsagas 2015).
The Indonesian solar market has historically been dominated by Chinese and
Japanese manufacturers. There are, however, six local players that have attempted to gain
ground in the Indonesian solar market. Persero, Adyawinsa Electrical & Power, Surya Utama
Putra, Swadaya Prima Utama, Azet Surya Lestari, Wijaya Karya Inatrade Energi have a
combined production capacity of 90MW (“Solar Panels in Indonesia” 2014).
2.2.6 Regulations, Feed in Tariffs, and Subsidies
In an attempt to encourage the development of the local solar industry the
Indonesian government introduced a new regulation to provide companies with an
incentive to use locally sourced components. The Ministry of Energy and Mineral Resources
Regulation No. 17, which was introduced in 2013, offered varying solar power feed-in-tariffs
(FIT) depending on the project’s use of locally sourced components. For example, solar
power project using at least 40% of components from local manufacturers will receive $0.30
per kWh fed back into the grid. On the other hand, solar projects using less than 40% of
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components from local manufacturers will receive only $0.25 per kWh fed into the grid
(“Solar Panels in Indonesia” 2014).
Indonesia has a long history of paying energy subsidies. The subsidies were initially
introduced in the 1970s to provide underprivileged households with energy. Since a lot of
underprivileged households do not have access to electricity and little or no need for
gasoline most of those subsidies go to middle class people that can afford homes with
adequate access to power and cars. In 2013, the Indonesian government paid a total of $27
billion of energy subsidies. This represented around 2.5% of GDP. Although the subsidies are
viewed as a form of social assistance they have, in the case of Indonesia, led to artificially
low energy prices that have encouraged wasteful energy consumption and prevented the
alternative energy sources to compete on a level playing field (“Indonesia Energy Subsidy
Review” 2014). As stated above, this situation is likely to improve with the election of the
new president who has pledged to reduce energy subsidies. The reduction in energy
subsidies will improve the outlook for renewable energy sources (Tsagas 2015).
2.3 General Conditions for Solar
2.3.1 Environmental Conditions
Located along the equator, Indonesia has a tropical climate. Coastal areas have a
yearly average temperature of 28°C while the mountainous inland regions average a yearly
temperature of 26°C. The country averages 2975 hours of sunshine per year, which
represents about 8 hours per day (“Jakarta, Java Climate & Temperature.” n.d.). Average
annual irradiation is estimated to be between 1460 to 2000 kWh/m2 (Jacobs 2012).
Humidity ranges from 70% to 90% (“Indonesia – Climate.” n.d.). The country has two
seasons: a dry season (May to September) and a rainy season (October to April) (“Indonesia:
Weather & When to Go.” n.d.). Western regions such as Java, Bali, Kalimantan and Sulawesi
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have rainfall of 2000 millimeters per year while eastern regions such as Tenggara, Maluku,
and Papua have rainfall of 1000 millimeters per year (“Indonesia – Climate.” n.d.).
2.3.2 Grid Parity
Figure 5. Grid parity in Asia and the Middle-East as of 2010. Source: Q-Cells.
As can be seen in Figure 5, Indonesia’s solar produced energy is far from reaching
grid parity. This is largely due to the energy subsidies paid by the Indonesian government.
These subsidies keep energy prices artificially low, making it difficult for solar to reach grid
parity with current technologies.
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2.3.3 Grid Structure
The geography of Indonesia presents a challenge for power distribution. Therefore,
the country’s power distribution has not yet been able to reach the most remote corners. As
stated earlier, Indonesia’s electrical grid is controlled by government owned PLN. The
company plans to develop a 500kV power transmission grid in eastern Sumatra, a region
that has so far been under connected (“PLN Will Develop the 500 KV Transmission Grid”
2014). Almost all small islands as well as large parts of east Indonesia rely on independent
local grids for electricity.
2.4 Trends and projections
The solar industry in Indonesia is seeing an upward trend. The trend is noticeable in
three main areas. First, as previously stated, the government has pledged support to local
PV manufacturers. Solar plants will have to use a specified minimum amount of locally
sourced equipment and FITs for solar plants using above certain percentage of locally
sourced equipment will be higher than others. Second, and also mentioned above, the
newly elected president will reduce energy subsidies, which will make solar plants more
attractive to investors as energy prices converge to their natural equlibrium. Third,
25000MW of the 35000MW power development program by the Indonesian government
will be open to IPPs with the rest being developed by PLN (“PLN Eyes Extra Capital” 2015).
