first solar annual 2015

7/25/2019 first solar annual 2015

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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 2054

!o"# $0%&Ma"( on)*

[x] ANNUA+ REORT URSUANT TO SECTION $- OR $5'* O! THE SECURITIES EXCHANGE ACT O! $-4

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[ ] TRANSITION REORT URSUANT TO SECTION $- OR $5'* O! THE SECURITIES EXCHANGE ACT O! $-4!o" th) t"ansition )"io /"o# to

Co##ission /i1) n#3)"6 00$%--$57

!i"st So1a", In.(Exact name of registrant as specified in its charter)

D)1a8a") 20%472-79:(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

-50 W)st Washington St"))t, Sit) 700T)#), A"i;ona :52:$

(Address of principal executie offices! including zip code)

'702* 4$4%-00(Registrant"s telephone num#er! including area code)

S)"iti)s ")gist)") "sant to S)tion $2'3* o/ th) At6

Tit1) o/ )ah 1ass Na#) o/ )ah )smaller reportn( compan&? n +ule 16%*6 o' the 4xchan(e Act.

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"n#cate %& check mark )hether the re(strant s a shell compan& as #e'ne# n +ule 16%*6 o' the 4xchan(e Act2. es [ ] No [x]

The a((re(ate market value o' the re(strant


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!IRST SO+AR, INC. AND SU=SIDIARIES

!ORM $0%& !OR THE >EAR ENDEDDECEM=ER -$, 20$5

TA=+E O! CONTENTS

ART Item 13 usness

4xecutve E''cers o' the +e(stranttem 1A3 +sk 9actorstem 13 Fnresolve# Sta'' Commentstem 63 =ropertestem 3 !e(al =rocee#n(stem 3 ne Sa'et& Dsclosures

ART IItem -3 arket 'or +e(strant


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NOTE REGARDING !ORWARD%+OO&ING STATEMENTS

Ths Annual +eport on 9orm 10*; contans 'or)ar#*lookn( statements )thn the meann( o' the Securtes 4xchan(e Act o' 154xchan(e Act?2 an# the Securtes Act o' 15, )hch are su%7ect to rsks, uncertantes, an# assumptons that are #''cult to pre#cttatements n ths Annual +eport on 9orm 10*;, other than statements o' hstorcal 'act, are 'or)ar#*lookn( statements. These 'or)ar#*lootatements are ma#e pursuant to sa'e har%or provsons o' the =rvate Securtes !t(aton +e'orm Act o' 155-. The 'or)ar#*lookn( statemnclu#e statements, amon( other thn(s, concernn(3 our %usness strate(&, nclu#n( antcpate# tren#s an# #evelopments n an# mana(emlans 'or our %usness an# the markets n )hch )e operateH 'uture 'nancal results, operatn( results, revenues, (ross mar(n, operaxpenses, pro#ucts, pro7ecte# costs nclu#n( estmate# 'uture mo#ule collecton an# rec&cln( costs2, )arrantes, solar mo#ule e''cenc&

alance o' s&stems >oS?2 cost re#ucton roa#maps, restructurn(, pro#uct rela%lt&, nvestments n unconsol#ate# a''lates, an# caxpen#turesH our a%lt& to contnue to re#uce the cost per )att o' our solar mo#ulesH our a%lt& to re#uce the costs to construct =I solar po&stemsH research an# #evelopment pro(rams an# our a%lt& to mprove the converson e''cenc& o' our solar mo#ulesH sales an# markentatvesH an# competton. "n some cases, &ou can #ent'& these statements %& 'or)ar#*lookn( )or#s, such as >estmate,? >expantcpate,? >pro7ect,? >plan,? >nten#,? >seek,? >%eleve,? >'orecast,? >'oresee,? >lkel&,? >ma&,? >shoul#,? >(oal,? >tar(et,? >m(ht,? >)coul#,? >pre#ct,? >contnue,? an# the ne(atve or plural o' these )or#s, an# other compara%le termnolo(&. 9or)ar#*lookn( statementnl& pre#ctons %ase# on our current expectatons an# our pro7ectons a%out 'uture events. All 'or)ar#*lookn( statements nclu#e# n

Annual +eport on 9orm 10*; are %ase# upon n'ormaton avala%le to us as o' the 'ln( #ate o' ths Annual +eport on 9orm 10*;. ou shot place un#ue relance on these 'or)ar#*lookn( statements. 8e un#ertake no o%l(aton to up#ate an& o' these 'or)ar#*lookn( statemor an& reason. These 'or)ar#*lookn( statements nvolve kno)n an# unkno)n rsks, uncertantes, an# other 'actors that ma& cause our aesults, levels o' actvt&, per'ormance, or achevements to #''er materall& 'rom those expresse# or mple# %& these statements, nclu#n(ot lmte# to3

J structural m%alances n (lo%al suppl& an# #eman# 'or photovoltac >=I?2 mo#ulesH

J the market 'or rene)a%le ener(&, nclu#n( solar ener(&HJ re#ucton, elmnaton, or expraton o' (overnment su%s#es an# support pro(rams 'or solar ener(& pro7ectsHJ our a%lt& to execute on our !on( Term Strate(c =lanHJ nterest rate 'luctuatons an# %oth our an# our customers< a%l

secure 'nancn(HJ our a%lt& to execute on our solar mo#ule an# oS cost re#u

roa#mapsHJ our a%lt& to attract ne) customers an# to #evelop an# mantan exstn( customer an# suppler relatonshpsHJ chan(es n, or the 'alure to compl& )th, (overnment re(ulatons an# envronmental, health an# sa'et& re/urementsHJ our compettve poston an# other ke& compettve 'actorsHJ envronmental respons%lt&, nclu#n( )th respect to ca#mum tellur#e an# other semcon#uctor materalsHJ clams un#er our lmte# )arrant& o%l(atonsHJ 'uture collecton an# rec&cln( costs 'or solar mo#ules covere# %& our mo#ule collecton an# rec&cln( pro(ramH

J our a%lt& to protect our ntellectual propert&HJ our a%lt& to prevent an#Kor mnmLe the mpact o' c&%er attacks or other %reaches o' our n'ormaton s&stemsHJ our contnue# nvestment n research an# #evelopmentHJ the suppl& an# prce o' components an# ra) materals, nclu

ca#mum tellur#eHJ our a%lt& to success'ull& #evelop an# complete our s&stems %us

pro7ectsHJ our a%lt& to attract an# retan ke& executve o''cers an# assocateJ (eneral economc an# %usness con#tons, nclu#n( those n'luence# %& nternatonal an# (eopoltcal eventsH an#J all other matters #scusse# n "tem 1A3 >+sk 9actors,? an# else)here n ths Annual +eport on 9orm 10*;.

ou shoul# care'ull& cons#er the rsks an# uncertantes #escr%e# un#er ths secton.

Unit o/ o8)"

8hen re'errn( to our manu'acturn( capact&, total sales, an# solar mo#ule sales, the unt o' electrct& n )atts 'or me(a)atts >n# ((a)atts >G8?2 s #rect current >DC?2 unless other)se note#. 8hen re'errn( to our =I solar po)er s&stems, the unt o' electrc

)atts 'or 8 an# G8 s alternatn( current >AC?2 unless other)se note#.

1


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ART I

t)# $6 Business

Co#an O@)"@i)8

8e are a lea#n( (lo%al prov#er o' comprehensve photovoltac >=I?2 solar ener(& solutons. 8e #es(n, manu'acture, an# sell =I mo#ules )th an a#vance# thn*'lm semcon#uctor technolo(& an# also #evelop, #es(n, construct, an# sell =I solar po)er s&stems

rmarl& use the mo#ules )e manu'acture. A##tonall&, )e prov#e operatons an# mantenance >EM?2 servces to s&stem o)ners thaolar mo#ules manu'acture# %& us or %& other thr#*part& manu'acturers. 8e have su%stantal, on(on( research an# #evelopment e'ocuse# on mo#ule an# s&stem level nnovatons. 8e are the )orl#


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Ma"()t O@)"@i)8

Solar ener(& s a (ro)n( 'orm o' rene)a%le ener(& )th numerous economc an# envronmental %ene'ts that make t an attracomplement to, an#Kor su%sttute 'or, tra#tonal 'orms o' electrct& (eneraton. "n recent &ears, the prce o' =I solar po)er s&stems,ccor#n(l& the cost o' pro#ucn( electrct& 'rom such s&stems, has #roppe# to levels that are compettve )th or even %elo) the retal prlectrct& n man& markets. The rap# prce #eclne that =I solar ener(& has experence# n recent &ears opens ne) poss%ltes to #ev&stems n some locatons )th lmte# or no 'nancal ncentves. The 'act that a =I solar po)er s&stem re/ures no 'uel prov#es a un/uealua%le he#(n( %ene't to o)ners o' such s&stems relatve to tra#tonal electrct& (eneraton assets. Ence nstalle#, =I solar po)er s&san 'uncton 'or 6- or more &ears )th relatvel& less mantenance or overs(ht, compare# to tra#tonal 'orms o' electrct& (enerato

##ton to these economc %ene'ts, =I solar has several envronmental %ene'ts. 9or example, =I solar po)er s&stems #o not (eneratereenhouse (as or other emssons an# use no or mnmal amounts o' )ater compare# to tra#tonal 'orms o' electrct& (eneraton. S

markets )orl#)#e contnue to #evelop, a#e# %& the a%ove 'actors as )ell as #eman# elastct& resultn( 'rom #eclnn( n#ustr& aveelln( prces, %oth at the mo#ule an# s&stem level, )hch make solar po)er more a''or#a%le to ne) markets, an# )e have contnueevelop our localLe# presence an# expertse n such markets.

The solar n#ustr& contnues to %e characterLe# %& ntense prcn( competton, %oth at the mo#ule an# s&stem levels. "n the a((re(ateeleve manu'acturers o' solar mo#ules an# cells have, relatve to (lo%al #eman#, s(n'cant nstalle# pro#ucton capact& an# the a%lt#tonal capact& expanson. 8e %eleve the solar n#ustr& ma& 'rom tme to tme experence pero#s o' structural m%alance %et)een sun# #eman# .e., )here pro#ucton capact& excee#s (lo%al #eman#2, an# that such pero#s )ll put pressure on prcn(. A##tonall&, ntompetton at the s&stems level can result n an envronment n )hch prcn( 'alls rap#l&, there%& 'urther ncreasn( #eman# 'or solar enolutons %ut constrann( the a%lt& 'or pro7ect #evelopersH en(neern(, procurement, an# constructon >4=C?2 companesH an# vertcnte(rate# solar companes such as 9rst Solar to sustan meann('ul an# consstent pro'ta%lt&. "n l(ht o' such market realtes, )

xecutn( our !on( Term Strate(c =lan, Ison 6060 >!on( Term Strate(c =lan?2 #escr%e# %elo), un#er )hch )e are 'ocusn( onompettve stren(ths. Such stren(ths nclu#e our a#vance# mo#ule an# s&stem technolo(es as )ell as our #''erentate#, vertcall&*nte(usness mo#el that ena%les us to prov#e utlt&*scale =I solar ener(& solutons to ke& (eo(raphc markets )th mme#ate electrct& nee#

t"at)g an Co#)titi@) St")ngths

To %ul# upon our n#ustr& lea#n( poston an# to reman one o' the pre'erre# prov#ers o' =I solar ener(& solutons, )e are pursunollo)n( strate(es3 #''erentaton, sustana%le (ro)th, an# 'nancal va%lt&.

$ifferentiation

J 9rst Solar s vertcall& nte(rate# across su%stantall& the entre solar value chan. an& o' the e''cences, cost re#uctons,

capa%ltes that )e #elver to our customers are not easl& replca%le 'or other n#ustr& partcpants that are not smlarl& vertcnte(rate#. The 9rst Solar mo#el o''ers =I solar ener(& solutons that %ene't 'rom our capa%ltes, nclu#n(3 pro7ect #evelopmen(neern( an# plant optmLatonH (r# nte(raton an# plant control s&stemsH a#vance# =I mo#ulesH trackers an# 'xe# mouns&stemsH procurement an# constructon consultn(H an# operatons an# mantenance servces.

