neutral initiation

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

20 August 2018 Americas/United States

Equity Research Alternative Energy

Bloom Energy (BE) Rating NEUTRAL Price (16-Aug-18, US$) 23.13 Target price (US$) 24.00 52-week price range (US$) 28.15 - 21.01 Market cap(US$ m) 2,453 Enterprise value (US$ m) 2,983 Target price is for 12 months.

[V] = Stock Considered Volatile (see Disclosure Appendix)

Research Analysts

Michael Weinstein, ERP

212 325 0897

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

Khanh Nguyen, CFA

212 538 3524

[email protected]

INITIATION

Cutting the Power Cord

■ Initiate Coverage with a Neutral Rating and $24 Target Price: Bloom is

the latest attempt to commercialize distributed fuel cell power generation,

selling Bloom servers directly to commercial/industrial customers seeking a

combination of higher reliability, greener power, and to a lesser extent for

now, lower costs. In our view, Bloom’s delivered cost of on-premise power is

now roughly at parity with incumbent utilities (up to 10-20% below in some

markets). This is a substantial leap from earlier attempts at commercialization

15 years ago that were hamstrung by equipment at 2-3x Bloom’s current

cost. After a nearly 80% jump off the $15 IPO, we believe that current pricing

captures a fair balance between the risk of executing continued cost

reductions and the possible upside from accelerating sales growth once the

investment tax credit (ITC) sunsets in 2023.

■ Valuation—We Split Future Market Potential into Two Separate Waves:

First, we calculate $12/sh value within a multistage DCF value model from

the current crop of data centers, health care, and outage/disaster-recovery

retail customers (first wave). We believe these customers are more driven by

a need for higher reliability, power quality, and lower carbon output than

simple cost savings vs incumbent utilities. For now, they benefit from a 30%

ITC that enables Bloom to charge higher pricing until the credit sunsets after

2023. As the credit declines, we see effective pricing maintained by 10-14%

annual cost reductions. The second wave of opportunity is worth another

$12/sh in our model and begins in 2023, as additional reductions could

significantly improve Bloom’s pricing vs utilities, driving customer growth on

simple cost savings.

■ Key Risks: Execution of installations and cost reductions below incumbent

utility retail rates are the keys to future growth, and Bloom faces competition

from possible declines for utility rates as fleets incorporate more renewables.

We also note potential disruptions in rare-earth material supply (Scandium).

Share price performance

On 16-Aug-2018 the S&P 500 INDEX closed at 2840.69

Daily Jul25, 2018 - Aug16, 2018, 07/25/18 = US$25.0

Quarterly EPS Q1 Q2 Q3 Q4 2017A -0.60 -0.63 -0.73 -0.67 2018E -0.11 -0.43 -0.10 -0.08 2019E -0.07 0.01 0.07 0.17

Financial and valuation metrics

Year 12/17A 12/18E 12/19E 12/20E EPS (CS adj.) (US$) -2.63 -0.72 0.18 0.70 Prev. EPS (US$) - - - - P/E rel. (%) -40.5 -181.6 773.9 225.1 Revenue (US$ m) 376.0 746.4 895.1 1,087.4 EBITDA (US$ m) -111.6 -57.6 -98.9 91.4 OCFPS (US$) -0.76 -0.35 0.76 0.93 P/OCF (x) -67.0 30.3 25.0 EV/EBITDA (current) -29.2 -56.6 -33.0 35.7 Net debt (US$ m) 734 530 469 358 ROIC (%) -67.77 -42.41 -66.81 15.29

Number of shares (m) 106.07 IC (current, US$ m) 233.28 BV/share (Next Qtr., US$) -2.7 EV/IC (x) 13.1 Net debt (Next Qtr., US$ m) 517.8 Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) -177.8 Source: Company data, Thomson Reuters, Credit Suisse estimates

20 August 2018

Bloom Energy (BE) 2

Bloom Energy (BE)

Price (16 Aug 2018): US$23.13; Rating: NEUTRAL; Target Price: 24.00; Analyst: Michael Weinstein

Income Statement 12/17A 12/18E 12/19E 12/20E

Revenue (US$ m) 376.0 746.4 895.1 1,087.4 EBITDA (US$ m) (112) (58) (99) 91 Depr. & amort. (46) (44) (47) (51) EBIT (US$) (158) (102) (146) 40 Net interest exp (109) (87) (74) (51) PBT (US$) (266) (188) (221) (10) Income taxes (1) 7 15 2 Profit after tax (267) (181) (205) (8) Minorities 19 18 18 18 Reported net income (US$) (263) (187) (187) 10 Other NPAT adjustments (30) (120) (221) (108) Adjusted net income (233) (67) 34 118

Cash Flow 12/17A 12/18E 12/19E 12/20E

EBIT (158) (102) (146) 40 Net interest (109) (87) (74) (51) Change in working capital 78 (19) (12) (39) Cash flow from operations (67) (34) 117 156 CAPEX (32) (7) (30) (40) Free cashflow to the firm (99) (41) 87 116 Acquisitions - - - - Divestments - - - - Cash flow from investments (32) (7) (30) (40) Net share issue(/repurchase) (1) 284 0 0 Dividends paid 0 0 0 0 Changes in Net Cash/Debt (158) 204 61 111

Balance Sheet (US$) 12/17A 12/18E 12/19E 12/20E

Assets Cash & cash equivalents 207 220 252 319 Account receivables 30 50 77 100 Other current assets 0 0 0 0 Total current assets 328 399 448 560 Total fixed assets 498 472 455 444 Investment securities - - - - Total assets 1,221 1,228 1,260 1,361 Liabilities Total current liabilities 1,574 1,394 1,370 1,332 Total liabilities 1,722 1,528 1,525 1,508 Shareholder equity (501) (300) (265) (147) Total liabilities and equity 1,221 1,228 1,260 1,361 Net debt 734 530 469 358

Per share 12/17A 12/18E 12/19E 12/20E

No. of shares (wtd avg) 88 99 152 168 CS adj. EPS (2.63) (0.72) 0.18 0.70 Prev. EPS (US$) Dividend (US$) 0.00 0.00 0.00 0.00 Free cash flow per share (1.12) (0.42) 0.57 0.69

Earnings 12/17A 12/18E 12/19E 12/20E

Sales growth (%) 80.3 98.5 19.9 21.5 EBIT growth (%) 34.9 35.6 (43.9) 127.7 Net profit growth (%) 8.0 71.0 150.6 245.9 EPS growth (%) 8.0 72.7 125.8 279.7 EBITDA margin (%) (29.7) (7.7) (11.1) 8.4 EBIT margin (%) (41.9) (13.6) (16.3) 3.7 Pretax margin (%) (70.8) (25.2) (24.6) (0.9) Net margin (%) (61.9) (9.0) 3.8 10.8

Valuation 12/17A 12/18E 12/19E 12/20E

EV/Sales (x) 8.48 4.00 3.26 2.58 EV/EBITDA (x) (29.2) (56.6) (33.0) 35.7 EV/EBIT (x) (20.2) (29.4) (20.0) 69.5 P/E (x) (8.8) (32.3) 125.1 32.9 Price to book (x) (4.1) (7.6) (13.3) (26.5) Asset turnover 0.3 0.6 0.7 0.8

Returns 12/17A 12/18E 12/19E 12/20E

ROE stated-return on (%) 69.2 46.8 66.1 (4.8) ROIC (%) (67.8) (42.4) (66.8) 15.3

Gearing 12/17A 12/18E 12/19E 12/20E

Net debt/equity (%) (146.6) (176.7) (176.7) (243.0) Interest coverage ratio (X) (1.5) (1.2) (2.0) 0.8

Quarterly EPS Q1 Q2 Q3 Q4 2017A -0.60 -0.63 -0.73 -0.67 2018E -0.11 -0.43 -0.10 -0.08 2019E -0.07 0.01 0.07 0.17

Company Background

Bloom Energy is a US based manufacturer of solid oxide fuel cell that produces electricity from natural gas using a patented process which is quiet, compact, and non-polluting enough to be located even in dense urban locations.

Blue/Grey Sky Scenario

Our Blue Sky Scenario (US$) 30.00

Our Blue sky scenario is driven by a faster growth of 15% per year beyond 2024 for 10-years post ITC step down. We also assume a lower terminal FCF yield (below industrial peers) reflecting continued growth in business

Our Grey Sky Scenario (US$) 12.00

Our Grey Sky scenario is driven by a drop in business beyond 2023 after ITC steps down, a higher equity discount rate for risks associated with cost cuts and execution, and a higher terminal FCF yield (above industrial peers).

Share price performance

On 16-Aug-2018 the S&P 500 INDEX closed at 2840.69

Daily Jul25, 2018 - Aug16, 2018, 07/25/18 = US$25.0

Source: Company data, Thomson Reuters, Credit Suisse estimates

20 August 2018

Bloom Energy (BE) 3

Table of Contents

Key Charts 4

Executive Summary 5

Key Risks 8

A New Market—Distributed Base Load 11

Cost Reductions Are the Key to Expansion ........................................................... 11

A Tale of Three Market Opportunities .................................................................... 16

Technology Overview ............................................................................................. 21

Scandium—The Secret Sauce ............................................................................... 24

Regulatory Overview .............................................................................................. 24

Key Model Drivers 26

Business Segment ................................................................................................. 26

Single-Project Economics ...................................................................................... 27

Financials 28

Valuation 30

Comps 33

Management, Compensation, and Corporate Governance 34

Financial Statements 36

20 August 2018

Bloom Energy (BE) 4

Key Charts

Figure 1: Deployments Grow 32% Through 2023 Figure 2: Revenues Grow 30% Through 2023

Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.

Figure 3: 30% GM and 20% EBTIDA Margin Target Figure 4: Cost Reductions to Offset ITC Decline


Figure 5: Natural Gas Constrained TAM of $188B Figure 6: Equity Value per Share


622

892

1,3

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90

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2,8

80 3,5

10

3,6

86

4,0

54

687

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2016

2017

2018

E

2019

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2020

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2021

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E

2023

E

2024

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2025

E

Upfront (cash sale) Ratable (lease sale)

209 376

746 895

1,087 1,269

1,540

1,853 1,747

1,920

$ -

$ 500

$ 1,000

$ 1,500

$ 2,000

2016

2017

2018

E

2019

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2020

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2021

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2025

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Upfront Revenue, $m Service revenue

Ratable Revenues, $m Electricity revenue

(20.0)%

(10.0)%

-

10.0%

20.0%

30.0%

2016

2017

2018

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GM% - excl SBC EBITDA margin %

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To

tal c

ost

- $

/kW

Non-GAAP cost (adj for ratable)GAAP cost/watt - historical &…

Cost reduction driven by capacity utilization and Gen 7

$0.75

$188

$0

$20

$40

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2018 rev CS est Natural gas constrained TAM

Rev

/TA

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$B

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11

18

-3 -3 -3

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Base case Grey sky Blue sky

Value of ITC period Value of post ITC growth

TV Net debt

20 August 2018

Bloom Energy (BE) 5

Executive Summary Taking Fuel Cells Seriously This Time: Bloom is a US-based manufacturer of solid

oxide fuel cells, an electrochemical method of producing electricity from hydrogen or

hydrocarbon based fuels (natural gas) without combustion and without moving parts.