This will present ample opportunity for solar companies.
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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20250
50
100
150
200
250
300
Solar capacity (conservative) Solar capacity installed (intermediate)Solar capacity installed (optimistic)
in M
W
Figure 6. Installed solar capacity projections from 2015 to 2025. Source: author’s estimates.
In order to include potential uncertainties when making projections about future
installed solar capacity, three scenarios were calculated. The initial installed capacity was
calculated by taking the installed capacity for 2013 an applying a 2.9% growth rate.8 The
installed capacity for 2015 was estimated at 62MW. The conservative estimate projects an
installed capacity of 104MW for 2025.9 The intermediate estimate projects an installed
capacity of 126MW.10 The optimistic estimate projects an installed capacity of 253MW.11 If
total energy capacity reaches 75000MW by the end of 2025, the share of solar is estimated
to be between 0.14% and 0.33% of total capacity.
2.5 Concluding remarks
Overall, the analysis of Indonesia’s energy market has shown that the country
presents good opportunities for solar, albeit with a couple of difficulties. The country’s GDP
8 This growth rate represents the electrification rate from 1995 to 2011.9 5.2% growth rate represents the expected GDP growth rate through 2017.10 7.3% growth rate represents the energy production growth rate from 1995 to 2011.11 15% growth rate represents a third of the Japanese solar adoption rate from 2008 to 2013.
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is projected to grow at a fast rate compared to other developed nations. Additionally, the
economy is shifting towards the industrial and services sector. The environmental conditions
are also favorable for solar with good yearly irradiation and a temperature range that allows
efficient use of solar panels. The key driver for adoption will undoubtedly be the country’s
high electrification rate, which will increase demand, and the favorable policy development
of the new government. The difficulties will lie in the countries archipelago disposition and,
for foreign companies, the stipulation that solar plants will require a certain percentage of
locally sourced equipment. Additionally, the fragmented grid will present a challenge as it
will drive initial investment costs.
3 Sunpower Company Analysis
3.1 Value Chain
Figure 7. Solar industry value chain. Source: author.
Figure 7 displays the value chain of the solar industry. Colored in blue are the
activities covered by Sunpower. As can be seen, Sunpower is vertically integrated from the
module production to the maintenance of solar plants. The company provides all the parts
needed for a Solar installation. The parts include solar panels, mounting structures, grid
interconnection equipment, and inverters (Sunpower 2014). This allows Sunpower to
maintain a high level of quality as well as high customer responsiveness (Locorotondo 2015).
Polysilicon Wafers Cells / modules DistributionEngineering,
procurement, and construction
Maintenance and recycling
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3.2 Market segmentation
The solar industry is divided into three segments. The three segments are residential,
commercial, and utility. The segments are divided by output capacity and specific needs.
The residential segment ranges from 1-20kWp while the commercial segment covers output
capacities of 20-1000kWp. The largest sector, utility, covers includes solar plants with
output capacities above 1000kWp (Locorotondo 2015).
In 2014, Sunpower has made efforts to develop complete residential solutions to
reduce complications involved with individually assembling a system. A new technology
acquired by Sunpower allows the company to ship panels with factory-integrated
microinverters (Sunpower 2014). This innovation improves installation times. The company
also supported its hardware innovation with the development of proprietary monitoring
applications that are aimed at providing the end customer with more transparency into
their energy production and consumption.
In the commercial segment Sunpower offers a variety of solutions to address a wide
range of site requirements. These include operating systems designed to support future grid
connectivity, sun tracking systems that rotate panels during the day, and solar concentrators
(Sunpower 2014). Just as in the residential segment, Sunpower has made efforts to make
these components easy to install in order to reduce costs.
In the utility segment Sunpower follows a, fully integrated, vertical approach
constructing and developing large scale solar plants. In recent years, the company has
shown commitment to developing large scale plants. Some of the company’ largest projects
include the Solar Star project and the California Valley Ranch project. The solar plants have
an output capacity of 579MW and 250MW respectively (Sunpower 2014).