J 9rst Solar s&stems #elver solar ener(& that s cost compettve )th certan conventonal ener(& sources, #epen#n( on the locaan# applcaton. Eur solutons #vers'& the ener(& port'olo an# re#uce the rsk o' 'uel*prce volatlt&, )hle #elvern( an !CE4s cost compettve n some crcumstances )th electrct& (enerate# 'rom 'ossl 'uels. 8th the a%sence o' commo#t& prce rsk, sener(& has a meann('ul value proposton, nclu#n( a lon(*term 'xe# prce )th relatvel& lo) operatn( costs an# rela%le ene8hen compare# to the prce o' po)er #erve# 'rom a conventonal source o' ener(&, a 'xe# prce cannot %e acheve# unless theo' he#(n( s nclu#e#. e#(n( costs o' a commo#t& such as natural (as, alon( )th the costs o' cre#t support re/ure# 'or a loterm he#(e, can s(n'cantl& ncrease conventonal ener(& costs.

J 9rst Solar


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J 8e o''er one o' the most %anka%le utlt&*scale solar ener(& solutons n the )orl#. 8th our proven experence, 'nancal sta%an# a%lt& to maxmLe the use o' our lea#n( technolo(& n #e%t*'nance# pro7ects, our %anka%le ener(& solutons prov#e accescaptal an# relatvel& lo)*cost 'nancn( to lea#n( utltes an# ener(& nvestors.

J 9rst Solar has #evelope# a#vance# (r# nte(raton technolo(&, )hch prov#es =I plants the a%lt& to actvel& sta%lLeelectrct& (r# an# operate more lke tra#tonal electrct& (eneraton plants. A#vance# plant 'eatures o' our (r# nte(raton s&snclu#e the a%lt& to re(ulate volta(e, curtal actve po)er )hen necessar&, lmt the rate o' chan(e o' po)er, prevent trps #u'aults an# #stur%ances, an# react to chan(es n (r# 're/uenc&.

J 9rst Solar has ma#e s(n'cant mprovements to oS components to optmLe the entre =I po)er plant an# re#uce l'ec&cle cEur propretar& #ata ac/uston, plant control, an# mountn( s&stems are examples o' plant optmLn( technolo(es that ena%le uprov#e rela%le an# pre#cta%le solar ener(&, ncrease# ener(& &el#s an# s&stem avala%ltes, 'aster constructon veloctes, alo)er !CE4. A##tonall&, our a#vance# plant controls ena%le seamless nte(raton o' our utlt&*scale solar plants onto the electr(r#, prov#n( vtal (r# support servces such as volta(e an# po)er 'actor re(ulaton, actve an# reactve po)er control, rampcontrol, 're/uenc& re(ulaton, an# 'ault r#e*throu(h.

J 8e nvest s(n'cant resources n research an# #evelopment >+MD?2, %oth at the mo#ule an# s&stem level. 9rst SolarC#Te?2 =I e''cenc&, achevan n#epen#entl& cert'e# research cell e''cenc& o' 66.1O an# a 'ull area mo#ule e''cenc& o' 1.6O . Eur mo#ule +MD e''ort%en( 'ocuse# on contnuall& mprovn( the ener(& #enst& o' our mo#ules an# other)se #rvn( mprovements n the l'etme enpro#ucton o' our mo#ules )hle smultaneousl& nte(ratn( our mo#ule an# oS o''ern(s 'or cost e''ectve, pro#uctve, an# rel=I po)er plants.

J "n man& clmates, 9rst Solar


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>==A?2 throu(hout the operatonal l'e o' the plants. 8e have ma#e s(n'cant nvestments n EM technolo(es n or#er to #evan# create a scala%le an# sustana%le EM plat'orm. Eur EM pro(ram s complant )th the North Amercan 4lectrc +ela%Corporaton >N4+C?2 stan#ar#s an# s #es(ne# to %e scala%le to accommo#ate the (ro)n( EM nee#s o' customers )orl#)8e %eleve our EM expertse s a s(n'cant #''erentator, as t s #''cult 'or man& compettors to replcate ths experence.

J 8e mana(e, as o)ner or partal o)ner, pro7ect assets to preserve an# enhance sharehol#er value. 8e prov#e seamless mana(emepro7ects 'rom ntal lan# #evelopment throu(h constructon, commssonn(, an# operaton %rn(n( to %ear all o' our expereneach o' these phases.

Sustaina#le &ro'th

"n executn( our !on( Term Strate(c =lan, )e are 'ocusn( on prov#n( =I solar ener(& solutons usn( our mo#ules to ke& (eo(ramarkets that )e %eleve have a compelln( nee# 'or mass*scale =I electrct&, nclu#n( markets throu(hout the Amercas, Asa, the 4ast, an# A'rca. As part o' our !on( Term Strate(c =lan, )e are 'ocusn( on opportuntes n )hch our =I solar ener(& solutonsompete #rectl& )th 'ossl 'uel o''ern(s on an !CE4 or smlar %ass, or complement such 'ossl 'uel electrct& o''ern(s. 4xecuton o'

!on( Term Strate(c =lan entals a prortLaton o' market opportuntes )orl#)#e relatve to our core stren(ths an# a corresponllocaton o' resources aroun# the (lo%e. Ths prortLaton nvolves a 'ocus on our core utlt&*scale o''ern(s an# exsts )thn a cur

market envronment that nclu#es roo'top an# #str%ute# (eneraton solar, partcularl& n the F.S. 8hle t s unclear ho) roo'topstr%ute# (eneraton solar m(ht mpact our core utlt&*scale o''ern(s n the next several &ears, )e %eleve that utlt&*scale solar ontnue to %e a compelln( solar o''ern( 'or companes )th technolo(& an# cost lea#ershp an# )ll contnue to represent an ncreaorton o' the overall electrct& (eneraton mx.

8e are closel& evaluatn( an# mana(n( the approprate level o' resources re/ure# as )e pursue the most a#vanta(eous an# cost e''ero7ects an# partnershps n our tar(et markets. 8e have #e#cate#, an# nten# to contnue to #e#cate, s(n'cant captal an# human resouo re#uce the total nstalle# cost o' =I solar ener(&, to optmLe the #es(n an# lo(stcs aroun# our =I solar ener(& solutons, an# to enhat our solutons nte(rate )ell nto the overall electrct& ecos&stem o' each spec'c market. 8e expect that, over tme, an ncreasn( po' our consol#ate# net sales, operatn( ncome, an# cash 'lo)s ma& come 'rom solar o''ern(s n the ke& (eo(raphc markets #escr%e# as )e execute on our !on( Term Strate(c =lan. The tmn(, executon, an# 'nancal mpacts o' our !on( Term Strate(c =lan are su%7ecsks an# uncertantes, as #escr%e# n "tem 1A3 >+sk 9actors.? 8e are 'ocusn( our resources n those markets an# ener(& applcaton

)hch solar po)er can %e a least*cost, %est*'t ener(& soluton, partcularl& n re(ons )th h(h solar resources, s(n'cant current or pro7electrct& #eman#, an#Kor relatvel& h(h exstn( electrct& prces. As part o' these e''orts, )e contnue to expan# or reallocate resoulo%all&, nclu#n( %usness #evelopment, sales personnel, an# other supportn( pro'essonal sta'' n tar(et markets. Accor#n(l&, )e ma& urrent costs or ncur a##tonal costs over tme as )e esta%lsh a localLe# %usness presence n these tar(et markets.

@ont ventures or other strate(c arran(ements )th partners are a ke& part o' our !on( Term Strate(c =lan, an# )e (enerall& use rran(ements to expe#te our penetraton o' varous ke& markets an# esta%lsh relatonshps )th potental customers. 8e also enter nto entures or strate(c arran(ements )th customers or other enttes to maxmLe the value o' partcular pro7ects. Some o' these arran(emnvolve, an# are expecte# n the 'uture to nvolve, s(n'cant nvestments or other allocatons o' captal. 8e contnue to #evelop relatons

)th polc&makers, re(ulators, an# en# customers n these strate(c markets )th a ve) to creatn( opportuntes 'or utlt&*scale =I so)er s&stems. 8e sell such s&stems #rectl& to en# customers, nclu#n( utltes, n#epen#ent po)er pro#ucers, commercal an# n#uompanes, an# other s&stem o)ners. Depen#n( on the market opportunt&, our sales o''ern(s ma& ran(e 'rom mo#ule*onl& sales, to moales )th a ran(e o' #evelopment, 4=C servces, an# other solutons, to 'ull turn*ke& =I solar po)er s&stem sales. 8e expect these o''ero contnue to evolve over tme as )e )ork )th our customers to optmLe ho) our =I solar ener(& solutons can %est meet our customner(& an# economc nee#s.

inancial ia#ility

9rst Solar


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O//)"ings an Caa3i1iti)s

*fferings

8e are 'ocusn( on markets an# ener(& applcatons n )hch solar po)er can %e a least*cost, %est*'t ener(& soluton, partculare(ons )th h(h solar resources, s(n'cant current or pro7ecte# electrct& #eman#, an#Kor relatvel& h(h exstn( electrct& prces.''erentate our pro#uct o''ern(s %& (eo(raphc market an# localLe the soluton, as nee#e#. Eur consultatve approach to our customers< ner(& nee#s an# capa%ltes results n customLe# solutons to meet ther economc (oals. 8e have #es(ne# our customer solutons accoro the nee#s o' the 'ollo)n( #''erent %usness areas. Althou(h )e have su%stantal experence )th the utlt&*scale po)er plant an# a#vaI mo#ule o''ern(s #escr%e# %elo), certan other o''ern(s are n varous sta(es o' #evelopment.

J +tility,Scale -o'er -lant. 8e have extensve, proven experence n #elvern( rela%le (r#*connecte# %ulk po)er s&stems 'or utscale (eneraton. 9rst Solar


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ull Suite of 0apa#ilities

The 9rst Solar mo#el o''ers =I solar ener(& solutons )th superor value an# less rsk )th our expertse across su%stantall& the eolar value chan, nclu#n(3

J -roject $eelopment. Durn( pro7ect #evelopment, )e o%tan lan# an# lan# r(hts 'or the #evelopment o' =I solar po)er s&stncorporatn( our mo#ules, ne(otate lon(*term ==As )th potental purchasers o' the electrct& to %e (enerate# %& those plan#evelop plants n re(ulate# markets )here 'ee#*n*tar'' >9T?2 or smlar structures are n place, mana(e the nterconnecton transmsson process, ne(otate a(reements to nterconnect the s&stems to the electrct& (r#, an# o%tan the permts that are re/upror to the constructon o' =I solar po)er s&stems, nclu#n( applca%le envronmental an# lan#*use permts. 8e also %u& pro7ecvarous sta(es o' #evelopment an# contnue #evelopn( those pro7ects )th s&stem #es(ns ncorporatn( our o)n mo#ules. 8e#evelope# =I solar po)er s&stems to utltes, n#epen#ent po)er pro#ucers, commercal an# n#ustral companes, an# other s&o)ners, such as nvestors )ho are lookn( 'or lon(*term nvestment vehcles that are expecte# to (enerate consstent returns.

J E-0 Serices. 8e prov#e 4=C servces to pro7ects #evelope# %& us, to pro7ects #evelope# %& n#epen#ent solar po)er pro#evelopers, an# #rectl& to s&stem o)ners such as utltes. 4=C servces nclu#e en(neern( #es(n an# relate# servces, procurement, a#vance# #evelopment o' (r# nte(raton solutons, an# constructon contractn( an# mana(ement. Depen#n( oncustomer an# market nee#, )e ma& prov#e our 'ull 4=C servces or an& com%naton o' n#v#ual pro#ucts an# servces )thn4=C capa%ltes. An example o' such com%naton o' n#v#ual servces )oul# %e prov#n( en(neern( #es(n an# procuremeoS parts >4=? servces2 'or a thr#*part& constructn( a =I solar po)er s&stem.

J*1 Serices

. 8e have a comprehensve EM servce o''ern( covern( more than -.B G8 DC o' utlt&*scale =I solar pos&stems. FtlLn( a state o' the art Glo%al Eperatons Center, our team o' EM experts prov#e a varet& o' servces to optms&stem per'ormance an# compl& )th ==As, other a(reements, an# re(ulatons. 8e o''er our EM servces to solar po)er po)ners that use ether our solar mo#ules or mo#ules manu'acture# %& other thr#*part& manu'acturers.

