SONORA ENERGY TO BUILD 39MW SOLAR PROJECT IN MEXICO

2013: The New Horizon

Jonathan Holguinisburg, Charles and Frank Duryea, Thomas Jeffry, Jacobus Spijker, George B. Selden, Gaston Planté? Ring any bells? How about Hermann Rieseler or Robert Bosch? In their day, hundreds of men such as these and other more familiar (read: successful) men like Enzo Ferrari, Karl Benz and Henry Ford played pivotal roles in pioneering what is today the automobile industry. History shows that for every successful manufacturer or patent applicant – hundreds and hundreds of other individuals and companies failed to establish a profitable market share and largely either ended up broke or became absorbed by a larger, more successful entity. Such was the way of the early automobile industry – such was the way in the early years of the internet — and such is and will continue to be the way for the solar industry and the thousands of satellite manufacturers, engineering, and other firms in its orbit, in 2013.

The death toll of solar and solar related companies from this past year reads like a Civil War era recount of a recent battle:

Energy Conversion Devices (US)
SunConcept (Germany)
Ralos New Energies (Germany)
Scheuten Solar (Netherlands)
Solarhybrid (Germany)
Qcells (Germany)
A123 (US)
Solar Trust of America (US)
SolFocus (US)
Solyndra (US)
Beacon Power (US)

Students of history and those with their ear to the ground right now know that the carnage will continue throughout 2013 and, most likely, beyond.

Who will survive? Among those will be the Sonora Energy Group and others who share and implement a different paradigm that replaces greed with common sense; revenue with profits; and, short sightedness with long term sustainability. Our company and others like us – will not only survive in 2013 but will endure for decades to come.

Why? Why such confidence, or as our detractors say, “arrogance” from the Sonora Energy Group? What do we know that SolFocus, Solyndra, A123 and dozens of other companies – many of them publicly traded – didn’t?

First, start with the premise that the world’s economy since Q1 2008 has changed. And, as a microcosm of that change is the revenue flow from taxpayers to their governments. As personal and corporate incomes and profits slowed and in some cases collapsed, so to was the inevitable result among governments in their support of renewable projects through Feed-in-Tariffs and other tax support mechanisms. Because their own revenue had been drastically reduced, governments simply couldn’t continue to pay to support such projects. As such, companies that built and continued to plan and rely and order equipment based on such an ill founded economic premise got exactly what they deserved. Those companies knew what was happening but continued to follow a fractured business model. So what did the Sonora Energy Group know differenly – to not build a business model based on artificial government support.

Second, in addition to not paying attention to the chaos enveloping their off-takers and, for all intents and purposes, their government “partners”, for many of these development and manufacturing companies, the very nature of their own business model was distorted and dysfunctional. Did it make sense to artificially increase construction and EPC costs to front-load profits knowing that the project would barely survive over the life of the PPA? Of course not. Did it make sense to try to compete in the manufacturing of solar panels against Chinese labor market forces? Of course not. Did it make sense to ignore the fact that other energy transfer and delivery companies were going to sit by to watch renewable projects take market share from utilities without a fight? Of course not. So what did the Sonora Energy Group know differently – among other things, to drill down for the lowest possible product price for panels, etc., to use the economic contraction of market forces to their advantage; and to plan for long term economic growth through the use of high yield reserve funds.

And while there are many, many more reasons, third, is the notion that transferring energy from the sun into utility scale electricity is just not rocket science. In fact, there is almost no advanced technology involved in the process. The evidence for that statement is supported by the failure of A123’s energy storage business, failure of SolFocus’ concentrated solar “technology”, and Qcell’s production lines of panels – and on and on. More pointedly, all it takes is to look at these “technologies” through another perspective: if the Chinese can build it – a panel, an inverter, a batter, a tracker — in an environment that offers no meaningful patent protection, then, by definition, the product is not a technology driven product. So, for companies in the United States, Germany, Spain, Italy, Canada (and others) to spend one dollar, euro, or peso manufacturing or planning to manufacture, or basing project developments on such manufacturing — is a manifestation of inept modeling. So what did we know? Simply not to do that – and to understand which companies have a market advantage, and just as importantly, which do not.

So as the Sonora Energy Group looks forward to 2013, our confidence is rooted in our common sense business model. We are keenly aware of what is happening in the various markets enveloping each project; we plan for long term sustainability, we are prudent with expenditures; and, being nimble, we are able to double down when an opportunity presents itself. That’s why we will complete three innovative, highly profitable PV projects in Mexico in 2013, conservatively plan and implement our expansion into other markets in near future, and be around for years to come.