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3.3 Technology
0.20%0.30%0.40%0.50%0.60%0.70%0.80%0.90%0%
5%
10%
15%
20%
25%
Sunpower (X-series) Yingli Green Energy (PANDA 45)Trina Solar (PA05) First Solar (Series 4)
Degradation rate
Efficie
ncy
Figure 8. Sunpower, Yingli, Trina, and First Solar panel technology comparison. Source:
company websites.
Figure 8 compares Sunpower’s panel technology to three of its main competitors. As
can be observed, Sunpower offers superior technology. Yingli, Trina, and First Solar offer
what appears to be an industry average. Sunpower’s X-series offers an efficiency of 21% and
a yearly degradation rate of 0.25%. Its closest competitor, Yingli’s PANDA 45, offers an
efficiency of 17.20% and a yearly degradation rate of 0.71%.
3.4 Production Facilities
2013 2014
Philippines $321,410.00 $335,643.00
U.S. $153,074.00 $183,631.00
Mexico $32,705.00 $40,251.00
France $25,293.00 $24,748.00
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Table 1. Sunpower’s property plant and equipment by location at the end of fiscal 2014. In
thousands of USD. Source: Sunpower annual report 2014.
Sunpower owns production facilities on three different continents (see Table 1).
These production facilities are used to assemble the company’s solar panels. The company’s
largest facility is located in the Philippines. This is likely an attempt by Sunpower to benefit
from lower labor costs in Southeast Asia. Interestingly however, from 2013 to 2014, the
company increased its investment in the U.S. by 19.9% compared to only 4.4% in the
Philippines. This could be an attempt to improve demand responsiveness in the growing U.S.
market. Combined, the four facilities have an annual production capacity of 1.7GW.
Additionally, Sunpower has partnerships with secondary producers in China and the U.S. to
assemble its solar panels (Sunpower 2014).
3.5 Financial Assessment
2012 2013 2014
Profitability Ratios
Gross Margin 10.19% 19.59% 20.65%
EBITDA 0.05% 9.67% 11.91%
Liquidity Ratios
Quick Ratio 0.93 0.7 1.54
Current Ratio 2.02 1.32 2.13
Debt Management
Interest coverage -3.43 1.46 3.58
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Long Term Debt to Equity 0.82 0.35 0.59
Table 2. Sunpower’s financial ratios from 2012 to 2014. Source: Morningstar.
Sunpower’s ability to invest in new projects will depend on its financial health. Table
2 displays financial ratios that were deemed most important for the company’s ability to
invest. As can be seen, the company was profitable from 2012 to 2014. The company
managed to increase its gross margin and EBITDA by roughly 10 percentage points from
2012 to 2014. The company also displays healthy liquidity ratios. Quick ratio and current
ratio have both improved from 2012 to 2014 and show that the company is able to meet its
short-term obligations. Interest coverage has seen the biggest improvement from 2012 to
2014. At the end of fiscal 2014, the company was able to cover its interest expense by more
than 3 times.
3.6 Concluding remarks
The analysis of Sunpower revealed a company with strong fundamentals. Vertical
integration insures that the company is able to offer reliable quality and makes it less
dependent on partners. Additionally, Sunpower offers a broad range of products and
services tailored to the specific needs of a broad range of customers. Having production
facilities on three continents reduces the company’s risk of production outages caused by
natural disasters or political instabilities. It also offers the access to a broader variety of
customers. Finally, the company’s strong financial performance gives it the opportunity to
make capital investments while remaining solvent.
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4 Feasibility
The following section will combine the analysis of Indonesia’s energy market and
Sunpower’s company analysis to determine the feasibility of an entry to the Indonesian
market. As made obvious in the analysis above, the Indonesian energy market is undergoing
rapid change. The government’s commitment to raise electrification rates to 90% by 2020
presents a huge opportunity for IPPs. Moreover, the government has pledged to reduce
energy subsidies, which will make it easier for renewable energy sources to compete.
Sunpower appears to have all the right mechanisms in place to benefit from the changing
energy landscape in Indonesia. There are numerous large scale projects in Indonesia that
would benefit from Sunpower’s advanced technology and expertise. Moreover, the
company has adequate production and financial capabilities to execute those projects.
Sunpower’s entry into the Indonesian market is therefore very feasible.
5 Financial projections
Entering a new market can have significant financial impact on a company’s top line.
This section will make a rough estimate of how much revenue Sunpower may be able to
derive from entering the Indonesian market.