J 2rac%er and *ther 3alance of Systems. oS conssts o' all o' the non*mo#ule components o' the solar po)er plant. 8e sell cercomponents o' the solar s&stem nclu#n( sn(le*axs trackers, )hch are manu'acture# %& a thr#*part& usn( our proprtechnolo(&. 8e o''er several propretar& mountn( solutons that have %een custom*#es(ne# %& 9rst Solar en(neers to nteexclusvel& )th our mo#ules an# re#uce s&stem costs. =ro7ect*spec'c 'actors such as the local rra#ance, )eather, sol, )n#,topo(raph& )ll #ctate the optmal mountn( soluton 'or each pro7ect. 8th a sn(le*axs tracker technolo(& an# multple 'mountn( solutons to choose 'rom, )e o''er a sute o' mountn( s&stems that have %een en(neere# to maxmLe ener(& ouncrease nstallaton veloct&, an# re#uce costs. Eur propretar& tracker s&stems 'ollo) the sun throu(hout the #a& to maxmLe enoutput an# (enerate up to 6-O more ener(& than 'xe# mountn( s&stems. "n a##ton, our vertcal nte(raton com%ne# )th pacolla%oraton has ena%le# us to contnue to make s&stem*level mprovements, such as =I solar po)er s&stems com%nn( our Cmo#ules )th 1-00 volt nverterKtrans'ormer s&stems.

G1o3a1 Ma"()ts

8e have esta%lshe# an# are contnun( to #evelop a localLe# %usness presence on sx contnents, as #escr%e# %elo). 4ner(& market& ther nature localLe#, )th #''erent #rvers an# market 'orces mpactn( electrct& (eneraton an# #eman# n a partcular re(on or 'artcular applcaton. Accor#n(l&, our %usness s evolvn( )orl#)#e an# s shape# %& the var&n( )a&s n )hch our =I solar enolutons can %e a compelln( an# economcall& va%le soluton to ener(& nee#s n #''erent markets an# applcatons.

The Americas

J +nited States.ultple =I markets n the Fnte# States, )hch accounte# 'or O o' our 601- net sales, exempl'& several o

crtera crtcal 'or a sustana%le solar market3 2 sLea%le electrct& #eman#, partcularl& aroun# (ro)n( populaton centersn#ustral areas, 2 h(h exstn( po)er prces, an# 2 a%un#ant solar resources. "n those areas an# applcatons n )hch th'actors are more pronounce#, our =I solar ener(& solutons compete 'avora%l& on an economc %ass )th more tra#tonal 'ormener(& (eneraton. The market penetraton o' =I solar s mpacte# %& certan state an# 'e#eral support pro(rams, nclu#n( the 'e#eral nvestment tax cre#t, as #escr%e# un#er >Support =ro(rams.? 8e have s(n'cant experence an# a market lea#erposton n #evelopn(, en(neern(, constructn(, an# mantann( utlt&*scale po)er plants n the Fnte# States, partcularlCal'orna an# other south)estern states,


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an# ncreasn(l& n southeastern states. Currentl&, our solar pro7ects n the Fnte# States account 'or a ma7ort& o' the 1.B G8a#vance#*sta(e ppelne o' pro7ects that )e are ether currentl& constructn( or expect to construct. See "tem 3 >ana(emeDscusson an# Anal&ss o' 9nancal Con#ton an# +esults o' Eperatons S&stems =ro7ect =pelne? 'or more n'ormaton athese pro7ects.

J 0hile.Chle s a promsn( re(on 'or =I solar n that certan markets are characterLe# %& a%un#ant solar resources an# pote#eman# n the 'orm o' mnn( or n#ustral actvt&. The Chlean (overnmentFA4?2, 4(&pt, an# @or#an

mportant markets 'or utlt&*scale solar )th n#catons o' 'uture potental comn( 'rom Sau# Ara%a, Eman, an# ;u)at. The F4(&pt, an# @or#an lea# the re(on )th polc& mechansms #es(ne# to ramp up the share o' rene)a%le ener(& n ther (eneraport'olos. 8hle ther motves 'or nvestn( n solar ener(& ran(e 'rom ener(& securt& to the #vers'caton o' ther (eneraport'olos to the mnmLaton o' #omestc consumpton o' hrocar%ons, the common 'actor s that the economcs o' =I solar ma#e t a compelln( choce as a (eneraton source.

@or#an an# 4(&pt have actvel& 'acltate# the #evelopment o' the n#epen#ent po)er pro#ucton sector n ther countres as a mo' respon#n( to ur(ent ener(& nee#s. 9or example, @or#an has commtte# to nstalln( B00 8 o' =I solar capact& %& 6060 , )4(&pt has pro(resse# n ts over*su%scr%e# mult*((a)att solar ten#er. "n the rest o' the Ara%an Gul', the re(on


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J Africa. A'rca o''ers stron( potental 'or =I solar, )hch can pla& a use'ul role n meetn( the re(on


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"n 601- , )e secure# r(hts throu(h a compettve aucton to sell po)er un#er a 6- *&ear ==A 'or a cumulatve capact& o' - 8to the state o)ne# electrct& #str%uton companes n Telan(ana. 8e also have 16- 8 AC o' exstn( pro7ects, 'or )hch =)ere secure# n 601 . "n 601- , )e success'ull& acheve# commercal operaton o' 60 8 AC o' our pro7ect ppelnecommence# #evelopment or constructon on 10 8 AC o' the remann( ppelne, )hch s expecte# to acheve commeoperaton #urn( 601B . 8e contnue to mantan our =I mo#ule market lea#ershp n "n#a )th over 1,000 8 DC o' nstamo#ules.

J *ther A-A0.8e are #evelopn( our %usness n other A=AC countres nclu#n( "n#onesa, ala&sa, Thalan#, an# the =hlpp4ach o' these re(ons has one or more market characterstcs or tren#s such as an envronment o' #eclnn( 'uel su%s#e

"n#onesa2 )hch can make =I solar electrct& attractve. "n Chna, )e contnue to evaluate our optons an# reman commtte# topresence, )th the (oal o' #evelopn( sales opportuntes n the market.

o"t "og"a#s

Althou(h our !on( Term Strate(c =lan prov#es 'or 9rst Solar to compete n ke& markets that #o not re/ure solar*spec'c (overnmu%s#es or support pro(rams, n the near term our net sales an# pro'ts reman su%7ect to vara%lt& %ase# on the avala%lt& an# sLovernment su%s#es an# economc ncentves. Support pro(rams 'or =I solar electrct& (eneraton, #epen#n( on the 7urs#cton, nc

9Ts, /uotas nclu#n( rene)a%le port'olo stan#ar#s an# ten#ern( s&stems2, an# net ener(& metern( pro(rams. "n a##ton to these supro(rams, 'nancal ncentves 'or =I solar electrct& (eneraton nclu#e tax ncentves, (rants, loans, re%ates, an# pro#ucton ncent

Althou(h )e expect to %ecome less mpacte# %&, an# less #epen#ent on, support pro(rams as )e execute our !on( Term Strate(c =lan, supro(rams )ll contnue to pla& var&n( roles n acceleratn( the a#opton o' =I solar s&stems aroun# the )orl#.

"n 4urope, rene)a%le ener(& tar(ets, n con7uncton )th 9Ts, +ene)a%le E%l(aton Cert'cates, an# other schemes such as ten#ertlt&*scale =I solar, have contr%ute# to the (ro)th n =I solar markets. +ene)a%le ener(& tar(ets prescr%e ho) much ener(& consum

must come 'rom rene)a%le sources, )hle ncentve polces an# compettve ten#er polces are nten#e# to support ne) suppl& #evelopm& prov#n( certant& to nvestors. A 6005 4uropean Fnon >4F?2 #rectve on rene)a%le ener(&, )hch replace# an earler rectve, sets var&n( tar(ets 'or all 4F mem%er states n support o' the #rectve"TC?2 'or %oth res#ental an# commercal solar nstallatons throu(h Decem%e015 . The cre#t )ll step #o)n to 6BO n 6060, 66O n 6061, an# reman at 10O permanentl& %e(nnn( n 6066 . The "TC has %eemportant economc #rver o' solar nstallatons n the F.S., an# ts extenson s expecte# to contr%ute to (reater me#um*term #ems%lt& n the F.S. The postve mpact o' the "TC has #epen#e# to a lar(e #e(ree on the avala%lt& o' tax e/ut& 'or pro7ect 'nancn(, n& s(n'cant re#ucton n the avala%lt& o' tax e/ut& n the 'uture coul# make t more #''cult to #evelop an# construct pro7ects re/unancn(. The eventual step*#o)n o' the "TC to 10O un#erscores the nee# 'or the !CE4 'rom solar s&stems to contnue to #eclne an# remompettve )th other sources o' ener(& (eneraton.

At the 'e#eral level, the 4nvronmental =rotecton A(enc&+ule?2 an# mplementathe +ule throu(h state plans o''ere# the poss%lt& o' ncreasn( the #eman# 'or =I solar (eneratn( capact& n certan re(ons o' the F.S

)hch =I solar has not hstorcall& receve# s(n'cant state*level polc& support. o)ever, the a#opton an# mplementaton o' the +uleeen mpacte# %& lt(aton a(anst the +ule ntate# %& states an# other stakehol#ers )hch has not &et %een resolve#, an# n 9e%ruar& 6he F.S. Supreme Court sta&e# mplementaton o' the +ule )hle such le(al challen(es are pen#n(. "t s there'ore premature to assess )ha''ects o' the +ule )ll %e on =I solar markets.

The ma7ort& o' states n the F.S. have enacte# le(slaton a#optn( +ene)a%le =ort'olo Stan#ar# >+=S?2 mechansms. Fn#er an +e(ulate# utltes an# other loa# servn( enttes are re/ure# to procure a spec'e# percenta(e o' ther total electrct& sales to en#*ustomers 'rom el(%le rene)a%le resources, such as solar (eneratn( 'acltes, %& a spec'e# #ate. Some pro(rams ma& 'urther re/ure tpec'e# porton o' the total percenta(e o' rene)a%le ener(& must come 'rom solar (eneratn( 'acltes. +=S le(slaton an# mplemene(ulatons var& s(n'cantl& 'rom state to state, partcularl& )th respect to the percenta(e o' rene)a%le ener(& re/ure# to acheve the st

+=S, the #e'nton o' el(%le rene)a%le ener(& resources, an# the extent to )hch rene)a%le ener(& cre#ts cert'cates representn(eneraton o' rene)a%le ener(&2 /ual'& 'or +=S complance. easure# n terms o' the volume o' rene)a%le electrct& re/ure# to mee

+=S man#ate, Cal'orna


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ast several &ears. 9rst enacte# n 6006 , Cal'ornas&stems se(ment?2, throu(h )hch )e prov#e complete turn*ke& =I solar po)er s&stems, or solutons, that #ra) upon our capa%ltes, )hch nclu#e 2 pro7ect #evelopment, 2 4=C servces, an# 2 EM servces, as #escr%e

more #etal %elo). 8e ma& prov#e our 'ull 4=C servces or an& com%naton o' n#v#ual pro#ucts an# servces )thn our 4=C capa%lepen#n( upon the customer an# market opportunt&. All o' our s&stems se(ment pro#ucts an# servces are 'or =I solar po)er s&stems, )rmarl& use our solar mo#ules, an# )e sell such pro#ucts an# servces to utltes, n#epen#ent po)er pro#ucers, commercal an# n#usompanes, an# other s&stem o)ners. A##tonall&, )thn our s&stems se(ment, )e ma& o)n an# operate certan o' our =I solar po&stems 'or a pero# o' tme %ase# on strate(c opportuntes.

See Note 6 >Se(ment an# Geo(raphcal "n'ormaton ? to our consol#ate# 'nancal statements 'or the &ear en#e# Decem%er 1, 6nclu#e# n ths Annual +eport on 9orm 10*; 'or 'urther n'ormaton on our %usness se(ments.