Bloom's on-premise process is quieter, less polluting, and – more importantly – now

competitively priced and reliable compared to retail electricity off utility grids for

commercial customers. The result is a first-of-a-kind distributed 24x7 baseload electric

generation system that can be placed even in dense urban locations.

Not Your Great Grandfather’s Fuel Cell

Invented in the 1830s, fuel cells are better known today for more exotic applications within

the US-manned space program as well as some versions of electric vehicles and other

specialty applications. For commercial electric power generation, fuel cells are designed to

run 24x7 with ultra-low pollution output (generally just water and CO2), which means they

are especially well suited to supply baseload power while running close to maximum

capacity. However, when paired with cost-efficient batteries, a fuel cell system can provide

virtually the entire range of baseload and peaking applications from on-site and, in many

cases, with greater reliability than utilities that have to rely (and charge for) long-distance

transmission and distribution systems. Investors will recall that fuel cells were previously

greeted with enthusiasm by investors 15 years ago (the Plug Power days) that ultimately

proved to be premature, as the technology was simply too expensive for mass adoption.

As recently as 2010, fuel cells had been prohibitively expensive at >$10k/kW and unable

to compete effectively against traditional utility-scale baseload electric generation options,

including nuclear at ~$6k/kW, new “clean coal” with some carbon sequestration at

~$5k/kW, new CCGTs at ~$982/kW, and gas peakers at ~$1.1k/kW. However, Bloom

Energy’s patented solid oxide fuel cell systems currently have a total installed system cost

of only $3.6k/kW and roll out to customers at an average selling price (ASP) of $5.6/kW.

While this is still expensive vs other forms of generation, the fact that it is located on-site is

a key attribute; Bloom servers are now competitive with utility electricity that must also

include the cost of delivery through transmission and distribution systems. Furthermore,

they are highly efficient, using only 5.6 mmBTUs of fuel for each kWh produced vs 6.0-7.0

for the most efficient gas turbines, which gives them a lower carbon output vs other forms

of fossil-fueled generation.

Figure 7: Declining Costs

Figure 8: Bloom’s Cell Is More Efficient than Other

Fuel Cells and Less Polluting than Traditional

Generators

Source: Company data, Credit Suisse estimates. Source: DOE, Credit Suisse estimates.

-

2,000

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6,000

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10,000

12,000

2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Tota

l cost -

$/k

W

Non-GAAP cost (adj for ratable) GAAP cost/watt - historical & forecast


Bloom Energy

SOFC

Doosan

PAFC

Natural gas

generator

Diesel

generator

NOx lbs/MWh <0.01 <0.01 5.9 1.5

SOx lbs/MWh Negligible Negligible 0.01 0.02

CO lbs/MWh <0.05 <0.02 11.8 7.7

VOCs lbs/MWh <0.02 <0.02 3.0 0.4

CO2 lbs/MWh 679-833 1,135 2,291

Electrical Efficiency % 65% 45%

Heat rate Btu/MWh 5811-7127 8,890 7000+ 10000+

https://www.eia.gov/outlooks/aeo/assumptions/pdf/table_8.2.pdf

20 August 2018

Bloom Energy (BE) 6

Longer Replacement Cycles and Higher Efficiency Make a Difference

Bloom Energy appears to be succeeding where earlier efforts had failed because of a

proprietary technology that has a longer replacement cycle (now more than five years vs

12-18 months less than a decade ago). Bloom’s servers started becoming cost

competitive with retail utility power service when the cell replacement cycle improved to

four years in 2016. Bloom has also made important strides with higher efficiency factors

~65% vs competitor technology <48%, higher reliability, improved manufacturing scale

and cost reductions, a sound business strategy with upfront cash generation, no reliance

on a balance sheet heavy leasing model, and a large and growing global customer base.

All-in delivered cost of Bloom power is currently at about 11.4c/kWh on average in the

United States, about 5-20% below all-in utility retail pricing depending on the market.

Figure 9: Power Density Increases with Each

Generation. 7th Gen Expected Soon

Figure 10: Electrical Efficiency Approaching DOE

Goal


PPAs Through SO’s PowerSecure Keep Financial Statements Simpler

Prior to 2017, Bloom sold take-or-pay long-term Purchase Power Agreements (PPAs) to

customers under its Bloom Electrons program as an alternative to direct purchase.

However, this practice was virtually halted in 2017, as customers increasingly favored

direct purchases that recognize revenue upfront. The ratable value of Bloom Electron

contracts accepted in 2017 was only $21.6M (21% of acceptances) compared with

$384.2M in 2016 (84% of acceptances). Nevertheless, the ratable amortizing of

prior-period Bloom Electron contract revenue continues through contract expirations, offset

by a ratable share of associated costs and services. Also of note, there are four major

customers that represent 10% of these legacy PPA assets: Utility Delmarva, Home Depot,

AT&T, and Walmart.

Going forward, customers seeking a leasing option or a long-term fully financed power

contract can do this through channel partner Southern Company’s PowerSecure

subsidiary, which provides for capital purchases of Bloom projects, as well as technology

co-development. We see the involvement of $46B market cap Southern Company (SO) as

an important mark of confidence in the maturity of the fuel-cell industry.

100

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Gen 1 Gen 2 Gen 2.5 Gen 5 Gen 7

2008-2011 2011-2015 2015-2017 2019?

System size -kW/container

40%

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Gen 1 Gen 2 Gen 2.5 Gen 5

20 August 2018

Bloom Energy (BE) 7

Figure 11: Using PowerSecure and Other Financing Partners for a Simpler

Financial Statement

Source: Company data, Credit Suisse estimates.

Valuation and Risk Summary

We initiate coverage of Bloom Energy with a Neutral rating and $24 target price, which is

based on the DCF of cash flows using an 8% discount rate. We use a three-stage growth

model wherein we estimate a 31% deployment CAGR from 2018 to 2023, till the ITC is

available in the US market (with a 5% safe harbor rule). Thereafter, in our second stage,

we assume deployment growth rate of 10%/yr until 2030, driven by nominal cost declines

per year. In our third stage, we assume a long-term terminal growth rate of 2% and

terminal free cash flow (FCF) yield of 5.6%.

Key Risks: (1) Cost reduction: >30% cost reduction from 2018 to 2023 to offset decline in

tax credits and compete with utilities, renewables, and other fuel cell technologies.

(2) Execution risk can be addressed by ramping up the company's engineering and design

teams. However, a longer-than-expected permitting process can further delay execution.

(3) Switching sales focus back to the US markets after the tax credit extension in early

2018 is important to capture ITC upside as the tax credits fade away from 2019 to 2023.

(4) Scandium (electrolyte) supply is bound to increase this decade as new mines open up

in Australia, but we see near term risk from potential supply chain disturbance or tariffs on

imports (mostly from China).

Catalysts: Continued execution and timely delivery of systems in South Korea and the US

markets in 2H18, PPA sponsor’s ability to safe harbor equipment by 4Q19, and new mines

in Australia to diversify Scandium supply by 2020.

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Moving away from ratable to cash sales

20 August 2018

Bloom Energy (BE) 8

Key Risks Continued Cost Reductions to Overcome Declining Tax Credits and Compete with Utilities

■ Costs Cuts to Offset ITC Decline: Although Gen 2 and Gen 5 Bloom’s servers have

demonstrated ability to reduce production costs by 50% and 37% through their

development cycles, we still need to see an additional 30% cost reduction from 2018 to

2023 to just offset the decline in tax credits and maintain TAM. Cost cuts beyond 2023

(i.e., >30% from current levels) will also help the company to capture a higher share of

US utility markets.

Figure 12: Cost Reductions in the Past for Bloom Energy


■ Utility Grid Rates Could Decline, Rather Than Increase: We note that since 2008,

utility rates have declined Y/Y in the United States in five of the ten years, largely due

to declining natural gas prices. The risk of further natural gas price decline is limited, as

Bloom’s cost of delivered power will also decline with lower fuel input prices. However,

we see a potential threat in increasing adoption of renewables in large-scale utility

fleets. We acknowledge that distributed renewables pose a limited threat to Bloom

owing to their intermittency and much larger footprint required in suburban and urban

settings. Even with four- to eight-hour batteries, distributed renewables can mimic

baseload power only one day at a time without the ability to provide high-quality

baseload power for any longer duration. However, utilities are much better positioned

to benefit from near-zero marginal costs of grid-scale renewables as part of their

delivered value proposition through existing transmission and distribution systems.

Utilities such as Xcel Energy (XEL) have successfully replaced retiring coal-fired power

plants with large-scale wind farms for which fuel savings help offset the higher cost of

upfront renewable capex. As renewable costs decline, this has the potential to reduce

the cost of generation within retail electric rates, even as transmission and distribution

charges continue to rise from ongoing infrastructure upgrades. It is unclear whether

reduced average marginal costs from renewables at utility-scale will completely offset

rising transmission and distribution costs, although we expect some dampening effect

on rising utility rates in any effect. Our estimates for Bloom assume 10% volume

growth from 2023 to 2030 based on utility all-in retail rates (generation + transmission

+ distribution) rising at least 2-3% while the cost of Bloom servers decline 5% per year

during the same period.

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Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2011 2012 2103 2014 2015 2016 2017 2018

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eria

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ost

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Gen 2 material cost Gen 5 Company product cost/watt

20 August 2018

Bloom Energy (BE) 9

Figure 13: Utility Rates Have Stabilized Owing to

Lower Natural Gas Prices

Figure 14: Bloom Servers Are Economical If Grid

Retail Prices Grow >0.5%/Yr


■ Competition from Other Fuel Cell Companies: Any viable competition from other

fuel cell technologies could hurt Bloom’s ASPs and gross margin and could (1) make it

tougher to attract C&I customers away from incumbent utility service on pricing, thus

reducing sales growth, and/or (2) erode profitability as ASPs decline to keep sales

growth up. However, Bloom benefits from at least two advantages: it has taken Bloom

over a decade of research and field experimentation at over $1.5B of expense to

develop its current product, with the company continuing to improve it, and its solid

oxide technology is protected by 147 patents in the United States and overseas and

unlikely to face a viable alternative technology with similar competitive attributes (such

as >60% efficiency) in any time frame shorter than the same decade. Hence, we feel

our base-case assumption of a relatively competition-free 2020’s is reasonably solid.

