SUNPOWER 2013 ANNUAL REPORT ANNUAL SUNPOWER 2013 CORPORATE HEADQUARTERS SunPower Corporation ANNUAL REPORT 77 Rio Robles San Jose, Calif. 95134 USA 2013 408.240.5500 www.sunpower.com SunPower is a leading global energy EXECUTIVE OFFICERS BOARD OF DIRECTORS services provider dedicated to changing Thomas H. Werner Thomas H. Werner the way the world is powered. With a history President, CEO and Chairman of the Board Chairman of the Board Arnaud Chaperon of pioneering breakthrough technologies, Lisa Bodensteiner Director Executive Vice President the company continues to design and Bernard Clement and General Counsel deliver solar cells and solar panels that Director Charles D. Boynton Denis Giorno Executive Vice President are unmatched in long-term reliability, Director and Chief Financial Officer efficiency and guaranteed performance. Catherine Lesjak Eric Branderiz Director Senior Vice President, SunPower designs, manufactures, installs and provides CAO, and Head of Global Thomas R. McDaniel Residential & Light Commercial Director ongoing maintenance and monitoring services to residential, Operations & Finance commercial and utility customers worldwide. Its proprietary Jean-Marc Otero del Val Marty T. Neese Director ® all-back contact Maxeon solar cells perform better Chief Operating Officer than traditional solar technology and are tested more Humbert de Wendel Douglas J. Richards Director extensively, driving continuous technological improvements Executive Vice President, Administration Pat Wood III for maximum return on investment. Consistently breaking Director world efficiency records, the company is currently Howard Wenger President, Regions manufacturing its third-generation solar cell with efficiencies of up to 24 percent. Founded nearly 30 years ago and headquartered in San Jose, Calif., SunPower operates in North America, Africa, Asia, Australia and Europe. Photos depicted are representative of power plant, SunPower is backed by Total, the fifth largest publicly-listed commercial and residential energy company in the world. installations worldwide. Dear Shareholders: SunPower had a breakout year in 2013. We recorded our highest gross margins since 2010, generated significant cash to fund our growth and delivered industry-leading solar products and solutions to residential, commercial and large-scale solar power plant customers around the world. We continued to expand in key markets and made significant progress penetrating new areas of the world, thanks in part to SunPower’s ability to leverage our relationship with our majority owner, Total. Our technology has always differentiated us, providing the foundation upon which we build incremental customer value through our distributed generation and power plant go-to-market platforms. Last year, we began a further transition toward delivering comprehensive energy solutions and services, a business model that we call ESP – Energy Services Provider. You will be hearing a lot more about ESP in the near future. Industry Leading Technology SunPower continued to improve our unique, differentiated solar cell and panel technology during 2013 as we started shipping our SunPower® X-Series solar panels, a new residential product line with demonstrated average panel efficiencies exceeding 21.5 percent. This level of performance from a mass-produced product was almost unimaginable only a few years ago. With strong and growing worldwide demand for our products, we announced plans for a new solar cell manufacturing facility (Fab 4), which is expected to expand our capacity by approximately 25 percent or around 350 megawatts (MW) dc and will be located in the Philippines. We are planning for initial Fab 4 production volumes in the first half of 2015. Fab 4 will allow us to continue down our cost reduction road map, with planned production cost per watt 35 percent lower than at Fab 2. In parallel to the construction of our new Fab, we will continue to advance the underlying solar cell technology. By 2015, we expect to reach production panel efficiencies of 23 percent using a simplified, lower cost manufacturing process. This past year, we executed well against our cell and panel cost reduction roadmap, achieving more than 20 percent year-over-year panel cost reduction for the second straight year. Our ability to directly attack costs across the entire value chain, from solar cell manufacturing through systems installation and maintenance, is one of our important long-term competitive advantages. Independent Validation of SunPower Efficiency, Reliability We’re always eager to promote our products’ cutting-edge efficiency and reliability, and are pleased to report further confirmation from additional leading independent test laboratories that underscores our technological accomplishments. Atlas Material Testing Technology, a global leader in weathering technology and services, and the Fraunhofer Institute, one of the industry’s most-respected PV laboratories, were just two of the third-party validators that published accolades for our industry-leading technology. Our high-efficiency SunPower® E20/327 Solar Panel underwent the rigorous Atlas 25+® Comprehensive Photovoltaic (PV) Durability Testing program and, upon completion, showed less than two percent power degradation. Considering that this test is designed to simulate the effects of 25 years of field service, this is an outstanding result. Fraunhofer designed and implemented a rigorous set of reliability tests to compare performance among top panel manufactures. They tested panels from five of the top eight manufacturers and subjected the panels to four categories of accelerated testing to simulate real-world electrical, mechanical and fatigue stress. SunPower panels once again topped the field, demonstrating a power loss four times lower than the average power loss of competing products tested. Lower panel output degradation rates results in more energy produced over the system lifetime and lower levelized cost of energy for our customers. Global Solar Power Plants – Pushing Back the Frontiers SunPower had a monumental year with our large-scale solar power plants, completing the California Valley Solar Ranch (CVSR), progressing quickly at Solar Star, the world’s largest PV power plant development, also in California, announcing the world’s first merchant solar power plant in Chile and expanding in markets such as South Africa and Japan. As the year progressed, we saw a strengthening market environment for the Europe, Middle East and Africa region. CVSR, located in San Luis Obispo County, Calif., is one of the world’s largest solar power plants at 250 MWac and is now fully operational. The plant is generating enough power for the equivalent of approximately 100,000 homes, roughly the number of homes in Madison, Wis. or Reno, Nev. We first announced the CVSR project in 2008, when we secured a power purchase agreement with Pacific Gas and Electric. We worked closely with state and local officials and the community through project development and permitting, ultimately partnering with NRG Solar in 2011 to finance the project before starting construction. About 700 jobs were created during peak construction, as we worked closely with the community to bring $315 million in economic development to the area, protect and preserve native plant and wildlife species, and contribute in other ways such as through donations to local charities and public road improvement projects. SunPower carried this strong momentum into 2013 when we announced the sale of the 579 MWac Solar Star projects to MidAmerican Solar, now delivering 57 MWac of energy to the California Independent System Operator grid. When complete, these projects, co-located in Kern and Los Angeles counties, will have more than 1.7 million panels installed, covering 3,230 acres. It is estimated that the projects will provide the electricity equivalent to powering nearly 255,000 average California households, displacing approximately 570,000 metric tons of carbon dioxide per year. Put another way, the expected carbon dioxide displacement would be the equivalent of taking more than 100,000 cars off the road, according to the U.S. Environmental Protection Agency. Outside the United States, co-development efforts with Total are rapidly expanding our global solar power plant footprint. Together we generated a backlog of over 300 MW in the last year alone. We made history last year when we announced a 70-MWac solar power project in Chile. This is the world’s largest merchant photovoltaic power plant, meaning that the power it will produce will be sold on the spot market without any long-term offtake agreement. We believe that this project, which is now under construction, represents an important milestone that proves solar power can compete in the wholesale power market with conventional technologies. Another project developed in partnership with Total is the 75 MWac Prieska solar power plant in South Africa, which was awarded following a highly competitive tender offer. SunPower will provide the, engineering, procurement, construction and operations and maintenance services. This project builds on two previous South African power plant projects, the 22 MWac Herbert Solar Park and the 11 MWac Greefspan Solar Park, which are already feeding electricity into the grid. SunPower has been in the power plant business since 2004, installing the world’s first 10 MWdc project in Germany. Since then, we have been building large power plants throughout the world. This experience sets us apart from our competition