Components Business

Eur components %usness nvolves the #es(n, manu'acture, an# sale o' solar mo#ules )hch convert sunl(ht nto electrct&.

Solar odules

0d2e odules. Eur 'la(shp mo#ule snce the ncepton o' 9rst Solar has %een manu'acture# usn( our a#vance# C#Te thn*echnolo(&. 4ach solar mo#ule s a (lass lamnate approxmatel& 6't x 't B0cm x 160cm2 n sLe that encapsulates a C#Te thn*emcon#uctor. Eur solar mo#ules ha# an avera(e rate# po)er per mo#ule o' approxmatel& 10 )atts , 5- )atts , an# 51 )atts 'or 6001 , an# 601 , respectvel&. Durn( 601, )e announce# the release o' our Seres Tmo#ule, )hch o''ers up to O more ener(&onventonal cr&stallne slcon mo#ules )th the same e''cenc& ratn(, an# s compat%le )th a#vance# 1-00*volt plant archtectures.eres A Tvarant 'eatures a ne) ant*re'lectve coate# (lass, )hch enhances ener(& pro#ucton. Eur semcon#uctor structure s a sn

uncton pol&cr&stallne thn*'lm that uses C#Te as the a%sorpton la&er. C#Te has a%sorpton propertes that are matche# to the solar specn# can #elver compettve converson e''cences usn( approxmatel& 1*6O o' the amount o' semcon#uctor materal that s use

manu'acture tra#tonal cr&stallne slcon solar mo#ules. Ene o' the #rvers o' 9rst Solar mo#ules< per'ormance a#vanta(e over tra#tr&stallne slcon mo#ules s a lo)er temperature coe''cent, #elvern( h(her ener(& &el#s at elevate# operatn( temperatures t&pctlt&*scale solar po)er plants n sunn& re(ons.

0rystalline Silicon odules."n a##ton to our prmar& C#Te mo#ule technolo(&, )e also manu'acture cr&stallne slcon mo#ules mrom h(h*e''cenc& N*T&pe ono cells pro#uce# at our 'aclt& n ;ulm, ala&sa an# then assem%le# nto a B0 or 6 cell mo#ule %& tart& contract manu'acturers. 8hen 'ull& rampe#, )e expect the 'aclt& to have the capact& to pro#uce --,000 1-Bmm cells per #a& ameplate capact& o' 100 8 annuall&. The stan#ar# 9rst Solar B0 cell =I mo#ule )ll have a po)er ratn( o' 00 )atts. Accor#n(l&r&stallne slcon technolo(& s expecte# to #elver a ver& h(h e''cent cell at a much lo)er manu'acturn( cost than s currentl& avala%he marketplace.

Descrptons %elo) o' our components %usness relate to our C#Te mo#ules unless other)se note#.

anufacturing -rocess

0d2e odules.8e manu'acture our C#Te solar mo#ules on h(h*throu(hput nte(rate# pro#ucton lnes n an automate#, propretar&ontnuous process. Eur solar mo#ules emplo& a thn la&er o' semcon#uctor materal to convert sunl(ht nto electrct&. Eur manu'acturocess elmnates the multple suppl& chan operators an# expensve an# tme*consumn( %atch processn( steps that are use# to pror&stallne slcon solar mo#ules. Currentl&, )e manu'acture our solar mo#ules at our =err&s%ur(, Eho an# ;ulm, ala&sa manu'actuacltes.

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8e have nte(rate# our C#Te manu'acturn( processes nto a contnuous pro#ucton lne )th the 'ollo)n( three sta(es3 the #eposta(e, the cell #e'nton an# treatment sta(e, an# the assem%l& an# test sta(e. "n the #eposton sta(e, panels o' transparent ox#e*coate# (re ro%otcall& loa#e# onto the pro#ucton lne )here the& are cleane#, laser etch #ent'e# )th a seral num%er, heate#, an# coate# )th a&ers o' C#Te an# other semcon#uctor materals usn( our propretar& vapor transport #eposton technolo(&, a'ter )hch the semcon#uoate# plates are coole# rap#l& to ncrease stren(th. "n the cell #e'nton an# treatment sta(e, )e use h(h spee# lasers to trans'orm the ln(le semcon#uctor coatn( on the (lass plate nto a seres o' nterconnecte# cells that #elver the #esre# current an# volta(e output. "nta(e, )e also treat the semcon#uctor 'lm usn( propretar& chemstres an# processes to mprove the #evce per'ormance, an# )e app

metal termnate# sputtere# %ack contact. 9nall&, n the assem%l& an# test sta(e, )e appl& %us%ars, nter*la&er materal, an# a rear (lass cheet that s lamnate# to encapsulate the #evce. A 7uncton %ox an# termnaton )res are then apple# to complete the assem%l&. The

ssem%l& sta(e s the onl& sta(e n our pro#ucton lne that re/ures manual processn(.

8e mantan a ro%ust /ualt& an# rela%lt& assurance pro(ram that montors crtcal process parameters an# measures proer'ormance to ensure that n#ustr& an# nternal stan#ar#s are met. Acceptance testn( 'or %oth electrcal leaka(e an# po)er measurementolar smulator are con#ucte# pror to a mo#ule %en( %oxe# 'or shpment. The /ualt& an# rela%lt& tests complement pro#ucton survell

)th an on(on( montorn( pro(ram, su%7ectn( pro#ucton mo#ules to accelerate# l'e stress testn( to help ensure on(on( con'ormane/urements o' the "nternatonal 4lectrotechncal Commsson >"4C?2 an# Fn#er)rters !a%oratores "nc. >F!?2. These pro(rams ass(h level o' pro#uct /ualt& an# rela%lt&, helpn( to #elver po)er per'ormance n the 'el#.

0rystalline Silicon odules.8e manu'acture our cr&stallne slcon cells at our 'aclt& n ;ulm, ala&sa. The manu'acturn( protarts )th 1-Bmm N*T&pe mono*cr&stallne slcon )a'ers supple# %& a varet& o' )a'er supplers. "ncomn( )a'ers are su%7ecte# to a s' nspectons to ensure that h(h /ualt& stan#ar#s are met. The propretar& manu'acturn( process conssts o' passvaton, anneal

metalLaton, prntn(, )et cleans, an# electroplatn( steps an# are all 'ull& automate# n#epen#ent steps. Complete# cells are teste# an# %

ccor#n( to strct per'ormance crtera. The 'nal mo#ule assem%l& s complete# %& a contract manu'acturn( compan& that per'manu'acturn( to our mo#ule spec'catons usn( a %ll o' materals mana(e# %& us.

8e mantan a ro%ust /ualt& an# rela%lt& assurance pro(ram that montors crtcal process parameters to ensure that n#ustr& an# nttan#ar#s are met. Ths r(orous set o' evaluatons s con#ucte# pror to each solar mo#ule un#er(on( acceptance testn( 'or %oth electeaka(e an# po)er measurement on a solar smulator. The /ualt& an# rela%lt& tests complement pro#ucton survellance )th an on(

montorn( pro(ram, su%7ectn( pro#ucton mo#ules to accelerate# l'e c&cle an# stress testn( to ensure con'ormance to "4C an#e/urements. Ths pro(ram assures a h(h level o' pro#uct /ualt& an# rela%lt&, helpn( to pre#ct po)er per'ormance n the 'el#.

Research! $eelopment! and Engineering

8e contnue to #evote su%stantal resources to research an# #evelopment )th the prmar& o%7ectve o' lo)ern( the l'ec&cle coslectrct& (enerate# %& our =I solar po)er s&stems. 8e con#uct our research an# #evelopment actvtes prmarl& n the Fnte# States. 8ur components %usness, )e 'ocus our research an# #evelopment actvtes on, amon( other areas, contnun( to ncrease the conver''cenc& an# ener(& &el# o' our solar mo#ules an# contnuousl& mprovn( #ura%lt& an# manu'acturn( e''cences, nclu#n( throu(mprovement, volume ramp, an# materal cost re#ucton.

"n the course o' our research an# #evelopment actvtes, )e contnuousl& explore an# research technolo(es n our e''orts to suompettve #''erentaton n our mo#ules. 8e t&pcall& /ual'& process an# pro#uct mprovements 'or 'ull pro#ucton at our =err&s%ur(, lant an# then use a s&stematc process to propa(ate them to our other pro#ucton lnes. 8e %eleve that our s&stematc approach to technohan(e mana(ement )ll prov#e contnuous mprovements an# ensure un'orm a#opton across our pro#ucton lnes. "n a##ton, our Cro#ucton lnes are replcas or near replcas o' each other an#, as a result, a process or pro#ucton mprovement on one lne can %e rap#l&ela%l& #eplo&e# to other pro#ucton lnes.

8e re(ularl& pro#uce research cells n our la%oratores, some o' )hch are teste# 'or per'ormance an# cert'e# %& n#epen#ent la%s su

he Natonal +ene)a%le 4ner(& !a%orator&. Cell e''cenc& measures the proporton o' l(ht converte# n a sn(le solar cell at stan#ar#on#tons. Eur research cells are pro#uce# usn( la%orator& e/upment an# metho#s an# are not nten#e# to %e representatve o'manu'acturn( capa%lt&. 8e %eleve that our recor# cells #emonstrate a potental lon(*term mo#ule e''cenc& enttlement o' over 15O uur commercal*scale manu'acturn( e/upment.

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"n 601 , )e ac/ure# G4


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0d2e Solar odule 0ollection and Recycling -rogram

9rst Solar s commtte# to exten#e# pro#ucer respons%lt& an# takes nto account the envronmental mpact o' ts pro#ucts over tntre l'e c&cle. 8e esta%lshe# the solar n#ustr&the pro(ram?2, )e nclu#e a #escrpton o'

mo#ule collecton an# rec&cln( o%l(atons. 9or such mo#ules covere# un#er the pro(ram, )e a(ree to cover the costs 'or the collectonec&cln( o' solar mo#ules, an# the en#*users a(ree to not'& us, #sassem%le ther s&stems, packa(e the solar mo#ules 'or shpment, an# re

mo#ule o)nershp r(hts %ack to us at the en# o' the mo#ules< servce lves.

The 4uropean Fnon8444?2 Drectve places the o%l(aton o' rec&cln( ncluollecton, treatment, an# envronmentall& soun# #sposal2 o' electrcal an# electronc e/upment >444?2 pro#ucts upon pro#ucers.

8444 Drectve s no) applca%le to =I solar mo#ules n 4F mem%er states. 9or mo#ules covere# un#er our pre*'un#e# pro(ram that )revousl& sol# nto an# nstalle# n the 4F, )e contnue to mantan a commtment to cover the estmate# collecton an# rec&cln( consstent )th our hstorcal pro(ram. "n a##ton, as a result o' the transposton o' the 8444 Drectve %& the 4F mem%er states, )e )#7ustn( our o''ern( n the varous 4F mem%er states as re/ure# to ensure complance )th spec'c 4F mem%er state 8444 re(ulatons

"n a##ton to achevn( su%stantal envronmental %ene'ts, our solar mo#ule collecton an# rec&cln( pro(ram ma& prov#e uspportunt& to recover certan ra) materals an# components 'or reuse n our manu'acturn( process. 8e currentl& have rec&cln( 'acperatn( at each o' our current manu'acturn( 'acltes n the F.S. an# ala&sa an# at our 'ormer manu'acturn( 'aclt& locaton n Germhat pro#uce (lass cullet suta%le 'or use n the pro#ucton o' ne) (lass pro#ucts %& a thr#*part& suppler an# unre'ne# semcon#u

materals that )ll %e 'urther processe# %& a thr#*part& suppler an# then use# to pro#uce semcon#uctor materals 'or use n ne) smo#ules.