Project Execution Risk

■ Bloom Energy is transitioning from being a technology-focused company to one that is

able to deliver projects on time and under costs. We estimate installations will grow at

43-49% Y/Y in 2018/19 and at a 32% CAGR through 2023. The biggest risk for the

company is timely execution on project construction, which can be lengthy (6-12

months) and lumpy. We believe the company can address execution by ramping up its

engineering and design teams.

Navigating Permitting Process

■ Longer-than-expected permitting processes in the United States and international

markets can further delay execution. In the US, the company’s largest market for the

coming five to ten years, the permitting process is different in each every state and

county and, at times, even at the city level. While most of the permitting pertains to

electrical and civil work, which are similar to that for solar and battery systems, Bloom’s

servers face a longer permitting process related to CO2 emissions.

(4.0)%

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% c

han

ge

Y//Y

Change in commercial electric rates - US

Change in industrial electric rates - US

Total savings on a 25 year contract

0.0% (1.0)% (0.5)% - 0.5% 1.0%

0.5% 4% 10% 15% 20% 25%

1.0% (2)% 4% 10% 15% 20%

1.5% (8)% (2)% 4% 9% 15%

2.0% (15)% (9)% (2)% 4% 9%

2.5% (23)% (16)% (9)% (3)% 3%

3.0% (31)% (24)% (17)% (10)% (3)%

Bloom PPA

annual

escalator %

Grid retail electricity escalator, %/yr

Note: Assumes Bloom server saves 20% in the first year compared to electricity bill

Firm PPA terms. No changes in the future to reflect declining costs of Bloom Servers

20 August 2018

Bloom Energy (BE) 10

Timely ITC Capture

■ Historically, the company’s strategy has been flexible, as when it switched sales efforts

in 2017/18 toward international markets after US tax credits for fuel cells initially were

not extended in 2017. However, since this policy changed and tax credits were

extended in the United States in early 2018, the company’s strategy needs to move

quickly to pivot back toward US markets to take advantage of tax credits for new

projects that decline from 30% in 2019 to 22% in 2021.

■ A recent IRS ruling also provides additional benefits allowing PPA sponsors to avail the

full 30% tax credit till 2023 as long as projects start construction in 2019. However, the

IRS language still requires Bloom Energy and its PPA sponsors to identify customers

and projects by late 2019, along with a 5% down payment on system fair value, putting

pressure on both balance sheet and the sales channel in 2019.

Dependence on Rare-Earth Materials from Asia

■ Scandium (electrolyte) supply is bound to increase this decade as new mines open up

in Australia, but we see near-term risk from potential supply chain disturbance or tariffs

on imports (mostly from China).

Figure 15: New Scandium Supply Expected in Australia by 2020

Source: Scandium Mining June 2018 Investor deck.

Lumpy Quarters

■ Predicting quarterly earnings accurately could be challenging given the lumpy nature of

execution and permitting. Moreover, revenue recognition on installed systems could

also be delayed, as the company recognizes only revenues on acceptances once it

receives the required utility permits and generates electricity. Barring any serious

issues with Bloom’s technology or execution ability, we caution against reading too

much into shorter delays caused by permitting or interconnection issues.

20 August 2018


A New Market—Distributed Base Load Despite savings vs electric rates in some markets, this is not yet a major adoption factor.

Bloom’s fuel cells are instead being adopted the fastest within certain industries seeking

ultra-reliable baseload power in which the local utility is relegated as a source of backup

power. Notably, this includes some international markets such as dense urban centers in

Japan and Korea, less reliable power grids in India, and higher-cost US states such as

California. The fastest-adopting industries include datacenters, high-tech, and health care,

including among its largest customers AT&T, Caltech, Equinix, and Kaiser Permanente.

Home Depot is also a customer for reliable power during storms and natural disasters,

especially in Eastern hurricane zones susceptible to power line outages. Other large

customers include utility Delmarva Power & Light and The Wonderful Company. To date,

almost all sales have been in the United States, but sales to Korea Energy were 17% of

sales in 1Q18.

Cost Reductions Are the Key to Expansion

Initially, Cost Savings Help Offset the Sunsetting of Tax Credits Through 2023: In

February 2018, the federal Business Energy Investment Tax Credit (ITC) for fuel cells was

reinstated by Congress for five years, retroactive to 2017. The ITC provides customers with

a tax credit of 30% or a max $3,000 per kilowatt of their equipment purchase price and the

installation cost on their federal tax returns. The credit enables Bloom to charge a higher

price for systems, so revenues will consequently suffer as the ITC sunsets though year-end

2023 (30% in 2017-19, 26% in 2020, 22% in 2021, then 0% but safe-harbored through 2023

under June 2018 IRS rules). However, we expect the company to offset the decline with cost

reductions to maintain a ~25-30% targeted gross margin through at least 2023.

Bloom Fuel cell system cost can be split into three major buckets – materials and

components that represent 80% of the costs, and balance 20% of costs equally split

between stack & column operations and system assembly operations. Product costs were

~$3,400/kW as of 4Q17, and additional ~$800-$1000/kW installation costs. Total system

costs are projected to decline at a 14% CAGR through 2019 which helps offset the decline

in 30% ITC. Longer term, we model out 5% annual cost reduction from 2023-2030 and

ultimately, we expect the company to reduce cost by >50% from current levels to well

under <$2,000/kW. Most of the cost declines are driven by material/components, but we

also expect stack, column and operations to see a similar decline in costs. We categorize

cost reductions under four primarily areas:

1. Higher Capacity Utilization of Existing Production Capabilities Beyond the

Current 50% in 2018: Bloom’s manufacturing facility is capable of producing 2,000

systems/year vs the 900 projected for 2018 and 1,300 projected for 2019. Increasing

utilization helps spread fixed overhead costs over more units, such that the proportion

of overhead cost within unit cost/kW declines from 22% at a 50% rate to only 12% at

100% capacity. In combination with purchasing power on cost of materials and

reduced labor per unit, this can bring unit cost per kW down more than 20% when

moving from 50% capacity to 100% full.

2. Thinner Catalyzing Layers: These result in denser cell stacking that can reduce the

cost of materials and installation per watt. Bloom’s latest 5th Generation servers use

fuel cell stacks with layers thin enough to fit 600 kW in a $1.8M power server

($3,000/kW). The next 7th Generation upgrade uses thinner layers that will fit 750 kW

into the same footprint at 1.3x power density vs 5th Generation. With a reduced server

cost of $1.5M, this represents a significant 33% reduction to $2,000/kW.

3. Longer Asset Life: This spreads service costs over a longer replacement cycle. A

thinner catalyzing layer not only increases power density, it also reduces the

molecular damage incurred by the process of passing ions through the layer, enabling

http://programs.dsireusa.org/system/program/detail/658

20 August 2018


the fuel cell to maintain high efficiency over a longer period of time. In 2011, the

median lifespan of a Bloom fuel cell was only 1.9 years, which represented the length

of time from 100% peak performance to 0%. By 2017, cell lifespan before unit

refurbishment (FRU) had been increased to 5.0 years. Based on data collected so far,

the company estimates that lifespan is increasing to 6.0 years. Furthermore, Bloom’s

cells achieve energy conversion efficiencies at ~65%, much better vs conventional

turbines at the mid-40% level, PAFC fuel cells used by Doosan at ~42%, MCFC in

development at FuelCell Energy at 47%, and PEM-FC used in the transportation

industry at the 30% level. Bloom typically performs an FRU when efficiencies decline

to the 40% level. Management states that the long-term cost of its servers became

profitably competitive in 2015 when lifespan finally reached four years. While Bloom

expects to spend ~$30M in 2018-2019 to complete FRUs for older units built prior to

2014, its service gross margins for newer-unit FRUs are now 15-20% and are

expected to remain so going forward.

4. Supply Chain and Manufacturing Efficiencies: Ultimately, lower costs also enable

the company to penetrate more difficult and less-expensive markets with lower pricing.

Figure 16: Power Density Increases with Each

Generation; 7th Gen Expected Soon

Figure 17: Electrical Efficiency Approaching DOE

Goal


100

200

250

500

700

Gen 1 Gen 2 Gen 2.5 Gen 5 Gen 7

2008-2011 2011-2015 2015-2017 2019?

System size -kW/container

40%

45%

50%

55%

60%

65%

70%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Gen 1 Gen 2 Gen 2.5 Gen 5

20 August 2018


Figure 18: Bloom product cost structure long-term

Source: Company data, Credit Suisse estimates

Ultimately, Getting the Cost of Bloom Servers Down Is the Key to Success: After

2023, any further reduction in the cost of Bloom’s equipment should fall right to the bottom

line, assuming that no viable competition emerges with an independently produced and

patented fuel cell technology (or some other distributed baseload solution). At current

average selling prices (ASPs) of $6,091/kW for 2018E and $5,476/kW projected for

2019E, most customers are seeing modest cost reductions versus their incumbent utilities

in a range of 0% to 20%. As we note elsewhere, this has not yet been enough on its own

to tip the scales in favor of fuel cell adoption for many customers (reliability and green

attributes are the primary drivers for now), although some key customers have also cited

the ability to eliminate UPC and backup generator costs as a helpful value-adder. Given

our expectation that continued annual cost declines of 10-15% through 2023 will simply

keep pace with the decline of the ITC, we also expect similar pricing parity between Bloom

and utility delivered power as the company enters into 2023. More specifically, we project

that estimated total installed system cost (TISC) of $3,636/kW in 2019E will decline about

30% by year-end 2023, approximately matching the sunset of the ITC (30% in 2019) as

gross margins of 25-30% are maintained. Furthermore, assuming no significant

competition, ASPs should remain more or less steady as the lack of an ITC offsets the

lower TISC. However, after 2023, our base-case assumption is for further 10% annual

TISC reductions through 2030, with ASPs following and creating a growing gap between

Bloom power pricing and the cost of delivered power from utilities, especially if utilities

continue to increase their rates ~3% annually for infrastructure upgrades, particularly for

their transmission and distribution systems. For this reason, another base-case

assumption we have is that these cost reductions flow into declining ASPs with steady

gross margins ~25%-30%, translating into 10% growth in acceptances from 2023 to 2030,

which is still fairly conservative vs the 32% CAGR we assume from 2018 to 2023.