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 $-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
Solar panel revenue (conservative) Solar panel revenue (intermediate)Solar panel revenue (optimistic)
in th
ousa
nds o
f USD
Figure 9. Estimated revenue of entering the Indonesian market from 2016 to 2025. Source:
author’s calculations.
Revenue projection Cumulative revenue from 2016 to 2025 (in thousands)
Solar panel sales (conservative) $123,302.40
Solar panel sales (intermediate) $139,900.80
Solar panel sales (optimistic) $222,642.00
Table 3. Projected cumulative revenue from entering the Indonesian market from 2016 to
2025. Source: author’s calculations.
In order to present credible revenue projections, three scenarios were calculated.12
In this projection, Sunpower’s market share is 3% from 2016 to 2019, 7% from 2020 to 2022
and 10% from 2023 to 2025. The rates were chosen arbitrarily but are believed to reflect
reality. Revenue projections for the year 2025 range from $50 million to $22 million. Table 3
12 The calculations use installed capacity projections from Figure 6. The unit price used for the calculations was $2.28 per W shipped.
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shows the cumulative revenue for all scenarios from 2016 to 2025. The projected 2025
revenue for Indonesia represents 0.72% to 1.6% of total 2014 revenue. Considering the
potential size of the Indonesian solar market these estimates are likely to be on the
conservative side.
6 Risks and Uncertainties
Expanding operation into a new country undoubtedly presents many challenges. This
section will discuss risks and uncertainties Sunpower may face when entering the
Indonesian market. Since these risks and uncertainties were found difficult to quantify they
will be discussed in no particular order.
Indonesia’s monopolistic energy market could present an issue for Sunpower. If PLN
loses extensive market share and sees its financial performance decline it might restrict
access to the grid. At the time of writing, this is the measure some Japanese utilities
have taken to stop the spread of solar (Soble 2015).
Indonesia’s location on the Pacific ring of fire, an area with a lot of tectonic activity,
makes the region prone to natural disasters such as volcanic eruptions, earthquakes,
floods, and tsunamis (“Natural Disasters in Indonesia” n.d.).
Terrorist groups could be a threat to business in Indonesia. Jemaah Islamiyah and Darul
Islam are two of the most active terrorist groups in Indonesia. Although terrorism
appears to be directed towards police in recent years, it could cause disruption to
business (“Indonesia’s Struggle” n.d.).
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The success of solar will be highly dependent on how fast and to what extend the
Indonesian government will reduce energy tariffs. If this reduction in subsidies does not
take place, solar will have a hard time competing against artificially low energy prices.
7 Conclusion
The report has shown that Indonesia is an attractive market for Sunpower. Although
there are several risks and uncertainties surrounding an entry to Indonesia, the potential
payoff for Sunpower is big. The Indonesian solar market is in its early days and entering the
market now could lead to a market leading position for Sunpower. The author recommends
that Sunpower enter the market as soon as 2016 to benefit from low competitive rivalry.
Also, the company should enter the market via a joint venture with a local company. This
will ensure that the products are considered locally produced and avoid the regulation that
stipulates that a certain percentage of the material needs to be locally sourced. Entering a
market with such a complex geography will also provide Sunpower with experience for
future expansions with similarly complex conditions.
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8 Appendices
Appendix 1. Map of the Republic of Indonesia. Source: Wikipedia.
Appendix 2. Detailed energy portfolio of Perusahaan Listrik Negara (PLN). Source: PLN.
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“Asia: GDP per Capita.” GDP per Capita in Asia. n.d. Web. 24 July 2015.
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National Energy Policy. Presidential Regulation No.5/2006, 2006. Web. 23 July 2015.
Henstridge, Mark, Sourovi De, and Maja Jakobsen. Growth in Indonesia: Is It Sustainable?
n.d. 01 Mar. 2013. Web. 24 July 2015.
"Indonesia - Climate." Country Studies. n.d. Web. 25 July 2015.
"Indonesia Data." World Bank, n.d. Web. 24 July 2015.
"Indonesia Energy Subsidy Review." International Institute for Sustainable Development. 01
Mar. 2014. Web. 26 July 2015.
"Indonesia: Weather & When to Go." Selective Asia. n.d. Web. 25 July 2015.
"Indonesia’s Struggle Against Terrorism." Council on Foreign Relations. n.d. Web. 26 July
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