Solar odule 5arranties

8e prov#e a lmte# =I solar mo#ule )arrant& covern( #e'ects n materals an# )orkmanshp un#er normal use an# servce con#tor 10 &ears 'ollo)n( the trans'er o' ttle to our mo#ules. 8e also t&pcall& )arrant that mo#ules nstalle# n accor#ance )th a(ree#*upec'catons )ll pro#uce at least 5O o' ther la%ele# po)er output ratn( #urn( the 'rst &ear, )th the )arrant& covera(e re#ucn( %& 0ver& &ear therea'ter throu(hout the 6- *&ear per'ormance )arrant& pero#. =ror to 601 , )e )arrante# that mo#ules nstalle# n accor#a

)th a(ree#*upon spec'catons )oul# pro#uce at least 50O o' ther la%ele# po)er output ratn( #urn( the 'rst 10 &ears 'ollo)n( nstalln# at least 0O o' ther la%ele# po)er output ratn( #urn( the 'ollo)n( 1- &ears. "n resolvn( clams un#er %oth the #e'ect an# po)er ou)arrantes, )e have the opton o' ether reparn( or replacn( the covere# mo#ules or, un#er the po)er output )arrant&, prov#n( a##tmo#ules to reme#& the po)er short'all. 8e also have the opton to make a pa&ment 'or the then current market prce o' mo#ules to resolvlams. Such lmte# mo#ule )arrantes are stan#ar# 'or mo#ule sales an# are automatcall& trans'erre# 'rom the or(nal purchasers o' the

mo#ules to su%se/uent purchasers upon resale.

As an alternatve 'orm o' our stan#ar# lmte# mo#ule po)er output )arrant&, )e also o''er an a((re(ate# or s&stem level lmte# moer'ormance )arrant&. Ths s&stem level lmte# mo#ule per'ormance )arrant& s #es(ne# 'or utlt&*scale s&stems an# prov#es 6- *&stem level ener(& #e(ra#aton protecton. "n a##ton, ths )arrant& represents a practcal expe#ent to a##ress the challen(e o' #ent'&rom the potental mllons o' mo#ules nstalle# n a utlt&*scale s&stem, n#v#ual mo#ules that ma& %e per'ormn( %elo) )arrant& thresh& 'ocusn( on the a((re(ate ener(& (enerate# %& the s&stem rather than the po)er output o' n#v#ual mo#ules. The s&stem level lm

mo#ule per'ormance )arrant& t&pcall& s calculate# as a percenta(e o' a s&stem


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9rom tme to tme, )e have taken reme#aton actons )th respect to a''ecte# mo#ules %e&on# our lmte# )arrant&, an# )e ma& eleo so n the 'uture, n )hch case )e )oul# ncur a##tonal expenses. Such potental voluntar& 'uture reme#aton actons %e&on# our lm

)arrant& o%l(aton coul# have a materal a#verse e''ect on our results o' operatons ' )e commt to an& such reme#aton actons.

!stems Business

Throu(h our 'ull& nte(rate# s&stems %usness, )e prov#e complete turn*ke& =I solar po)er s&stems, or solar solutons, )hch nclu#e pro7ect #evelopment, 4=C servces, an#Kor EM servces.

-roject $eelopment

=ro7ect #evelopment actvtes nclu#e3 ste selecton an# securn( r(hts to ac/ure or use the ste, o%tann( the re/uste nterconnecn# transmsson stu#es, executn( an nterconnecton a(reement, o%tann( envronmental an# lan#*use permts, mantann( e''ectveontrol, an# entern( nto a ==A )th an o''*taker o' the po)er to %e (enerate# %& the pro7ect. These actvtes culmnate n recevn( the o construct an# operate a =I solar po)er s&stem. Depen#n( on the market opportunt& or (eo(raphc locaton, )e ma& ac/ure pro7ecarous sta(es o' #evelopment or ac/ure pro7ect companes 'rom #evelopers n or#er to complete the #evelopment process, construct a s&ncorporatn( our mo#ules, an# sell the s&stem to a lon(*term o)ner. 8e ma& also colla%orate )th local partners n connecton )th tro7ect #evelopment actvtes. Depen#n( on the t&pe o' pro7ect or (eo(raphc locaton, ==As or 9T structures #e'ne the prce an# termtlt& customer or nvestor )ll pa& 'or po)er pro#uce# 'rom the pro7ect. 4ntern( nto a ==A (enerall& prov#es the un#erl&n( econoee#e# to 'nalLe #evelopment nclu#n( permttn(, %e(nnn( constructon, arran(n( 'nancn(, an# marketn( the pro7ect 'or sale to a lerm o)ner. Depen#n( prmarl& on the locaton, sta(e o' #evelopment upon our ac/uston o' the pro7ect, an# other ste attr%utesevelopment c&cle t&pcall& ran(es 'rom one to t)o &ears %ut can %e as lon( as 've &ears. 8e ma& %e re/ure# to ncur s(n'cant costrelmnar& en(neern(, permttn(, le(al, an# other expenses %e'ore )e can #etermne )hether a pro7ect s 'eas%le, economcall& attracr capa%le o' %en( %ult. "' there s a #ela& n o%tann( an& re/ure# re(ulator& approvals, )e ma& %e 'orce# to ncur a##tonal costs, )o)n captalLe# pro7ect assets, an# the r(ht o' the o''*taker un#er the ==A to termnate ma& %e tr((ere#.

E-0 Serices

4=C servces nclu#e en(neern( #es(n an# relate# servces, oS procurement, a#vance# #evelopment o' (r# nte(raton solutonsonstructon contractn( an# mana(ement. 8e prov#e the ma7ort& o' our 4=C servces to our sel'*#evelope# pro7ects nten#e# to %e so)ever, )e also prov#e 4=C servces to pro7ects #evelope# %& n#epen#ent solar po)er pro7ect #evelopers, an# #rectl& to s&stem o)uch as utltes. Depen#n( on the customer an# market nee#, )e ma& prov#e our 'ull 4=C servces or an& com%naton o' n#v#ual pro#n# servces )thn our 4=C capa%ltes.

9or =I solar po)er s&stems %ult %& us, )e t&pcall& prov#e a lmte# pro#uct )arrant& on oS parts 'or #e'ects n en(neern( #enstallaton, an# )orkmanshp 'or a pero# o' one to t)o &ears 'ollo)n( the su%stantal completon o' a s&stem. "n resolvn( clams un#er

oS )arrantes, )e have the opton o' reme#&n( the #e'ect throu(h repar or replacement.

As part o' our s&stems %usness, )e con#uct per'ormance testn( o' a s&stem pror to su%stantal completon to con'rm the s&stem mts operatonal an# capact& expectatons note# n the 4=C a(reement. "n a##ton, )e ma& prov#e an ener(& per'ormance test #urn( theear o' a s&stem


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*1 Serices

Eur t&pcal EM servce arran(ements nvolve the per'ormance o' stan#ar# actvtes assocate# )th operatn( an# mantann( aolar po)er s&stem. 8e per'orm such actvtes pursuant to the scope o' servces outlne# n the un#erl&n( contract. These actvteons#ere# necessar& to optmLe s&stem per'ormance an# compl& )th ==As, other a(reements, an# re(ulatons. Althou(h the scope o'ervces ma& var& %& contract, our EM servce arran(ements (enerall& nclu#e 6K s&stem montorn(, certan ==A an# other a(reemomplance, North Amercan 4lectrc +ela%lt& Corporaton complance, !ar(e Generator "nterconnecton A(reement complance, enorecastn(, per'ormance en(neern( anal&ss, re(ular per'ormance reportn(, turn*ke& mantenance servces nclu#n( spare partsorrectve mantenance repar, )arrant& mana(ement, an# envronmental servces. As part o' our EM servces, )e also t&pcall& prov#

''ectve avala%lt& (uarantee, )hch stpulates that a s&stem )ll %e avala%le to (enerate a certan percenta(e o' total poss%le ener(& #uspec'c pero# a'ter a#7ustn( 'or 'actors outs#e o' our control as the servce prov#er, such as )eather, curtalment, outa(es, 'orce ma7

n# other con#tons that ma& a''ect s&stem avala%lt&.

0ustomers

8th respect to our s&stems %usness, our customers consst o' utltes, n#epen#ent po)er pro#ucers, commercal an# n#uompanes, an# other s&stem o)ners. These customers ma& purchase complete# =I solar po)er s&stems, )hch nclu#e our solar mo#ulen& com%naton o' #evelopment, 4=C servces, an# EM servces. Durn( 601- , the su%stantal ma7ort& o' our s&stems %usness sales n North Amerca, an# the prncpal customers o' our s&stems %usness )ere Next4ra 4ner(&, "nc. an# Southern =o)er Compan& , eac

)hch also accounte# 'or more than 10O o' the se(ment+sk 9actors As an

1B


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)ner an# operator o' =I solar po)er s&stems that #elver electrct& to the (r#, certan o' our a''late# enttes ma& %e re(ulate# as putltes un#er F.S. 'e#eral an# state la), )hch coul# a#versel& a''ect the cost o' #on( %usness an# lmt our (ro)th. ? 9or more n'orm%out the economcs o' such o)nershp an# the mpacts on our l/u#t& see "tem 3 >ana(ement+sk 9actors 4nvronmental o%l(atons an# la%oul# have a su%stantal ne(atve mpact on our 'nancal con#ton, cash 'lo)s, an# pro'ta%lt&. ?

Co"o"at) Histo"

"n 9e%ruar& 600B, )e )ere ncorporate# as a Dela)are corporaton. Eur common stock has %een lste# on The NASDAQ Glo%al Searket un#er the s&m%ol >9S!+? snce our ntal pu%lc o''ern( n Novem%er 600B. "n Ecto%er 6005, our common stock )as a##e# to

M= -00 "n#ex, makn( 9rst Solar the 'rst, an# currentl& onl&, pure*pla& rene)a%le ener(& compan& n the n#ex.

Assoiat)s

As o' Decem%er 1, 601- , )e ha# approxmatel& B,-0 assocates our term 'or 'ull an# part*tme emplo&ees2, nclu#n( approxma,B0 n mo#ule manu'acturn( postons an# approxmatel& -B0 assocates that )ork #rectl& n our s&stems %usness. The reman#er ossocates are n research an# #evelopment, sales an# marketn(, an# (eneral an# a#mnstratve postons. None o' our assocates are currepresente# %& la%or unons or covere# %& a collectve %ar(ann( a(reement. As )e expan# #omestcall& an# nternatonall&, )e ma& encother re(onal la)s that man#ate unon representaton or assocates )ho #esre unon representaton or a collectve %ar(ann( a(reementeleve that our relatons )th our assocates are (oo#.

1


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n/o"#ation A3ot G)og"ahi A")as

8e have s(n'cant marketn(, #str%uton, an# manu'acturn( operatons %oth )thn an# outs#e the Fnte# States. Currentl&manu'acture our solar mo#ules at our =err&s%ur(, Eho an# ;ulm, ala&sa manu'acturn( 'acltes.

"n601-, the 'ore(n countr& )th the (reatest concentraton rsk )as Australa, )hch accounte# 'or -Oo' our consol#ate# net saleart o' our !on( Term Strate(c =lan, )e are n the process o' expan#n( our operatons to varous countres across the )orl#, nclu#ountres n the Amercas, Asa, the ##le 4ast, an# A'rca. As a result, )e are su%7ect to the le(al, tax, poltcal, socal, re(ulator&,conomc con#tons o' an ncreasn( num%er o' 'ore(n 7urs#ctons. The nternatonal nature o' our operatons su%7ects us to a num%esks, nclu#n( 'luctuatons n exchan(e rates, a#verse chan(es n 'ore(n la)s or re(ulator& re/urements, an# tar''s, taxes, an# other t

estrctons. See "tem 1A3 >+sk 9actors Eur su%stantal nternatonal operatons su%7ect us to a num%er o' rsks, nclu#n( un'avoroltcal, re(ulator&, la%or, an# tax con#tons n 'ore(n countres? an# >+sk 9actors 8e ma& %e una%le to 'ull& execute on our !on( Ttrate(c =lan, )hch coul# have a materal a#verse e''ect on our %usness, 'nancal con#ton, or results o' operatons. ? See NotSe(ment an# Geo(raphcal "n'ormaton ? to our consol#ate# 'nancal statements nclu#e# n ths Annual +eport on 9orm 10*;n'ormaton a%out our net sales an# lon(*lve# assets %& (eo(raphc re(on.