What About Competition?

To be sure, should any viable competition in fuel cell technology emerge, ASPs and gross

margins could suffer, which could either (1) make it tougher to attract C&I customers away

from incumbent utility service on pricing, thus reducing sales growth, and/or (2) erode

profitability as ASPs decline to keep sales growth up. However, Bloom benefits from at

least two advantages: it has taken Bloom over a decade of research and field

experimentation at over $1.5B of expense to develop its current product, with the company

continuing to improve it, and its solid oxide technology is protected by 147 patents in the

-

1,000

2,000

3,000

4,000

4Q17 Long-term

Blo

om

pro

du

ct s

yste

m-c

ost

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Material & components Stack & column System assembly

> 50% cost cut long-term

20 August 2018


United States and overseas and unlikely to face a viable alternative technology with similar

competitive attributes (such as >60% efficiency) in any time frame shorter than the same

decade. Hence, we feel our base-case assumption of a relatively competition-free 2020’s

is reasonably solid.

What About Renewables Plus Batteries? Is that an Alternative?

Today and for the foreseeable future, renewables with batteries constitute another viable

form of distributed baseload electrification. In contrast, backup diesels are too inefficient

and far too polluting to provide sustained baseload power. However, renewables fail to

compete with fuel cells on several measures: First, the footprint of a 1 MW solar farm or

wind generator is far, far larger than a similarly powerful Bloom server barely larger than a

shipping container. For this reason alone, renewables simply cannot serve commercial

customers in dense urban or even suburban areas. In contrast, fuel cells are quiet and

clean enough to be placed into even the densest urban locations. Second, renewables

produce intermittent power and require batteries to replicate a consistent generation

pattern akin to fuel cells. However, at best, current Li-ion battery technology can store four

to eight hours of power, which is enough for overnight but not adequate for long-term

baseload reliability during periods of low wind or solar during the winter in many parts of

the world. In contrast, fuel cells are a legitimate distributed alternative versus baseload

power service from a utility, with quality and reliability that exceeds utility standards in

many cases. (Data centers with fuel cells relegate the utility to a backup service.)

Furthermore, when batteries are paired up with fuel cells, they can enhance baseload

service with peaking services as well as backup power, effectively eliminating the need

and avoiding the cost of separate uninterruptible power supplies (UPS). Batteries also

enable customers with a Bloom server to bank unneeded power during lower off-peak

periods to sell back to the local utility during its peak period under net metering payment

rules. This can further enhance the economics of a Bloom server, albeit only to the extent

that battery costs continue to decline from the current ~$200/kWh. We estimate that

batteries become a compelling added value at the $150/kWh mark or less, which we also

estimate will be reached by mid 2020s based on our forecast for ~$70-75 by 2030.

Figure 19: Bloom Cost Reduction—Credit Suisse Estimates


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ost -

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Non-GAAP cost (adj for ratable) GAAP cost/watt - historical & forecast


20 August 2018


Figure 20: Bloom Servers Need Grid Tariffs to Grow by 0.5%/Yr

Source: Credit Suisse estimates.

Total savings on a 25 year contract

Grid retail electricity escalator, %/yr

0.0% (1.5)% (1.0)% (0.5)% - 0.5% 1.0% 1.5% 2.0%

0.5% (1)% 4% 10% 15% 20% 25% 29% 34%

1.0% (8)% (2)% 4% 10% 15% 20% 25% 29%

1.5% (15)% (8)% (2)% 4% 9% 15% 20% 25%

2.0% (22)% (15)% (9)% (2)% 4% 9% 15% 20%

2.5% (30)% (23)% (16)% (9)% (3)% 3% 9% 15%

3.0% (39)% (31)% (24)% (17)% (10)% (3)% 3% 9%

Note: Assumes Bloom server saves 20% in the first year compared to electricity bill

Firm PPA terms. No changes in the future to reflect declining costs of Bloom Servers

Bloom PPA

annual

escalator %

20 August 2018


A Tale of Three Market Opportunities

Cost savings are not yet a driving factor for adoption. We tend to view the market potential

as split into three separate opportunities:

■ First is a need for reliability beyond the reach of traditional central-station utilities that

depend on long-distance transmission and above-ground distribution systems. A

secondary consideration for some customers is a desire for more predictable short-

term power costs, as fuel represents only 25% of power cost delivered by Bloom at the

$3,636/kW total installed system cost (TISC) projected for 2019. (However, as

equipment costs come down, the percentage of variable fuel cost affecting output

pricing will increase.) Essentially, Bloom’s equipment cost is declining and stable,

whereas utility costs, particularly for transmission and distribution, are increasing and

subject to weather events, etc.

■ Second is a growing desire for greener baseload power among many commercial

customers. Fuel cells are a virtually nonpolluting power source beyond carbon dioxide,

which is produced in lower quantities versus gas turbines owing to Bloom’s realized

heat rate of ~5.5 mmBTU’s/kWh.

■ Third, cost savings vs utilities become a bigger factor after the sunset of the ITC

at year-end 2023.As we note above, projected cost declines (~14% for 2018 and

2019) are expected to be offset with declining ITCs through 2023, likely delaying the

impact of cost factors on customer adoption until 2023 and beyond. So although some

customers are currently seeing 10-20% cost savings from Bloom vs their local utility,

our understanding is that most customers to date have stated that their cost of power

from Bloom equipment is roughly comparable with the delivered cost of electric service

from utilities, with the savings they currently see not enough to compel a switch away

from traditional utility service for baseload power requirements. This is unsurprising to

us given that through 2016, Bloom’s fuel cells were uneconomic on any basis and

required a subsidized (low) price from Bloom to attract early customer adoption and get

units out into the field for long-term testing. Hence, we see most of the initial phase

32% CAGR in cumulative acceptances projected from 2018 through 2023 as driven by

customers seeking higher power quality and resiliency as well as a greener baseload

option, particularly for data centers, cloud services, and retailers such as Walmart and

The Home Depot that need to remain open during power outages and natural disasters.

Bloom Describes Its Potential Total Addressable Market (TAM) for Commercial &

Industrial Load at $1.6T, Including $608B Outside the United States: Markets already

penetrated by Bloom constitute a smaller $175B serviceable addressable market (SAM).

This represents global annual revenue per 2015 EIA data. The states with the highest cost

of utility power are naturally the first targets: HI, AK, RI, CT, MA, CA, NH, NY, VT, NJ, ME,

MD, and DE. Internationally, countries with the highest grid pricing are Japan, Germany,

UK, India, and Brazil. As of March 2018, Bloom has installed 312 MW in the United States,

Japan, and India. In comparison, total US commercial and industrial demand in 2017 was

>300 GWs, which is consistent with >$1T of product sales and installations at the

projected 2019 average selling price (ASP) of $5,476/kW. Even with a 32% CAGR in

cumulative acceptances projected from 2018 through 2023, it is clear that Bloom’s current

primary target audience is barely penetrated, as its product sustains a more limited appeal

based on reliability and greener baseload power.

20 August 2018


Figure 21: Acceptances Grow at a 32% CAGR Through 2023


However, as Bloom’s costs come down (14% declines forecast for 2018/19), we expect

the list of interested companies to expand rapidly as the appeal broadens to pure

economics. With costs now at parity or 10-20% below full retail utility rates, we expect the

shift to this larger audience to occur after 2022, as cost savings will initially be offset by

declining ITC tax credits through then.

The fastest-growing markets include data centers, international, health care, and microgrids.

− International ($244B TAM): Outside of the United States, the company has

installations or orders in Japan, India, and South Korea and is also targeting Ireland

and Great Britain.

− Data Centers ($12-15B TAM) and Health Care ($12B TAM): Paired with batteries

or uninterruptable power supply (UPS), Bloom servers provide data centers and

hospitals with high-level Tier-III electric reliability and availability, providing the

added benefit of avoiding the cost of backup or power conditioning equipment. The

company reports that a customer-commissioned study by the University of Illinois

projects that a Bloom Server with batteries is significantly more reliable than grid

power even with uninterruptible power systems and backup diesel generator.

− Microgrids ($15B TAM): This refers to the opportunity for customers to completely

disconnect from the traditional utility grid and still achieve similar or better reliability

and resiliency. Combined with batteries, Bloom servers can achieve this for

prolonged outages, natural disasters, and a rising risk of cyber-attacks. Microgrid

integration may also include combining Bloom’s systems with other distributed

energy technologies including renewables and storage.

209

376

746

895

1,087

1,269

1,540

1,8531,747

1,920

$ -

$ 200

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

$ 1,600

$ 1,800

$ 2,000

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E



30% CAGR

109

489

892 1,

330

1,89

0 2,34

0

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3,68

6 4,05

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2016

2017

2018

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2024

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2025

E


32% CAGR 2018-2023

20 August 2018


Figure 22: Cloud Energy Market Is Worth $12B for

Distributed Generation

Figure 23: Market Penetration Required in Various

Segments to Match 2017 Revenue Levels


Could Gas Utilities Accelerate the Displacement of Electric Utilities Using Bloom?

This is a very intriguing thought, and at the very least, we expect gas utilities to become

increasingly interested in Bloom technology as costs decline. It’s worth noting that in the

United States alone, 2,295 TWhs commercial & industrial (C&I) demand represents about

62% of total electric consumption (although higher C&I load factors require only about a

third of ~1,000 GWs total generation capacity). For Bloom to serve 100% of this load at a

5.5 MMBTU/kWh heat rate would require about 12 TCF incremental natural gas

consumption, almost a 50% increase from total US consumption. However, a more

modest 10% increase in gas utility load could enable Bloom to serve about 24 GWs, an

opportunity of nearly $188B at the projected 2019 ASP of $5,476/kW. Importantly, a 10%

increase in gas demand could probably be handled by existing utility systems with little to

moderate incremental investment aside from end-point hookup.

$5

$12

$2

$25

$0

$5

$10

$15

$20

$25

$30

6 major MTDC All MTDCmarket base

case

Grey sky Blue sky

En

erg

y m

arke

t T

AM

-$B

Industry Verticals - Market size $58B

Data Centers, Healthcare, Retail

Penetration required to meet 2017 revenue: 0.7%

Domestic Markets - Market size $38B

California, New York


International Markets - Market size $244B

India, South Korea


Applications - Market size $6B

Uninterruptible Power, Energy Storage Systems


Existing Customers 16,124 GWh

Home Depot, Walmart, Equinix

Penetration required to meet 2017 revenue 3.2%

20 August 2018


Figure 24: Bloom Could Serve ~24 GWs to C&I Customers with a 10% Increase

in US Gas Utility Load, a Potential $188B Sales Opportunity

Source: Company data, Credit Suisse estimates, US Energy Information Agency.

