Up on the previous year

Down on the previous year

Flat on the previous year

Does not exist

Short term:

One to three years

Medium term:

Three to five years

Long term:

More than five years

1. Worsening of the financial crisis and/or the recession: Falling propensity to invest among private end customers; tighter financing terms and conditions for investors in large-scale solar projects
2. Falling electricity prices for private households: Delays in solar power reaching grid parity; slowdown in tapping new markets

1. Low: According to economic experts the recession has already bottomed out. We therefore assess the risk of a falling propensity to invest among private end customers as low. They will continue to have access to loans for investments in solar power systems in the framework of programs to promote economic activity.
   Medium: We assess the risk of tighter financing terms and conditions for large-scale projects as medium. According to experts, the most difficult phase of the financial crisis is behind us. Nevertheless, there may be short-term credit bottlenecks for large-scale investment projects.
2. Low: We assess the risk as low. Falling costs of primary sources of energy are hardly ever passed on to customers. Due to a further rise in energy demand, prices are expected to tend to rise in future.

1. Medium, short term: A decline in demand from end customers might have a medium negative effect on our group revenues and earnings.
   Low, short term: Large-scale projects only represent a small portion (9 per cent) of our revenues. If these investments were to decline, the negative effect on SolarWorld would be minor.
2. Medium, medium term: In the medium term, household power prices will impact on our business since, due to the incentive system for self-consumption of solar power, the economy of solar plants will be affected by price expectations for household electricity in the medium term.

Changes in laws to promote solar power: Slower market growth due to a reduction in, or even abolition of, financial incentives in individual countries

High: In our sales markets, Germany and Italy, changes in the regulatory framework have been announced and will probably take effect as of mid-2010 or 2011.  EEG amended  Growth in European markets  

High, short term: Declines in demand due to changes in the regulatory framework in individual regions may temporarily impact our revenues and earnings.. As long as grid parity is not achieved in individual markets, SolarWorld will be exposed to this risk.

Intensification of competitive pressure: A tendency towards consolidation at all stages of the value chain in the industry, price competition, oversupply

High: Due to development of the solar market towards an end customers’ market, competitive pressure is intensifying significantly. The fight for market shares and an ongoing expansion of supply will result in price reductions in the wafer and module segments. Further rise in supply

Medium, medium term: Potential loss of market shares and stronger pressure on margins due to tighter price competition may have adverse effects on revenues and earnings. Due to our solid market position, we assess the probability of a significant impact of this risk on our group as medium.

Technological breakthrough of alternative solar power technologies: Risk of substitution for crystalline technologies

Medium: Due to the fall in silicon prices, previous cost advantages of alternative solar power technologies versus crystalline technologies have declined. This applies mainly to the rooftop systems market. The potential for these companies to succeed is additionally impaired by the more difficult financing environment. Few of these companies have so far been able to produce on an industrial scale. These technologies might also be adversely affected by future regulation measures, disposal risks and the finite nature of the raw materials used such as cadmium, tellurium and indiu. Supply exceeds demand

Medium, medium term: A potential loss of market shares and increasing price competition with stronger pressure on margins might adversely affect our revenues and earnings.

Insolvency of individual customers: Loss of receivables outstanding

High: Due to rising consolidation tendencies in the market, the risk of wafer and trading costumers’ insolvency is increasing. We assess this risk as high for us.

Medium, short term: Contractual defaults and non-performance of payment obligations might have a negative effect on earnings and our order book.

1. Stronger price pressure and increased supply: Falling demand for our products
2. Purchase of less than agreed volume: Non-performance of long-term wafer contracts

1. Medium: Due to growing internationalization, tougher competition and changes in the legal framework in the core market Germany, price and cost pressure might emerge in the market. Shifts in demand might increasingly be observed among customers basing their purchasing decision exclusively on price.  The future solar power market
   
2. High: Due to the dropped market prices and the increased supply of wafers, it is to be assumed that not all wafer customers will meet their contractual purchasing obligations in 2010 or demand re-negotiations.

• Medium, short term: None of our customers in Wafer or Trading accounts for more than eleven per cent of our revenues. Sales and contractual defaults might have a negative effect on our earnings and order book. They can also lead to inventories being built up. If long-term contracts were to be cancelled, downpayments already made by customers would be retained.

Misjudgments concerning future developments: Wrong investment and technology decisions, lack of market acceptance for newly developed products.

Low: Thanks to our long-standing market experience and the conclusion of important partnerships and strategic alliances, we assess the probability of this risk as low.

High, long term: Losses of market shares, image, and capital due to wrong strategic decisions might adversely affect the economic situation of our group. Lack of acceptance of new products might have a negative effect on revenues and earnings.

Shortage of highly qualified technical staff and executives: Difficulties in filling key positions.

Low: Due to our reputation as an attractive employer and increasing personnel marketing, we assess this risk as low for us. Moreover, interest in solar companies has risen in the labor market due to the growth of the solar industry.

Medium, medium term: Potential reduction in our technological edge and corporate growth due to shortage of skilled technical staff may adversely affect our revenues and earnings.

Disturbances in the operation of IT systems and networks: Data security risks and interruption of work at our sites worldwide

Medium: Our IT systems comply with state-of-the-art safety standards and undergo regular maintenance.

Medium, long term: Productivity losses due to interruption of production and workflows might have a negative impact on our productivity.

1. Credit crunch: More difficult access to credit markets; rise in financing costs due to widening of interest spreads and shorter maturities in lending
2. Failure to reach financial indicators: Termination of borrowed funds.

1. Low: Due to our long-term credit agreements and our strong liquidity, we assess the short-term risk as low for us. Should the situation in the credit business not improve over the medium to long term, we would have to accept a widening of spreads in future financing measures.
2. Low: In the fiscal year the financial indicators were regularly exceeded substantially.

1. Medium, medium term: Tougher lending commitments would have a medium negative impact on the funding options for our expansion plans.
2. Medium, medium term: Premature refinancing need with potentially poorer conditions.

Currency, interest rate and price risks

Medium to high: Due to the procurement of raw materials, in particular in US dollars, and the sale of US products in other currency regions, we are exposed to currency risks. As a global player we are also exposed to interest rate and price risks.

Legal risks: A wide range of tax, competition, patent, anti-trust, copyright and environmental provisions in the framework of our international business operations

Low: SolarWorld is currently not aware of any risks from litigation, patent infringement or other legal risks that might significantly impact the business situation of our company.

Medium, long term: Litigation might have an impact on earnings from business operations since it would tie up financial resources and might jeopardize our reputation.

1. Warranty risks: Granting a warranty of 25 years for solar modules which we sell. Since 1 January 2010, this has been a linear performance warranty.
2. Other customary liability risks

1. Low: Due to the careful review of our process and product quality, we assess the risk of claims being made against our product warranty as low.
2. Low: Thanks to pro-active regular controls concerning protection against hazards and health and safety protection at our sites, we assess the probability of these risks as low.

1. Medium, long term: Potential negative impacts on our net assets, financial position and results of operations in the event of warranty
2. Medium, long term: Production loss, loss of assets, potential claims for damages