A@ai1a31) In/o"#ation

8e mantan a )e%ste at http3KK))).'rstsolar.com . 8e make avala%le 'ree o' char(e on our )e%ste our annual reports on 9orm 1uarterl& reports on 9orm 10*Q, current reports on 9orm *;, prox& statements, an# an& amen#ments to those reports 'le# or 'urnsursuant to Secton 1a2 or 1-#2 o' the 4xchan(e Act, as soon as reasona%l& practca%le a'ter )e electroncall& 'le these materals )t

urnsh them to, the Securtes an# 4xchan(e Commsson >S4C?2. The n'ormaton contane# n or connecte# to our )e%ste sncorporate# %& re'erence nto ths report. 8e use our )e%ste as one means o' #sclosn( materal non*pu%lc n'ormaton an# 'or compl

)th our #sclosure o%l(atons un#er the S4C


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nclu#e# =res#ent an# Che' Eperatn( E''cer o' 4nron Glo%al Assets, =res#ent an# Che' Eperatn( E''cer o' 4nron Asa =ac'c, A'n# Chna, an# as Assstant General Counsel o' 4nron "nternatonal. r. u(hes s a Drector o' T=" Compostes, "nc., a lea#n( manu'ac' composte )n# %la#es 'or the )n# ener(& market. e s Charman o' the %oar# o' #rectors o' the !os An(eles %ranch o' the 9e#

+eserve ank o' San 9rancsco. r. u(hes hol#s a 7urs #octor #e(ree 'rom the Fnverst& o' Texas at Austn School o' !a), a Cert'caCompleton n nternatonal %usness la) 'rom Queen ar&TCI?2, a pr/ut& an# venture 'rm that he 7one# n @ul& 6011. =ror to 7onn( TCI, r. Antoun )as the ea# o' =ro#uct Area "= M roa#%an# Net)

or 4rcsson, %ase# n San @ose, Cal'orna. r. Antoun 7one# 4rcsson n 600, )hen 4rcsson ac/ure# +e#%ack Net)orkelecommuncatons e/upment compan&, )here r. Antoun serve# as the Senor Ice =res#ent o' 8orl# 8#e Sales M Eperatons. A'tec/uston, r. Antoun )as promote# to Che' 4xecutve E''cer o' the +e#%ack Net)orks su%s#ar&. =ror to +e#%ack Net)orks, r. Anpent 've &ears at Csco S&stems, )here he serve# as Ice =res#ent o' 8orl#)#e S&stems 4n(neern( an# 9el# arketn(, Ice =res' 8orl#)#e Eptcal Eperatons, an# Ice =res#ent o' Carrer Sales. e has also hel# senor mana(ement postons at Ne)%r#(e Net)orata an# voce net)orkn( compan&, an# N&nex no) IerLon Communcatons2, )here he )as part o' ts Scence an# Technolo(& Dvs

r. Antoun s a mem%er o' the %oar# o' #rectors o' +uckus 8reless, "nc. an# Ioln emor&, "nc., %oth pu%lcl&*tra#e# companes.Antoun earne# a achelor o' Scence #e(ree n 4n(neern( 'rom the Fnverst& o' !ousana at !a'a&ette an# a aster


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+a'' Gara%e#an has %een the Che' Technolo(& E''cer o' 9rst Solar, "nc. snce a& 6016 an# mana(es the Compan&


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t)# $A6 "is# $actors

An nvestment n our stock nvolves a h(h #e(ree o' rsk. ou shoul# care'ull& cons#er the 'ollo)n( n'ormaton, to(ether )th the on'ormaton n ths Annual +eport on 9orm 10*;, %e'ore %u&n( shares o' our stock. "' an& o' the 'ollo)n( rsks or uncertantes occur,usness, 'nancal con#ton, an# results o' operatons coul# %e materall& an# a#versel& a''ecte# an# the tra#n( prce o' our stock coeclne.

Ris(s R)1at) to O" Ma"()ts an Csto#)"s

Competition at the s!stems le%el can &e intense, there&! potentiall! e'ertin donard pressure on s!stems le%el profit mar

ndustr!-ide, hich could reduce our profita&ilit! and ad%ersel! affect our results of operations*

The s(n'cant #eclne n =I mo#ule prces over the last several &ears contnues to create a challen(n( envronment 'or momanu'acturers, %ut t has also ncrease# nterest n solar electrct& )orl#)#e %& ero#n( one o' the prmar& hstorcal constrants to )#espolar market penetraton, namel& ts a''or#a%lt&. A#e# %& such lo)er mo#ule prces, compettors have n man& cases %een )lln( an# a%# a((ressvel& 'or ne) pro7ects an# ==As, usn( lo) cost assumptons 'or mo#ules, oS components, nstallaton, mantenance, an# oosts as the %ass 'or such %#s. +elatvel& lo) %arrers to entr& 'or compettors have le# to, #epen#n( on the market an# other 'actors, ntompetton at the s&stems level. "ntense competton at the s&stems level can result n an envronment n )hch s&stems level prcn( ap#l&, there%& 'urther ncreasn( #eman# 'or solar solutons %ut constrann( the a%lt& 'or pro7ect #evelopers, 4=C companes, anertcall&*nte(rate# solar companes such as 9rst Solar to sustan meann('ul an# consstent pro'ta%lt&. Accor#n(l&, )hle )e %eleve&stems o''ern(s an# experence are postvel& #''erentate# n man& cases 'rom that o' our compettors, )e ma& 'al to correctl& #ent'&ompettve poston, )e ma& %e una%le to #evelop or mantan a su''cent ma(ntu#e o' ne) s&stems pro7ects )orl#)#e at economc

ttractve rates o' return, an# )e ma& not other)se %e a%le to acheve meann('ul pro'ta%lt& un#er our !on( Term Strate(c =lan.

Depen#n( on the market opportunt&, )e ma& %e at a #sa#vanta(e compare# to potental s&stems*level compettors. 9or example, ce' our compettors ma& have a stron(er an#Kor more esta%lshe# localLe# %usness presence n a partcular (eo(raphc re(on. Certan o'ompettors ma& %e lar(er enttes that have (reater 'nancal resources an# (reater overall %ran# name reco(nton than )e #o an#, as a re

ma& %e %etter postone# to mpact customer %ehavor or a#apt to chan(es n the n#ustr& or the econom& as a )hole. Certan compettorslso have #rect or n#rect access to sovere(n captal an#Kor other ncentves, )hch coul# ena%le such compettors to operate at mnme(atve operatn( mar(ns 'or sustane# pero#s o' tme.

A##tonall&, lar(e*scale solar s&stems are stll n ther relatvel& earl& sta(es o' exstence, an#, #epen#n( on the (eo(raphc area, ceotental customers ma& stll %e n the process o' e#ucatn( themselves a%out the ponts o' #''erentaton amon( varous avala%le prov#eI solar solutons, nclu#n( a compan&AS=s?2 have #eclne#, at tmes s(n'cantl&, %oth at the mo#ule an# s&stem levelompettors have re#uce# AS=s to sell*throu(h nventores )orl#)#e. "' our compettors re#uce mo#ule prcn( to levels near or %elo)

manu'acturn( costs, or are a%le to operate at mnmal or ne(atve operatn( mar(ns 'or sustane# pero#s o' tme, or ' #eman# 'o

mo#ules #oes not (ro) su''centl& to 7ust'& the current pro#ucton suppl&, our %usness, 'nancal con#ton, an# results o' operatons cou#versel& a''ecte#.

If P+ technolo! is not suita&le for idespread adoption at economicall! attracti%e rates of return or if sufficient additional demand

olar modules and s!stems does not de%elop or ta#es loner to de%elop than e anticipate, our net sales and profit ma! flatten or dec

nd e ma! &e una&le to sustain profita&ilit!*

"n comparson to 'ossl 'uel*%ase# electrct& (eneraton, the solar ener(& market s at a relatvel& earl& sta(e o' #evelopment. "echnolo(& proves unsuta%le 'or )#esprea# a#opton at economcall& attractve rates o' return or ' a##tonal #eman# 'or solar mo#ules&stems 'als to #evelop su''centl& or takes lon(er to #evelop than )e antcpate, )e ma& %e una%le to (ro)

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ur %usness or (enerate su''cent net sales to sustan pro'ta%lt&. "n a##ton, #eman# 'or solar mo#ules an# s&stems n our tar(ete# mama& #evelop to a lesser extent than )e antcpate. an& 'actors ma& a''ect the va%lt& o' )#esprea# a#opton o' =I technolo(& an# #emor solar mo#ules an# s&stems, nclu#n( the 'ollo)n(3

J cost*e''ectveness o' the electrct& (enerate# %& =I solar po)er s&stems compare# to conventonal ener(& sources, such as na(as an# coal )hch 'uel sources ma& %e su%7ect to s(n'cant prce 'luctuatons 'rom tme to tme2, an# other non*solar rene)ener(& sources, such as )n#H

J per'ormance, rela%lt&, an# avala%lt& o' ener(& (enerate# %& =I solar po)er s&stems compare# to conventonal an# other solar rene)a%le ener(& sources an# pro#ucts, partcularl& conventonal ener(& (eneraton capa%le o' prov#n( 6*hour, ntermttent %aseloa# po)erH

J success o' other rene)a%le ener(& (eneraton technolo(es, such as hroelectrc, t#al, )n#, (eothermal, an# %omassH

J 'luctuatons n economc an# market con#tons that a''ect the prce o', an# #eman# 'or, conventonal an# non*solar rene)a%le ensources, such as ncreases or #ecreases n the prces o' natural (as, coal, ol, an# other 'ossl 'uelsH

J 'luctuatons n captal expen#tures %& en#*users o' solar mo#ules an# s&stems )hch ten# to #ecrease )hen the econom& slo)s)hen nterest rates ncreaseH an#

J avala%lt&, su%stance, an# ma(ntu#e o' support pro(rams nclu#n( (overnment tar(ets, su%s#es, ncentves, an# rene)

port'olo stan#ar#s to accelerate the #evelopment o' the solar n#ustr&.

The reduction, elimination, or e'piration of o%ernment su&sidies, economic incenti%es, renea&le ener! tarets, and other sup

or on-rid solar electricit! applications, or an increase in protectionist or other ad%erse pu&lic policies, could reduce demand andor p

e%els for our solar modules and limit our roth or lead to a reduction in our net sales, there&! ad%ersel! impactin our operatin resu

Althou(h our !on( Term Strate(c =lan prov#es 'or 9rst Solar to transton over tme to)ar# operatn( n ke& (eo(raphc markets thot re/ure solar*spec'c (overnment su%s#es or support pro(rams, an# )e %eleve that solar )ll experence )#esprea# a#opton n tpplcatons )here t competes economcall& )th tra#tonal 'orms o' ener(& )thout an& support pro(rams, n the near*term our net salesro't reman su%7ect to vara%lt& %ase# on the avala%lt& an# sLe o' (overnment su%s#es an# economc ncentves. 9e#eral, state, an# overnmental %o#es n man& countres have prov#e# su%s#es n the 'orm o' 9Ts, re%ates, tax ncentves, an# other ncentves to en#*ustr%utors, s&stems nte(rators, an# manu'acturers o' =I pro#ucts. an& o' these support pro(rams expre, phase out over tme, re/ene)al %& the applca%le authort&, or ma& %e amen#e#. A summar& o' recent #evelopments n the ma7or (overnment support pro(rams

an mpact our %usness appears un#er "tem 13 >usness Support =ro(rams.? To the extent these support pro(rams are re#uce# earler revousl& expecte# or are chan(e# retroactvel&, or 'ree*'el# or converson lan# applcatons are #sa#vanta(e#, such chan(es coul# reeman# an#Kor prce levels 'or our solar mo#ules an# s&stems, lea# to a re#ucton n our net sales, an# a#versel& mpact our operaesults. Another cons#eraton n the F.S. market, an# to a lesser extent n other (lo%al markets, s the e''ect o' (overnmental lan#*use planolces an# envronmental polces on utlt&*scale =I solar #evelopment. The a#opton o' restrctve lan#*use #es(natons or envronmee(ulatons )hch proscr%e or restrct the stn( o' utlt&*scale solar 'acltes coul# a#versel& a''ect the mar(nal cost o' such #evelopm

These examples sho) that esta%lshe# markets 'or =I solar #evelopment, such as the F.S. market, 'ace uncertantes arsn( 'rom poe(ulator&, an# (overnmental constrants. 8hle the expecte# potental o' the emer(n( markets )e are tar(etn( s s(n'cant, poromul(aton an# market #evelopment are especall& vulnera%le to (overnmental nerta, poltcal nsta%lt&, (eopoltcal rsk, 'ossl u%s#Laton, potentall& strn(ent localLaton re/urements, an# lmte# avala%le n'rastructure.

e could &e ad%ersel! affected &! an! %iolations of the .** $orein Corrupt Practices Act ($CPA), the .*/* Bri&er! Act, and oorein anti-&ri&er! las.