Contracts with Blue Chip Companies: Major industries in the customer mix include

banking and financial (Franklin Templeton, and Morgan Stanley); cloud services,

technology, and data centers (Apple, Equinix, and Intel); communications and media

(AT&T, Cox Communications, and Disney); consumer (Kellogg’s, Taylor Farms, and The

Wonderful Company); education (California Institute of Technology); government (AC

Transit, City of Hartford, and NASA); health care (Kaiser Permanente); retail (Costco, The

Home Depot, and Walmart); utilities (Baltimore Gas and Electric, Delmarva Power, and

Pacific Gas and Electric); manufacturing (Lockheed Martin); logistics (FedEx); and others.

EIA - Retail sales of electricity

Million kWh 2017

Residential 1,378,819

Commercial 1,349,208

Industrial 946,443

Transportation 7,524

Total 3,681,995

Heat rate, BTU per kWh 5,500

Nat gas reqd for commercial/industrial, mm BTU 12,626,080,500

Nat gas heat content, Btu/cu ft 1,037

Nat gas reqd for commercial/industrial, mm CF 12,175,584

as of % of total nat gas delivered today 49.1%

Nat gas volume delivery by sector 2017

Million Cubic Feet

Residential 4,422,523

Commercial 3,177,099

Industrial 7,901,117

Electric Power 9,250,066

Others 43,406

Total 24,794,211

Incremental nat gas supported (est) 10%

Gas available for Commercial, mm cf 317,710

Gas available for Industrial, mcf 790,112

Total gas available for DG, mm cf 1,107,822

heat rate, Btu/kWh 5,500

heat conent, Btu/cu ft 1,037

kWh produced by incremental gas, mm kWh 208,875

as of % of total C&I consumption 9.1%

plant utilization, hrs/yr 8,672

Nat gas DG TAM, MW 24,085

TISC, $/kW $ 5,476

GM% 30.0%

System ASP, $/kW $ 7,823

US C&I Blue Sky TAM - Natural gas constrained, $B $ 188

20 August 2018


Among the largest (top ten) customers, we note AT&T, The Home Depot, Intel, Walmart,

and utility Delmarva Power. AT&T has Bloom power servers installed at 85 locations (47

MW) across the US, including data centers for which fuel cells provide a higher degree of

reliable service with lower levels of emissions that help meet corporate environmental

sustainability goals. The Home Depot has deployed Bloom at 178 locations (34 MWs) and

states that it is seeing a 14% reduction in power costs vs its local utilities and is also

attracted to the low-carbon environmental attributes of Bloom’s servers. Nevertheless, a

key feature for it is the ability to maintain resiliency at its retail locations during hurricanes

and other natural disasters. The Home Depot is also one of the first customers to take

advantage of the strategic partnership between Bloom and SO’s PowerSecure, using an

integrated fuel cell and energy storage system. Intel is in the early stages of adoption with

3.5 MW deployed that improve power quality and reliability at its facilities and cut carbon

emissions by 65%. An important feature for Intel and AT&T is the ability to avoid the cost

of backup diesel generators and UPC equipment, as Bloom servers plus batteries already

provide these services. (The avoided cost improves the economics of Bloom adoption.)

Walmart has been an early adopter since 2009, with 60 stores equipped (16 MW) and

certain stores supplied with uninterruptible power supplies for natural disasters and power

outages (similar to The Home Depot). Delmarva Power is a utility subsidiary of Exelon

(EXC) that is driving to achieve a goal of supplying 25% of its power from clean resources

by 2025. Since 2012, Delmarva has deployed 30 MWs of Bloom servers, which is the

largest utility-scale deployment to date. While Bloom’s fuel cells are too expensive to be

competitive with gas turbines and other sources of utility power delivered by lines, they

have proven useful in this context as a way to relieve local congestion and improve

reliability during storms.

Bloom has grown business from its top ten customers from <50 MW in 2010 to ~300 MW

currently. The majority of the growth is driven by repeat business with existing customers

as they become comfortable with first-of-its-kind Bloom Energy servers. Positive feedback

from initial installations leads to increased installations across a customer’s properties

across states with higher costs of electricity.

Figure 25: Installation Growth Driven by Repeat Business (Two-Thirds of Sales

Volume)

Source: Company data.

20 August 2018


Technology Overview

Solid Oxide Fuel cells (SOFC) use a hard, ceramic compound of metal oxides as

electrolyte (Scandium). The electrolytes are sandwiched between an Anode and a

Cathode. The electrochemical process is started by passing natural gas through the cell

stack. Electrical efficiency is ~65%, which is defined as efficiency w.r.t. theoretical

thermodynamic maximum electricity generation (LHV). The cells operate at high

temperatures (but below combustion temperatures). Generally a fuel cell needs a reformer

to extract hydrogen from other feedstocks like natural gas; however, since Bloom Box

operates at a high temperature, it doesn’t require a separate reformer. The relatively larger

size and higher temperature limit applications to stationary use case.

Figure 26: Basic Fuel Cell Process

Source: DOE.

The smallest unit (i.e., a single fuel cell) generates 25 W of power, while a stack of fuel cells

is rated ~1 kW. A Modules includes 50 stacks, while a system comprises ~46 modules.

20 August 2018


Figure 27: Modular Fuel Cell Technology


Key Differentiating Factors for Bloom’s Solid Oxide Fuel Cells (SOFC)

■ Less Polluting: Bloom fuel cells emit 30-65% less CO2 and negligible SOx/NOx

compared to traditional natural gas or diesel power generators using a reciprocating

combustion engine.

■ No Noise (but for the Air Blower): Bloom Energy doesn’t use any moving parts and

emits no noise during generation. The boxes do use a small air blower to cool the

system.

■ Higher Efficiency: Bloom fuel cells are 20-70% more efficient, as its heat rate, ~5,800

Btu/MWh, is the lowest vs natural gas and diesel generators (7,000-10,000 Btu/MWh).

Lower heat rates clubbed with higher electrical efficiency (~65%) implies lower natural

gas consumption and higher electricity production. A higher electrical efficiency also

results in less energy lost to heating and less wear and tear vs competing fuel cell

technologies that run at a lower electrical efficiency.

■ Higher Reliability: Bloom’s fuel cells are highly modular, which makes it easy to

service issues in individual units without affecting electricity supply.

■ Proprietary Technology with Less Competition: Bloom is the only global

manufacturer operating a SOFC, which is IP protected. Direct competition is primarily

from PAFC (used by Doosan for electric+heating applications) and PEMFC (used by

FCEL and BLDP for niche applications in the portable/transportation industry).

■ Base Load Operability: Most importantly, it's a base load replacement (i.e., it doesn’t

need a backup generator or battery like solar and wind).

20 August 2018


Figure 28: Bloom Energy Emits Less CO2 and Negligible NOx/SOx vs

Traditional Generators


Figure 29: Fuel Cell Landscape

Source: DOE, Company data, Credit Suisse estimates.

Figure 30: Fuel Cell Market—Supply by Application, Region, and Technology

Source: DOE, Company data, Credit Suisse estimates.

Fuel Cells Traditional generator

Bloom Energy

SOFC

Doosan

PAFC

Natural gas

generator

Diesel

generator

NOx lbs/MWh <0.01 <0.01 5.9 1.5

SOx lbs/MWh Negligible Negligible 0.01 0.02

CO lbs/MWh <0.05 <0.02 11.8 7.7

VOCs lbs/MWh <0.02 <0.02 3.0 0.4

CO2 lbs/MWh 679-833 1,135 2,291

Electrical Efficiency % 65% 45%

Heat rate Btu/MWh 5811-7127 8890.0 7000+ 10000+

Fuel Cell Technology Feedstock Electrolyte

material

Electrical

efficiency

Temperature Applications Companies

PEMFC Proton Exchange

Membrane Fuel Cell

Hydrogen Polymer

membrane

<120 C Backup, Portable,

Transport

FCEL, BLDP

DMFC Direct Methanol Fuel

Cell

Methanol Polymer

membrane

<100 C Backup, Portable,

Transport

SOFC Solid Oxide Fuel Cell Natural gas, Syngas High 500-1000 C DG, Backup, utility BE

AFC Alkaline Fuel Cells Hydrogen Alkaline <100 C Military, Space

MCFC Molten Carbonate Fuel

Cells

Natural gas, Syngas Molten carbonate

salt

High 600-700 C DG, Backup, utility

PAFC Phosphoric Acid Fuel

Cells

Hydrogen Phosphoric Acid 150-200 C DG Doosan

2012 2013 2014 2015 2016 2017

Fuel cell MWs by application

Portable 0.5 0.3 0.4 0.9 0.3 0.5

Stationary 124.9 186.9 147.8 183.6 209.0 213.5

Transport 41.3 28.1 37.2 113.6 307.2 455.7

Total 166.7 215.3 185.4 298.1 516.5 669.7

Fuel cell MWs by region

Europe 17.3 17.3 9.9 27.7 27.4 39.1

N America 61.5 74.7 69.8 108.4 213.6 325.5

Asia 86.1 122.9 104.5 159.7 273.8 303.0

ROW 1.8 0.4 1.2 2.3 1.7 2.1

Total 166.7 215.3 185.4 298.1 516.5 669.7

Fuel cell MWs by technology

PEMFC 68 68 73 152 341 487

DMFC 0 0 0 0 0 0

PAFC (Doosan, Fuji, +) 9 8 4 24 56 81

SOFC (*Bloom) 27 47 38 53 63 76

MCFC 62 92 71 69 56 25

AFC - 0 - 0 1 1

Total 167 215 185 298 517 669.7

20 August 2018


Scandium—The Secret Sauce

■ Solid Oxide Fuel Cells like Bloom’s use Scandium as the electrolyte. Scandium is

a rare earth material that is predominantly used in Fuel Cells and to make Aluminum

Alloys for aviation and other industries. The metal is produced mainly as a byproduct in

other mining processes, including from Titanium and rare earths in China, Uranium in

Kazakhstan and Ukraine, and Apatite in Russia. Global consumption of scandium is

currently 10-15tpa, which is predominantly sourced from China as per the USGS.