The 9C=A (enerall& proh%ts companes an# ther nterme#ares 'rom makn( mproper pa&ments to non*F.S. (overnment o''calhe purpose o' o%tann( or retann( %usness. Ether countres n )hch )e operate also have ant*%r%er& la)s, some o' )hch promproper pa&ments to (overnment an# non*(overnment persons an# enttes, an# others e.(., the 9C=A an# the F.;. r%er& Act2 exten# pplcaton to actvtes outs#e o' ther countr& o' or(n. Eur polces man#ate complance )th all applca%le ant*%r%er& la)s. 8e currperate n, an# pursuant to our !on( Term Strate(c =lan ma& 'urther expan# nto, ke& parts o' the )orl# that have experence# (overnmeorrupton to some #e(ree an#, n certan crcumstances, strct complance )th ant*%r%er& la)s ma& con'lct )th local customs an# practn a##ton, #ue to the level o' re(ulaton n our n#ustr&, our operaton n certan 7urs#ctons, nclu#n( "n#a, Chna, South Amerca, an

##le 4ast, re/ures su%stantal (overnment

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ontact )here norms can #''er 'rom F.S. stan#ar#s. Althou(h )e have mplemente# polces an# proce#ures #es(ne# to 'acltate compl)th these ant*%r%er& la)s, our o''cers, #rectors, assocates, su%contractors, a(ents, an# partners such as 7ont venture partners2 ma& ctons n volaton o' our polces an# ant*%r%er& la)s. An& such volaton, even ' proh%te# %& our polces, coul# su%7ect us an# sersons to crmnal an#Kor cvl penaltes or other sanctons, )hch coul# have a materal a#verse e''ect on our %usness, 'nancal con#ash 'lo)s, an# reputaton.

e ma! &e una&le to full! e'ecute on our 0on Term trateic Plan, hich could ha%e a material ad%erse effect on our &usininancial condition, or results of operations*

8e 'ace numerous #''cultes n executn( on our !on( Term Strate(c =lan, partcularl& n ne) 'ore(n 7urs#ctons, nclu#n(ollo)n(3

J #''cult& n accuratel& prortLn( (eo(raphc markets )hch )e can most e''ectvel& an# pro'ta%l& serve )th our =I o''ernclu#n( mscalculatons n overestmatn( or un#erestmatn( the a##ressa%le market #eman#H

J #''cult& n overcomn( the nerta nvolve# n chan(n( local electrct& ecos&stems as necessar& to accommo#ate lar(e*scalesolar #eplo&ment an# nte(ratonH

J protectonst or other a#verse pu%lc polces n countres )e operate n an#Kor are pursun(, nclu#n( local content re/uremencaptal nvestment re/urementsH

J %usness clmates, such as that n Chna, that ma& have the e''ect o' puttn( 'ore(n companes at a #sa#vanta(e relatve to #omcompanesH

J unsta%le economc, socal, an#Kor operatn( envronments n 'ore(n 7urs#ctons, nclu#n( socal unrest, currenc&, n'laton,nterest rate uncertantesH

J the poss%lt& o' appl&n( an ne''ectve commercal approach to tar(ete# markets, nclu#n( pro#uct o''ern(s that ma& not mmarket nee#sH

J #''cult& n (eneratn( su''cent sales volumes at economcall& sustana%le pro'ta%lt& levelsH

J #''cult& n tmel& #ent'&n(, attractn(, trann(, an# retann( /ual'e# sales, techncal, an# other personnel n (eo(raptar(ete# 'or expansonH

J the poss%lt& o' havn( nsu''cent captal resources necessar& to acheve an e''ectve localLe# %usness presence n tar(7urs#ctonsH

J #''cult& n mantann( proper controls an# proce#ures as )e expan# our %usness operatons %oth n terms o' complext&(eo(raphcal reach, nclu#n( transtonn( certan %usness 'unctons to lo)*cost (eo(raphes, )th an& materal control 'apotentall& lea#n( to reputatonal #ama(e an# loss o' con'#ence n our 'nancal reportn( accurac&H

J #''cult& n competn( a(anst companes )ho ma& have (reater 'nancal resources an#Kor a more e''ectve or esta%lshe# loca%usness presence an#Kor an a%lt& to operate )th mnmal or ne(atve operatn( mar(ns 'or sustane# pero#s o' tmeH

J #''cult& n competn( a(anst companes )ho ma& (an n pro'ta%lt& an# 'nancal stren(th over tme %& success'ull& partcpa

n the (lo%al roo'top =I solar market, )hch s a se(ment n )hch )e #o not have s(n'cant hstorcal experenceH

J #''cult& n esta%lshn( an# mplementn( a commercal an# operatonal approach a#e/uate to a##ress the spec'c nee#s omarkets )e are pursun(H

J #''cult& n #ent'&n( the r(ht local partners an# #evelopn( an& necessar& partnershps )th local %usnesses on commercaccepta%le termsH an#

J #''cult& n %alancn( market #eman# an# manu'acturn( pro#ucton n an e''cent an# tmel& manner, potentall& causn( us tmanu'acturn( capact& constrane# n some 'uture pero#s or over*supple# n others.

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"n a##ton, please see the +sk 9actors enttle# > Eur su%stantal nternatonal operatons su%7ect us to a num%er o' rsks, nclun'avora%le poltcal, re(ulator&, la%or, an# tax con#tons n 'ore(n countres ,? an# > The re#ucton, elmnaton, or expraton o' (overnu%s#es, economc ncentves, rene)a%le ener(& tar(ets, an# other support 'or on*(r# solar electrct& applcatons, or an ncreasrotectonst or other a#verse pu%lc polces, coul# re#uce #eman# an#Kor prce levels 'or our solar mo#ules an# lmt our (ro)th or lea#e#ucton n our net sales, there%& a#versel& mpactn( our operatn( results .?

e ma! &e una&le to profita&l! pro%ide ne solar offerins or achie%e sufficient mar#et penetration ith such offerins*

8e ma& expan# our port'olo o' o''ern(s to nclu#e solutons that %ul# upon our core competences %ut 'or )hch )e have not(n'cant hstorcal experence, nclu#n( varatons n our tra#tonal pro#uct o''ern(s or other o''ern(s relate# to commercal an# n#uustomers an# communt& solar. 8e cannot %e certan that )e )ll %e a%le to ascertan an# allocate the approprate 'nancal an# huesources necessar& to (ro) these %usness areas. 8e coul# nvest captal nto (ro)n( these %usnesses %ut 'al to a##ress market or custoee#s or other)se not experence a sats'actor& level o' 'nancal return. Also, n expan#n( nto these areas, )e ma& %e competn( a(aompanes that prevousl& have not %een s(n'cant compettors, such as companes that currentl& have su%stantall& more experence thao n the roo'top or other tar(ete# o''ern(s. "' )e are una%le to acheve (ro)th n these areas, our overall (ro)th an# 'nancal per'orm

ma& %e lmte# relatve to our compettors an# our operatn( results coul# %e a#versel& mpacte#.

An increase in interest rates or tihtenin of the suppl! of capital in the lo&al financial mar#ets (includin a reduction in tota

1uit! a%aila&ilit!) could ma#e it difficult for customers to finance the cost of a P+ solar poer s!stem and could reduce the demandur modules or s!stems andor lead to a reduction in the a%erae sellin price for P+ modules*

an& o' our customers an# our s&stems %usness #epen# on #e%t an#Kor e/ut& 'nancn( to 'un# the ntal captal expen#ture re/urevelop, %ul#, an#Kor purchase a =I solar po)er s&stem. As a result, an ncrease n nterest rates, or a re#ucton n the suppl& o' pro7ect #nancn( or tax e/ut& nvestments, coul# re#uce the num%er o' solar pro7ects that receve 'nancn( or other)se make t #''cult 'orustomers or our s&stems %usness to secure the 'nancn( necessar& to #evelop, %ul#, purchase, or nstall a =I solar po)er s&stemavora%le terms, or at all, an# thus lo)er #eman# 'or our solar mo#ules )hch coul# lmt our (ro)th or re#uce our net sales. "n a##toneleve that a s(n'cant percenta(e o' our en#*users nstall s&stems as an nvestment, 'un#n( the ntal captal expen#ture throuom%naton o' e/ut& an# #e%t. An ncrease n nterest rates coul# lo)er an nvestor


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Eur mo#ules, s&stems, an# servces such as EM2 are su%7ect to overs(ht an# re(ulaton n accor#ance )th natonal an# lr#nances relatn( to %ul#n( co#es, sa'et&, envronmental protecton, utlt& nterconnecton an# metern(, an# other matters, an# trackne/urements o' n#v#ual 7urs#ctons s complex. An& ne) (overnment re(ulatons or utlt& polces pertann( to our solar mo#u&stems, or servces ma& result n s(n'cant a##tonal expenses to us or our customers an#, as a result, coul# cause a s(n'cant re#ucteman# 'or our solar mo#ules, s&stems, or servces. "n a##ton, an& re(ulator& complance 'alure coul# result n s(n'cant mana(emstracton, unplanne# costs, an#Kor reputatonal #ama(e.

En%ironmental o&liations and lia&ilities could ha%e a su&stantial neati%e impact on our financial condition, cash flos,

rofita&ilit!*

Eur operatons nvolve the use, han#ln(, (eneraton, processn(, stora(e, transportaton, an# #sposal o' haLar#ous materals an#u%7ect to extensve envronmental la)s an# re(ulatons at the natonal, state, local, an# nternatonal levels. These envronmental la)se(ulatons nclu#e those (overnn( the #schar(e o' pollutants nto the ar an# )ater, the use, mana(ement, an# #sposal o' haLar#ous maten# )astes, the cleanup o' contamnate# stes, an# occupatonal health an# sa'et&. As )e execute our !on( Term Strate(c =lan an# expan#usness nto 'ore(n 7urs#ctons )orl#)#e, our envronmental complance %ur#en ma& contnue to ncrease %oth n terms o' ma(ntu#eomplext&. 8e have ncurre# an# ma& contnue to ncur s(n'cant costs n compl&n( )th these la)s an# re(ulatons. "n a##ton, vola', or la%ltes un#er, envronmental la)s or permts ma& result n restrctons %en( mpose# on our operatn( actvtes or n our %u%7ecte# to su%stantal 'nes, penaltes, crmnal procee#n(s, thr#*part& propert& #ama(e or personal n7ur& clams, cleanup costs, or oosts. Such solutons coul# also result n su%stantal #ela& or termnaton o' pro7ects un#er constructon )thn our s&stems %usness, )oul# a#versel& mpact our results o' operatons. 8hle )e %eleve )e are currentl& n su%stantal complance )th applca%le envronmee/urements, 'uture #evelopments such as more a((ressve en'orcement polces, the mplementaton o' ne), more strn(ent la)se(ulatons, or the #scover& o' presentl& unkno)n envronmental con#tons ma& re/ure expen#tures that coul# have a materal a#v

''ect on our %usness, 'nancal con#ton, an# results o' operatons.