■ New Capacity in Australia This Decade: We don’t expect any disruptions in the

Scandium supply chain given limited use cases that keep demand in check and

Bloom’s declining material usage as fuel cells become thinner. However, any

disruptions because of a China-dependent supply chain amid a disruptive trade policy

can be addressed by new mines expected to start by 2020 in Australia. Three mining

companies have identified land and are already building new mines in Australia that

start production in 2020.

Figure 31: New Scandium Supply Expected in Australia by 2020

Source: Scandium Mining June 2018 Investor deck.

Regulatory Overview

Fuel cells primarily receive a 30% tax credit from the federal government in the US. Fuel

cells also receive some incentives from state governments and other countries.

■ US ITC Through 2023: The US federal government supports the fuel cell industry via

a 30% investment tax credit on new installations. The tax credits had expired in 2016

but were reinstated in earlier 2018 with the passage of the tax reform bill. The tax

credits were designed to decline from 30% in 2019 to 26% in 2020, 22% in 2021, and

0% thereafter. However, a favorable IRS policy enables the company (and other fuel

cell customers) to use the 30% tax credit through 2023 as long as PPA sponsors

procure 5% of project cost upfront in 2019 (a rule fairly easy to execute with spending

on inverters and other supporting systems).

https://minerals.usgs.gov/minerals/pubs/commodity/scandium/mcs-2018-scand.pdf

20 August 2018


Figure 32: US Federal Tax Credit for Alternative Energy Technology Owners


■ CA SGIP—Fading Away: California’s CPUC provided incentives to IOUs to install DG

resources. The program was modified in 2016 to gradually replace natural gas with

biogas to avail the incentives. The CPUC decided to increase biogas requirements

from 10% in 2017 to 25% in 2018, 50% in 2019, and 100% in 2020. Owing to a limited

availability of biogas as a result BE’s reliance on California, subsidies declined from

36% of revenues in 2016 to 12% of revenues in 2017 and 18% in 1Q18.

Construction start date for

US federal tax credits 2016 2017 2018 2019 2020 2021 2022 2023 2024 and >

Fuel Cells - ITC 30% 30% 30% 30% 26% 22% - - -

construction deadline - December 2023

Solar PV - ITC 30% 30% 30% 30% 26% 22% 10% 10% 10%

construction deadline - December 2023

Wind - ITC 30% 24% 18% 12% - - - -

Wind - PTC (% of base value) 100% 80% 60% 40% - - - -

construction deadline - four years from start

ITC - Investment Tax Credit

PTC -Production Tax Credit

20 August 2018


Key Model Drivers

■ A system sale contract includes product and installation along with an ongoing service

contract for maintenance. Historically, the company also used to lease Bloom servers

to customers for which the company recognized revenues ratably through the contract

duration as Electricity Revenues. However, the company has discontinued its

legacy-leasing business and currently sells systems to the customers directly or to

third-party PPA sponsors. Under the new revenue-recognition methodology, the

company focuses on three key metrics: Acceptances, Average Selling Price (ASP),

and Total Installed System Cost (TISC).

■ Acceptances—A Conservative Measure of New Orders: New orders for Bloom

Servers are recorded in the backlog when a contract is signed. While bookings are

more lumpy in nature due to multiple orders from the same customer, installations are

relatively linear in nature. A Bloom Server is generally installed within 9-12 months

after receiving the order. This includes up to six months of designing, permitting, and

setting up site infrastructure and roughly three months to manufacture, install, and

commission a system. We note that a 9-12 month period is in-line with a permitting and

commissioning period for C&I solar installations. An order is classified as an

Acceptance after a system is commissioned turned on, and produces full power for at

least 24 hours. Every 100kW of installation is classified as a single Acceptance. We

forecast Acceptances increase at a ~33% CAGR from 622 in 2017 to 3,510 in 2023.

■ TISC—14% Decline per Year: Cost reductions for Bloom Servers are driven by the

following three main drivers: scale advantages from higher capacity utilization,

increasing power density that results in a lower cost of consumables and longer asset

life, and supply chain efficiencies. We discuss these three drivers in detail in this report.

■ ASP—Function of Cost/Tax Credit Declines and GM% Targets: We calculate the

ASP of a new Bloom system (product + installation) increases from $4,460/KW in 2017

to $6,490/kW in 2018 owing to reinstated tax credits in the United States. We believe

system ASPs would be priced to ensure a 30% gross margin but still maintain

competitiveness vs the grid retail rates. The current ASP corresponds to an electricity

PPA of $11/MWh for customers. Note that ASPs benefit from a 30% tax credit in the

United States. A continuous decline in costs will enable the company to grow sales in

price-sensitive regions by offering lower effective PPAs but continue to maintain its

product gross margins.

Business Segment

We forecast total revenues grow from $376m in 2017 to $1.8b in 2020 at a 30% CAGR.

New system sale revenues are recognized under product and installation business, while

ongoing support is recognized under the service business.

■ Product Business—34% GM in the Longer Term: Revenues on upfront sales of the

Bloom Servers are recognized as Product Revenues. We estimate Bloom Energy

servers cost $3,900/kW in 2017, declining to $3,750/kW in 2018.

■ Installation Business—EPC Margins in the Longer Term: In some installations,

the company also provides installations services to customers (designing and

installing the electrical system). This is recognized as Installation Revenues. The

company hopes to break even in the installation business and continue to reduce

installation costs. In the longer term, we expect installation business could earn a

10% GM, in-line with EPC companies.

20 August 2018


■ Service Business Supports Long-Term Customer Contracts: Service Revenues

cover ongoing maintenance and warranty for Bloom Servers installed. While the

servers themselves last for five to six years (in the 5th generation), the service

contracts extend through year 20 and hence also include ongoing replacement capex.

Historically, the service business was loss making, as the Bloom Servers had a very

short replacement cycle (12-18 months in Gen 1-3). We expect the service business to

be negatively affected by $30m of higher costs in 2018 and 2019 associated with

replacing older generation fuel cells with newer Gen 5 that lasts for five-plus years.

Excluding the one-time replacement for legacy systems, the service business should

be able to generate positive gross margins owing to longer replacement cycles and

lower system costs for new generation equipment

■ Legacy Business—$85m/Yr, 30% GM: This includes electricity & ratable business

associated with legacy lease and PPA contracts. We don’t expect any growth in

this business.

Single-Project Economics

Figure 33: Bloom Server Is Economical in 12 States at Current Prices


Figure 34: Current Bloom PPA vs Avg Commercial Electric Rates

Source: EIA, Company data, Credit Suisse estimates.

Product PPA, $ 49

Install PPA, $ 12

Service PPA, $ 25

Fuel cost, $ 31

$ 117

Generation, $ 77

T&D, $ 56

$ 133

$ -

$ 20

$ 40

$ 60

$ 80

$ 100

$ 120

$ 140

Bloom energy economics Electric retail price

$ -

$ 50

$ 100

$ 150

$ 200

$ 250

$ 300

HI

AK

CT

MA

CA RI

VT

NY

NH NJ

ME

DC AL

MD WI

MI

KS

AZ

SC

MT

TN

DE IN OH

MN

GA

NM

CO

SD

KY

MS

WY

WV

MO PA IA ND IL

OR FL

NE

UT

NC LA WA

TX

AR

NV

VA ID OK

20 August 2018


Financials Credit Suisse Forecasts

Figure 35: Bloom Energy Acceptance, Revenue, and Margin Forecasts


■ Strong Growth till ITC Sunset: We estimate revenues grow at a 30% CAGR from

2017 to 2023, driven by a growth in acceptances (33% CAGR) offset by a declining

ASP as costs decline. Acceptance growth is primarily driven by the attractiveness of

Bloom’s products and favorable IRS policy, which makes higher 30% to 22% tax

credits available till 2023 in the United States. We estimate GM% increase from 20% in

2018 to 30% on average from 2019 to 2023 and EBITDA margin grows from <10% in

2018 to ~20% in 2020 to 2023.

■ Life Beyond 2023: We estimate a slowdown in installations owing to a decline in the

tax credits in the United States. The decline also results in a sharp drop in ASPs, as

tax credits are currently captured in the form of higher revenues in the United States.

As a result, we expect a drop in revenues and a corresponding drop in margins.

o Acceptances: We estimate 89.2 MW in 2018, 133 MW in 2019,

increasing to 360 MW by 2023, and then flat at 350-360 MW. Note the

company’s manufacturing capacity stands at 200 MW at current plant

and would hence require a new facility by 2021 based on our forecast.

o Revenues: We estimate revenues grow 3x/2x from $209m/$376m in

2016/2017 to $746m in 2018 primarily owing to mix-shift from ratable to

upfront sales. We forecast 100% upfront sales, 2019 revenues of $895m,

growing to $1.9B by 2023. We estimate a decline in 2024-25 to ~$1.7B

owing to ITC expiration in the United States. Growth is predominantly

made of upfront sales, which represents 78% of revenues in 2018 (80% by

2025), followed by long-term service revenues which are 11% of revenues

in 2018 (15% by 2025). We don’t expect any growth in revenues from

legacy operations (Ratable and Electricity sales), which mainly represent

revenues associated with already funded long-term leases.

209

376

746

895

1,087

1,269

1,540

1,853

1,6791,743

$ -

$ 200

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

$ 1,600

$ 1,800

$ 2,000

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E



30% CAGR

109 48

9

892

1,33

0

1,89

0

2,34

0

2,88

0

3,51

0

3,51

0

3,60

0

578

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E


33% CAGR

(20.0)%

(10.0)%

-

10.0%

20.0%

30.0%

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E

Blended GM% EBITDA margin %

20 August 2018


Figure 36: Upfront Business Turns Profitable in 2018, Service Business Breaks Even in 2020


Q2 2018 Results

■ In-Line Quarter: Bloom Energy announced 2Q18 results on August 7. The company

installed 18.1 MW (181 acceptances, up %12 Y/Y) in the quarter, in-line with guidance

provided in the IPO prospectus. Total revenues of $168.9m (flat Q/Q, up 95% Y/Y)

were also in-line with the midpoint of guidance ($167-170m). Strong revenue growth

and profitability, despite a nominal 12% growth in acceptances, is due to a higher mix

of upfront sales vs ratable (100% in 2Q18) and higher tax credits. On an apples-to-

apples basis, billings (a proxy for upfront revenue recognition) grew by 56% from

$108.5m in 2Q17 and $168.9m in 2Q18.

■ Improved Profitability: Gross margin of 20.6% (excl stock comp, vs -4.5% in 2Q17)

and adjusted EBITDA $12.5m (vs -$22.3m in 2Q17). System ASP increased to

$7,093/kW in 2Q18 from $5,581/kW in 2Q17. Total installed system cost (TISC) also

increased to $5,607/kW in 2Q18 from $4,966/kW in 2Q17

■ Korea Installations on Track: The company is building an 8.35 MW system in South

Korea for KEPCO, which is on track and should be completed by next year.

■ Pro Forma Net Debt Was $518m After IPO: Adjusting for $284.4m net IPO proceeds

and conversion of 8% $220m convertible debt, we calculate pro forma net debt of

$518m in Q3 after the IPO.

Q3 2018 Guidance

■ Management guided acceptances to increase to 215-235 (21.5-23.5 MW) in 3Q18.

Guided ASP $6,440-6,790/kW was down 6.5% Q/Q owing to a higher mix of Asian

deliveries but was up 50% Y/Y reflecting the impact of tax credits in 2018. Guided TISC

of $4,890-5,240/kW implies a decline of 9% Q/Q and 1% Y/Y, driven primarily by lower

material costs as the company ramps Gen 5 and production.

$ -

$ 2,000

$ 4,000

$ 6,000

$ 8,000

$ 10,000

$ 12,000

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E

Total Upfront ASP, $/kW Total Upfront COGS, $/kW

Upfront sales turn profitable in 2018

$ -

$ 20.00

$ 40.00

$ 60.00

$ 80.00

$ 100.00

$ 120.00

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E

Service ASP $/MWh Service Cost $/MWh

Higher costs reflect one-time expenditure for legacy replacements

20 August 2018


Valuation We arrive at our $24 target price based on DCF of cash flows using an 8% discount rate.

We use a three-stage growth model wherein we estimate a 31% deployment CAGR from

2018 to 2023, till the ITC is available in the US market (with a 5% safe harbor rule).

Thereafter, in our second stage, we assume a deployment growth rate of 10%/yr till 2030

driven by nominal cost declines per year. Finally, in our third stage, we assume a long-

term terminal growth rate of 2% and terminal FCF yield of 5.6%.

In our blue sky scenario, we use the same DCF framework with similar stage one growth

rates till 2023; however, in the second stage, we assume deployments grow 15%/yr till

2034 owing to faster cost declines, which make Bloom Energy products economical in

more markets. Our terminal growth rate of 3%/yr reflects a terminal FCF yield of 4.6%. Our

blue sky scenario implies a value of $30/sh.

In our grey sky scenario, we use a 10% discount rate to reflect risks associated with

achieving required cost reductions and project executions. Stage one growth rates are

unchanged; however, we skip stage two growth and replace it with a terminal growth rate

of 2%/yr and terminal FCF yield of 7.3%. Our grey sky scenario implies a value of $12/sh.

Figure 37: DCF-Based Valuation Analysis


Key Assumptions Pegging Our Base-Case Value of $24sh:

■ Shipment Growth: We assume installations in our base-case scenario grow from ~900

acceptances in 2018 to ~1,330 acceptances in 2019, which is reflective of backlog in

Asia and the United States. We estimate growth will predominantly be driven by the US

(~70% of acceptances) owing to the ITC extension. We estimate an acceptance growth

rate of ~42% Y/Y in 2020 vs ~48% in 2019, declining to a 22% growth rate by 2023. We

estimate flat acceptances in 2024 after the ITC extension under the new IRS ruling

expires in 2023. We estimate modest acceptance growth in 2025.

■ GM%: We estimate GM% stay relatively flattish at ~30% through 2023, decline to 25%

in 2024 owing to a decline in the ITC from 30% to 10% in the US, but recover to 30% in

the long term.

■ Service Business: We estimate the service business grows in accordance with the

cumulative MWs installed.

DCF components Base case Grey sky Blue sky

$m $/sh $m $/sh $m $/sh

PV of ITC growth stage, 2018-2023 $ 717 $4.6 $ 668 $4.3 $ 717 $4.6

(+) Value from post ITC growth $ 1,037 $6.7 $ 1,631 $10.5

(+) Terminal value @ industrial comps $ 2,498 $16.0 $ 1,713 $11.0 $ 2,826 $18.1

NPV, $m $ 4,252 $27.3 $ 2,381 $15.3 $ 5,174 $33.2

(-) Net Debt, $m (post IPO) $ (518) -$3.3 $ (518) -$3.3 $ (518) -$3.3

Equity value, $m $ 3,734 $24.0 $ 1,863 $12 $ 4,656 $29.9

Share count (post IPO), m 156

Summary of assumptions Base case Grey sky Blue sky

Cost decline per year post ITC stepdown 5.0% 5.0% 7.0%

Deployment growth /yr post ITC stepdown 10.0% 2.0% 15.0%

Equity discount rate 8.0% 10.0% 8.0%

Terminal FCF yield 5.6% 7.3% 4.6%

DCF stage 1 2018-2023 2018-2023 2018-2023

DCF stage 2 2024-2030 2024-2034

DCF terminal stage >2030 >2023 >2034

20 August 2018


■ Other Assumptions: We estimate an 8% discount rate for the business that reflects the

strong demand for its product. We assume a 2% perpetual growth rate for the company,

implying a terminal FCF yield of 5.6% (in-line with the forward multiple for industrials).

Figure 38: Valuation Sensitivity to Deployment Growth and Gross Margin Estimates


Figure 39: Valuation Sensitivity to Acceptance CAGR till 2025 (Assuming a Diminishing Curve) and Gross

Margins; TP Implies a 20% CAGR and 30% GM


Equity value/sh Incremental acceptances in each yr over base case

$ 63 (10)% (5)% - 5% 10% 20% 50%

-500 bps $ 11 $ 12 $ 14 $ 15 $ 17 $ 20 $ 30

-400 bps $ 12 $ 14 $ 16 $ 17 $ 19 $ 23 $ 33

-300 bps $ 14 $ 16 $ 18 $ 20 $ 21 $ 25 $ 36 0 bps

%% $ 20 $ 22 $ 24 $ 26 $ 28 $ 33 $ 45

100 bps $ 22 $ 24 $ 26 $ 28 $ 31 $ 35 $ 49

200 bps $ 24 $ 26 $ 28 $ 31 $ 33 $ 38 $ 52

300 bps $ 26 $ 28 $ 31 $ 33 $ 36 $ 41 $ 56

400 bps $ 28 $ 31 $ 33 $ 36 $ 38 $ 44 $ 59

500 bps $ 30 $ 33 $ 36 $ 38 $ 41 $ 47 $ 63

Increment

al GM%

over base

case. i.e.

~30%

Equity value/sh 2019-2030 Acceptance CAGR

$ 69 10.0% 12.5% 15.0% 17.5% 20.0% 22.5% 25.0%

20.0% $ (5) $ (1) $ 3 $ 8 $ 15 $ 23 $ 32

22.5% $ (2) $ 2 $ 7 $ 13 $ 20 $ 29 $ 40

25.0% $ 1 $ 5 $ 11 $ 18 $ 26 $ 37 $ 49

27.5% $ 4 $ 9 $ 15 $ 23 $ 33 $ 45 $ 59

30.0% $ 7 $ 13 $ 20 $ 29 $ 40 $ 53 $ 69

32.5% $ 10 $ 17 $ 25 $ 35 $ 47 $ 62 $ 80

35.0% $ 14 $ 21 $ 30 $ 42 $ 55 $ 72 $ 92

37.5% $ 18 $ 26 $ 36 $ 49 $ 64 $ 82 $ 104

40.0% $ 22 $ 31 $ 42 $ 56 $ 73 $ 93 $ 118

current price range

Annual

gross

margin %

20 August 2018


Figure 40: Our $24 Target Price Implies 36x/22x 2019/20 EBITDA Multiples and 2.2%/3.0% FCF Yields


Key Forecasts & Ratios 2017 2018E 2019E 2020E 2021E 2022E

Acceptances, 100kW Systems 622 892 1,330 1,890 2,340 2,880

Revenues, $m $ 376 $ 746 $ 895 $ 1,087 $ 1,269 $ 1,540

Gross margin, % (3)% 20% 27% 29% 27% 29%

EBITDA, $m (ex stock-comp) $ (81) $ 62 $ 122 $ 199 $ 230 $ 322

EPS, $/sh (ex stock-comp) $ (2.63) $ (0.72) $ 0.18 $ 0.70 $ 0.83 $ 1.21

FCF, $m $ (99) $ (53) $ 87 $ 116 $ 233 $ 227

EV/EBITDA - current 65.9x 33.5x 20.5x 17.7x 12.7x

EV/EBITDA - target 68.6x 34.9x 21.3x 18.5x 13.2x

P/E - current (32.0)x 123.9x 32.6x 27.7x 19.0x

P/E - target (33.5)x 129.8x 34.2x 29.1x 19.9x

PEG - current (0.4)x 1.0x 0.1x 1.6x 0.4x

PEG - target (0.5)x 1.0x 0.1x 1.7x 0.4x

FCF yield - current (1.5)% 2.4% 3.2% 6.5% 6.3%

FCF yield - target (1.4)% 2.3% 3.1% 6.2% 6.1%

EV/Sales - current 5.5x 4.6x 3.8x 3.2x 2.7x

EV/Sales - target 5.7x 4.8x 3.9x 3.4x 2.8x

20 August 2018


Comps

Figure 41: BE vs Comparable in Fuel Cell, Renewables, Industrials—P/E, PEG, and EV/EBITDA

Source: Thomson Reuters, Credit Suisse estimates.

Figure 42: BE Vs Comparable in Fuel Cell, Renewables, Industrials—FCF Yield, EV/Sales, and Dividend Yield

Source: Thomson Reuters , Credit Suisse estimates.