Eur C#Te solar mo#ules contan ca#mum tellur#e an# other semcon#uctor materals. 4lemental ca#mum an# certan o' ts compore re(ulate# as haLar#ous materals #ue to the a#verse health e''ects that ma& arse 'rom human exposure. ase# on exstn( research, the ' exposure to ca#mum tellur#e are not %eleve# to %e as serous as those relatn( to exposure to elemental ca#mum. "n our manu'actuperatons, )e mantan en(neern( controls to mnmLe our assocates< exposure to ca#mum or ca#mum compoun#s an# re/uressocates )ho han#le ca#mum compoun#s to 'ollo) certan sa'et& proce#ures, nclu#n( the use o' personal protectve e/upment sucesprators, chemcal (o((les, an# protectve clothn(. +elevant stu#es an# thr#*part& peer reve) o' our technolo(& have conclu#e# thask o' exposure to ca#mum or ca#mum compoun#s 'rom our en#*pro#ucts s ne(l(%le. "n a##ton, the rsk o' exposure s 'urther mnm& the encapsulate# nature o' these materals n our pro#ucts, the ph&scal propertes o' ca#mum compoun#s use# n our pro#ucts, an#ec&cln( or respons%le #sposal o' our mo#ules. 8hle )e %eleve that these 'actors an# proce#ures are su''cent to protect our assocn#*users, an# the (eneral pu%lc 'rom a#verse health e''ects that ma& arse 'rom ca#mum exposure, )e cannot ensure that humanvronmental exposure to ca#mum or ca#mum compoun#s use# n our pro#ucts )ll not occur. An& such exposure coul# result n 'u

hr#*part& clams a(anst us, #ama(e to our reputaton, an# he(htene# re(ulator& scrutn&, )hch coul# lmt or mpar our a%lt& to sellstr%ute our pro#ucts. The occurrence o' 'uture events such as these coul# have a materal a#verse e''ect on our %usness, 'nancal con#n# results o' operatons.

The use o' ca#mum or ca#mum compoun#s n varous pro#ucts s also comn( un#er ncreasn(l& strn(ent (overnmental re(ula

9uture re(ulaton n ths area coul# mpact the manu'acturn(, sale, collecton, an# rec&cln( o' solar mo#ules an# coul# re/ure us to mn'oreseen envronmental expen#tures or lmt our a%lt& to sell an# #str%ute our pro#ucts. 9or example, 4uropean Fnon Drec011KB-K4F on the +estrcton o' the Fse o' aLar#ous Su%stances n electrcal an# electronc e/upment recast +oS Drectve2 restrctse o' certan haLar#ous su%stances, nclu#n( ca#mum an# ts compoun#s, n spec'e# pro#ucts. Ether 7urs#ctons, such as Chna, h#opte# smlar le(slaton or are cons#ern( #on( so. Currentl&, =I mo#ules are explctl& exclu#e# 'rom the scope o' recast +oS Ar2, as a#opte# %& the 4uropean =arlament an# the Councl n @une 6011. The next (eneral reve) o' the +oS Drectve s sche#ule# 'or 6nvolvn( a %roa#er #scusson o' the exstn( scope. A scope reve) 'ocusn( on a##tonal exclusons s expecte# to %e propose# %&

4uropean Commsson n 601B un#er the 4uropean Fnon


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As an oner and operator of P+ solar poer s!stems that deli%er electricit! to the rid, certain of our affiliated entities ma

eulated as pu&lic utilities under .** federal and state la, hich could ad%ersel! affect the cost of doin &usiness and limit our rot

As an o)ner an# operator o' =I solar po)er s&stems that #elver electrct& to the (r#, certan o' our a''late# enttes ma& %e cons#u%lc utltes 'or purposes o' the 9e#eral =o)er Act, as amen#e# the >9=A?2 an# pu%lc utlt& companes 'or purposes o' the =u%lc Ft

ol#n( Compan& Act o' 600- >=FCA 600-?2, an# are su%7ect to re(ulaton %& the 94+C, as )ell as varous local an# state re(ulao#es.

Some o' our a''late# enttes ma& %e exempt )holesale (enerators or /ual'&n( 'acltes un#er the =u%lc Ftlt& +e(ulator& =olce' 15, as amen#e# >=F+=A?2 an# as such are exempt 'rom re(ulaton un#er =FCA 600-. "n a##ton, our a''late# enttes maxempt 'rom most provsons o' the 9=A, as )ell as state la)s re(ar#n( the 'nancal or or(anLatonal re(ulaton o' pu%lc utltes. 8e arrectl& su%7ect to 94+C re(ulaton un#er the 9=A. o)ever, )e are cons#ere# to %e a >hol#n( compan&? 'or purposes o' Secton 60 o

9=A, )hch re(ulates certan transactons nvolvn( pu%lc utltes, an# such re(ulaton coul# a#versel& a''ect our a%lt& to (ro) the %ushrou(h ac/ustons. !ke)se, nvestors seekn( to ac/ure our pu%lc utlt& su%s#ares or ac/ure o)nershp nterests n our securu''cent to (ve them control over us an# our pu%lc utlt& su%s#ares ma& re/ure pror 94+C approval to #o so. Such approval coul# rn transacton #ela&s or uncertantes.

=u%lc utltes un#er the 9=A are re/ure# to o%tan 94+C acceptance o' ther rate sche#ules 'or )holesale sales o' electrct& anompl& )th varous re(ulatons. The 94+C ma& (rant our a''late# enttes the authort& to sell electrct& at market*%ase# rates an# ma&rant them certan re(ulator& )avers, such as )avers 'rom complance )th 94+C An ncrease# (lo%al suppl& o' =I mo#ules has cause# an# ontnue to cause structural m%alances n )hch (lo%al =I mo#ule suppl& excee#s #eman#, )hch

6B


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oul# have a materal a#verse e''ect on our %usness, 'nancal con#ton, an# results o' operatons ,? 'or a##tonal n'ormaton. "n a##toneleve an& s(n'cant #ecrease n the cost o' slcon 'ee#stock )oul# re#uce the manu'acturn( cost o' cr&stallne slcon solar mo#ules ea# to 'urther prcn( pressure 'or solar mo#ules an# potentall& the oversuppl& o' solar mo#ules.

Durn( an& such pero#, our compettors coul# #ec#e to re#uce ther sales prces n response to competton, even %elo)

manu'acturn( costs, n or#er to (enerate sales. Ether compettors ma& have #rect or n#rect access to sovere(n captal, )hch coul# enuch compettors to operate at mnmal or ne(atve operatn( mar(ns 'or sustane# pero#s o' tme. As a result, )e ma& %e una%le to sellolar mo#ules or s&stems at attractve prces, or 'or a pro't, #urn( an& pero# o' excess suppl& o' solar mo#ules, )hch )oul# re#uce ouales an# a#versel& a''ect our results o' operatons. Also, )e ma& #ec#e to lo)er our avera(e selln( prce to certan customers n cer

markets n response to competton.

Pro&lems ith product 1ualit! or performance ma! cause us to incur sinificant andor une'pected arrant! and related e'pen

amae our mar#et reputation, and pre%ent us from maintainin or increasin our mar#et share*

8e per'orm a varet& o' mo#ule /ualt& an# l'e tests un#er #''erent con#tons upon )hch )e %ase our assessments an# )arrantmo#ule per'ormance over the #uraton o' the )arrant&. o)ever, ' our thn*'lm or h(h*e''cenc& cr&stallne solar mo#ules per'orm %xpectatons, )e coul# experence s(n'cant )arrant& an# relate# expenses, #ama(e to our market reputaton, an# eroson o' market sh

8th respect to our mo#ules, )e prov#e a lmte# )arrant& covern( #e'ects n materals an# )orkmanshp un#er normal use an# seron#tons 'or 10 &ears 'ollo)n( the trans'er o' ttle to our mo#ules. 8e also t&pcall& )arrant that mo#ules nstalle# n accor#ance (ree#*upon spec'catons )ll pro#uce at least 5O o' ther la%ele# po)er output ratn( #urn( the 'rst &ear, )th the )arrant& covee#ucn( %& 0.O ever& &ear therea'ter throu(hout the 6-*&ear per'ormance )arrant& pero#. As an alternatve 'orm o' our mo#ule putput )arrant&, )e also o''er an a((re(ate# or s&stem level mo#ule per'ormance )arrant&. Ths s&stem level mo#ule per'ormance )arran

es(ne# 'or utlt&*scale s&stems an# also prov#es 6-*&ear s&stem level ener(& #e(ra#aton protecton. The s&stem level mo#ule per'orm)arrant& t&pcall& s calculate# as a percenta(e o' a s&stem


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"n a##ton to our solar mo#ule )arrantes, )e also prov#e )arrantes 'or our oS e/upment, nclu#n(, %ut not lmte# to, mountructures, solar trackers, electroncs, an# ca%ln(. These )arrantes cover #e'ects n materals an# )orkmanshp 'or one to 've &ears 'or /upment an# up to 10 &ears 'or mountn( structures. As )th our mo#ules, these )arrantes are %ase# on a varet& o' /ualt& an# l'e testsna%le pre#ctons o' #ura%lt& an# 'uture per'ormance. 9or =I solar po)er s&stems )e construct, )e also t&pcall& prov#e a lmte# )arr(anst #e'ects n en(neern( #es(n, nstallaton, an# )orkmanshp 'or a pero# o' one to t)o &ears 'ollo)n( the su%stantal completon&stem. An& 'alures n oS e/upment or s&stem constructon %e&on# our expectatons ma& also a#versel& mpact our %usness reputanancal poston, operatn( results, an# cash 'lo)s.

As part o' our s&stems %usness, )e ma& prov#e an ener(& per'ormance test #urn( the 'rst &ear o' a s&stem


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2ur failure to protect our intellectual propert! rihts ma! undermine our competiti%e position, and litiation to protect our intellec

ropert! rihts or defend aainst third-part! alleations of infrinement ma! &e costl!*

=rotecton o' our propretar& processes, metho#s, an# other technolo(& s crtcal to our %usness. 9alure to protect an# montor the uur exstn( ntellectual propert& r(hts coul# result n the loss o' valua%le technolo(es. 8e rel& prmarl& on patents, tra#emarks, tra#e secop&r(hts, an# contractual restrctons to protect our ntellectual propert&. 8e re(ularl& 'le patent applcatons to protect nventons arrom our research an# #evelopment, an# are currentl& pursun( such patent applcatons n varous countres n accor#ance )th our strate(ntellectual propert& n that 7urs#cton. Eur exstn( patents an# 'uture patents coul# %e challen(e#, nval#ate#, crcumvente#, or ren#nen'orcea%le. Eur pen#n( patent applcatons ma& not result n ssue# patents, or ' patents are ssue# to us, such patents ma& not %e su''

o prov#e meann('ul protecton a(anst compettors or a(anst compettve technolo(es.

8e also rel& upon unpatente# propretar& manu'acturn( expertse, contnun( technolo(cal nnovaton, an# other tra#e secrets to #evn# mantan our compettve poston. Althou(h )e (enerall& enter nto con'#entalt& a(reements )th our assocates an# thr# parterotect our ntellectual propert&, such con'#entalt& a(reements are lmte# n #uraton an# coul# %e %reache# an# ma& not prov#e meannrotecton 'or our tra#e secrets or propretar& manu'acturn( expertse. A#e/uate reme#es ma& not %e avala%le n the event o' unauthorse or #sclosure o' our tra#e secrets an# manu'acturn( expertse. "n a##ton, others ma& o%tan kno)le#(e o' our tra#e secrets thron#epen#ent #evelopment or le(al means. The 'alure o' our patents or con'#entalt& a(reements to protect our processes, e/upmechnolo(&, tra#e secrets, an# propretar& manu'acturn( expertse, metho#s, an# compoun#s coul# have a materal a#verse e''ect onusness. "n a##ton, e''ectve patent, tra#emark, cop&r(ht, an# tra#e secret protecton ma& %e unavala%le or lmte# n some 'orountres, especall& an& #evelopn( countres nto )hch )e ma& expan# our operatons. "n some countres )e have not apple# 'or patra#emark, or cop&r(ht protecton.

Thr# partes ma& n'rn(e or msapproprate our propretar& technolo(es or other ntellectual propert& r(hts, )hch coul# have a mat#verse e''ect on our %usness, 'nancal con#ton, an# operatn( results. =olcn( unauthorLe# use o' propretar& technolo(& can %e #''n# expensve. Also, lt(aton ma& %e necessar& to en'orce our ntellectual propert& r(hts, protect our tra#e secrets, or #etermne the valn# scope o' the propretar& r(hts o' others. 8e cannot ensure that the outcome o' such potental lt(aton )ll %e n our 'avor. Such lt(a

ma& %e costl& an# ma& #vert mana(ement attenton an# other resources a)a& 'rom our %usness

first solar annual 2015

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