Comps Sheet 8/15/2018 Mkt Cap EV, $m P/E PEG EV/EBITDA EV/Sales

Consensus est Last Close $m $m 2018 2019 2020 2018 2019 2020 2018 2019 2020

FuelCell manufacturers (55.1)x 69.9x 6.1x

FCEL.O FuelCell Energy Inc $ 1.03 $ 89 $ 202 NaN NaN NaN (7.2)x (12.1)x (36.6)x

PLUG.O Plug Power Inc $ 1.86 $ 400 $ 545 NaN NaN 186.0x (1.8)x (25.3)x 119.7x 13.4x

BLDP.O Ballard Power Systems Inc $ 3.01 $ 555 $ 522 NaN NaN 66.9x (0.2)x (132.7)x 102.2x 41.4x

Doosan Fuel Cell - not public

US renewable 31.3x 16.9x 13.8x (0.9)x 0.2x 0.6x 15.2x 8.7x 7.5x

FSLR.O First Solar Inc $ 50.70 $ 5,313 $ 2,635 31.3x 16.9x 13.8x (0.9)x 0.2x 0.6x 8.3x 4.2x 3.6x

SPWR.O SunPower Corp $ 6.69 $ 943 $ 2,636 NaN NaN NaN 22.0x 13.3x 11.5x

US YieldCo 24.2x 39.0x 28.6x (0.1)x (1.1)x 2.2x 11.6x 10.0x 9.5x

NEP Nextera Energy Partners LP O $ 49.0 $ 47.62 $ 2,586 $ 7,677 16.8x 22.5x 19.6x 0.1x (0.9)x 1.3x 8.2x 7.3x 6.1x

PEGI.O Pattern Energy Group Inc $ 19.48 $ 1,911 $ 5,039 12.0x 27.2x 25.8x (0.0)x (0.5)x 4.6x 12.6x 11.5x 11.4x

TERP.O TerraForm Power Inc $ 10.97 $ 2,293 $ 8,019 44.0x 67.2x 40.4x (0.4)x (1.9)x 0.6x 14.1x 11.3x 11.0x

Generation 13.7x 9.8x 11.6x (3.4)x 1.0x 0.0x 8.1x 8.9x 9.7x

NRG NRG Energy Inc $ 32.61 $ 9,895 $ 27,194 9.4x 8.9x 9.9x 0.0x 1.7x (1.0)x 8.7x 12.4x 14.6x

VST Vistra Energy Corp N $ 24.0 $ 22.06 $ 11,441 $ 22,654 20.6x 10.1x 15.2x (10.8)x 0.1x (0.5)x 7.8x 6.6x 7.3x

AES AES Corp $ 13.49 $ 8,926 $ 29,732 11.2x 10.3x 9.7x 0.6x 1.2x 1.6x 7.9x 7.6x 7.3x

Backup generators 12.5x 11.0x 10.1x (0.1)x 1.7x 0.1x 8.5x 7.9x 7.6x

GNRC.N Generac Holdings Inc $ 54.13 $ 3,356 $ 4,231 13.2x 12.9x 12.0x 0.5x 5.6x 1.5x 11.2x 11.0x 10.8x

BGG.N Briggs & Stratton Corp $ 18.41 $ 785 $ 1,063 14.8x 12.7x 10.9x (1.5)x 0.8x 0.7x 7.2x 6.6x 5.9x

CMI.N Cummins Inc O $ 171.0 $ 138.04 $ 22,543 $ 24,368 10.4x 9.2x 9.5x 0.4x 0.7x (3.8)x 6.8x 6.4x 6.6x

CAT.N Caterpillar Inc O $ 210.0 $ 132.02 $ 78,463 $ 106,041 11.3x 10.3x 9.6x 0.1x 1.0x 1.2x 9.2x 8.6x 8.2x

TEX.N Terex Corp O $ 62.0 $ 36.92 $ 2,721 $ 3,442 12.6x 9.9x 8.8x 0.1x 0.4x 0.7x 8.1x 7.0x 6.6x

Industrial comps 19.9x 18.1x 16.4x 1.3x 1.9x 1.7x 12.7x 12.0x 11.1x

AYI Acuity Brands Inc $ 140.07 $ 5,628 $ 5,892 15.9x 14.3x 12.6x 2.7x 1.3x 0.9x 10.7x 10.1x 9.2x

AOS A. O. Smith Corp $ 57.98 $ 9,892 $ 9,481 22.2x 19.8x 18.2x 1.0x 1.6x 2.1x 14.4x 13.0x 12.1x

NDSN.O Nordson Corp $ 132.89 $ 7,720 $ 9,108 22.1x 19.8x 18.0x 1.7x 1.7x 1.9x 14.6x 13.6x 12.8x

IEX IDEX Corp $ 151.58 $ 11,623 $ 12,024 28.4x 26.3x 24.3x 1.1x 3.3x 2.9x 18.2x 17.1x 16.0x

RBC Regal Beloit Corp $ 80.40 $ 3,494 $ 4,677 13.6x 12.4x 11.4x 0.6x 1.2x 1.3x 8.9x 8.4x 7.9x

HUBB.K Hubbell Inc $ 120.83 $ 6,618 $ 8,419 16.7x 15.2x 14.0x 0.5x 1.5x 1.7x 11.1x 10.5x 9.9x

B Barnes Group Inc $ 65.63 $ 3,360 $ 3,830 20.1x 18.8x 16.4x 1.4x 2.6x 1.2x 11.4x 10.9x 10.1x

BE.N Bloom Energy - CSest N $ 24.0 $ 22.91 $ 3,570 $ 4,088 (33.5)x 129.8x 34.2x (0.5)x 1.0x 0.1x 68.6x 34.9x 21.3x

CS Rating and

TP

Comps Sheet 8/15/2018 Mkt Cap EV, $m EV/Sales FCF Yield Dividend yield EPS

Consensus est Last Close $m $m 2018 2019 2020 2018 2019 2020 2018 2019 2020

FuelCell manufacturers 3.3x 2.5x 1.9x

FCEL.O FuelCell Energy Inc $ 1.03 $ 89 $ 202 2.2x 1.5x 1.1x 18.4% (53.5)% 1.5%

PLUG.O Plug Power Inc $ 1.86 $ 400 $ 545 3.2x 2.4x 1.6x (9.0)% 1.0%

BLDP.O Ballard Power Systems Inc $ 3.01 $ 555 $ 522 4.5x 3.6x 2.9x (4.2)% (0.7)% 2.1%

Doosan Fuel Cell - not public

US renewable 1.2x 1.0x 0.9x (17.2)% 3.2% 9.7%

FSLR.O First Solar Inc $ 50.70 $ 5,313 $ 2,635 1.0x 0.9x 0.8x (15.9)% 2.6% 8.1%

SPWR.O SunPower Corp $ 6.69 $ 943 $ 2,636 1.3x 1.2x 1.0x (18.5)% 3.8% 11.2%

US YieldCo 9.3x 7.8x 7.3x (5.6)% 11.3% 12.9% 6.4% 6.8% 7.2%

NEP Nextera Energy Partners LP O $ 49.0 $ 47.62 $ 2,586 $ 7,677 7.6x 6.0x 5.1x 1.9% 2.9% 10.9% 3.7% 4.2% 4.8%

PEGI.O Pattern Energy Group Inc $ 19.48 $ 1,911 $ 5,039 9.9x 8.8x 8.4x 8.8% 15.4% 15.0% 8.7% 8.7% 9.0%

TERP.O TerraForm Power Inc $ 10.97 $ 2,293 $ 8,019 10.3x 8.5x 8.4x (27.5)% 15.6% 6.9% 7.4% 7.9%

Generation 2.4x 2.5x 2.6x 10.2% 14.2% 13.5%

NRG NRG Energy Inc $ 32.61 $ 9,895 $ 27,194 2.3x 2.8x 3.0x 7.0% 13.1% 11.1%

VST Vistra Energy Corp N $ 24.0 $ 22.06 $ 11,441 $ 22,654 2.3x 2.0x 2.1x 12.3% 17.7% 16.0%

AES AES Corp $ 13.49 $ 8,926 $ 29,732 2.6x 2.6x 2.7x 11.3% 11.8% 13.4%

Backup generators 1.3x 1.2x 1.2x 4.8% 7.7% 9.2%

GNRC.N Generac Holdings Inc $ 54.13 $ 3,356 $ 4,231 2.2x 2.2x 2.1x 6.1% 6.7%

BGG.N Briggs & Stratton Corp $ 18.41 $ 785 $ 1,063 0.6x 0.6x 0.6x (0.6)% 6.2% 8.4%

CMI.N Cummins Inc O $ 171.0 $ 138.04 $ 22,543 $ 24,368 1.0x 1.0x 1.0x 6.6% 8.7% 8.6%

CAT.N Caterpillar Inc O $ 210.0 $ 132.02 $ 78,463 $ 106,041 2.0x 1.8x 1.7x 7.3% 9.5% 9.9%

TEX.N Terex Corp O $ 62.0 $ 36.92 $ 2,721 $ 3,442 0.7x 0.6x 0.6x 4.7% 7.6% 10.0%

Industrial comps 2.7x 2.6x 2.5x 5.4% 6.2% 6.6%

AYI Acuity Brands Inc $ 140.07 $ 5,628 $ 5,892 1.6x 1.6x 1.5x 6.1% 7.4% 7.4%

AOS A. O. Smith Corp $ 57.98 $ 9,892 $ 9,481 2.9x 2.7x 2.5x 4.0% 4.7% 3.8%

NDSN.O Nordson Corp $ 132.89 $ 7,720 $ 9,108 4.0x 3.8x 3.7x 4.8% 5.4%

IEX IDEX Corp $ 151.58 $ 11,623 $ 12,024 4.9x 4.6x 4.4x 3.8% 4.3% 4.8%

RBC Regal Beloit Corp $ 80.40 $ 3,494 $ 4,677 1.3x 1.2x 1.2x 7.8% 9.0% 9.9%

HUBB.K Hubbell Inc $ 120.83 $ 6,618 $ 8,419 1.9x 1.8x 1.8x 6.0% 6.8% 7.3%

B Barnes Group Inc $ 65.63 $ 3,360 $ 3,830 2.5x 2.4x 2.3x 5.4% 5.6% 6.3%

BE.N Bloom Energy - CSest N $ 24.0 $ 22.91 $ 3,570 $ 4,088 5.7x 4.8x 3.9x (1.4)% 2.3% 3.1%

CS Rating and

TP

20 August 2018


Management, Compensation, and Corporate Governance

■ CEO KR Sridhar: Mr. Sridhar is a passionate founder CEO. He was a professor of

aerospace and mechanical engineering at Arizona University and was an advisor to

NASA and Kleiner Perkins.

■ CFO Randy Furr: Mr. Furr has CFO experience at publicly listed Spansion, a

semiconductor manufacturer that was acquired by Cypress in 2015, and other tech

firms and started his career at Sanmina-SCI, an electronics manufacturing company.

Figure 43: Bloom Energy Management


Figure 44: Bloom Energy Management Compensation


Management Current Position at Bloom Tenure Prior experience/education

KR Sridhar CEO, Founder Since 2001 Arizona University, Professor of Aerospace and Mechanical Engineering

Advisor to NASA and Kleiner Perkins

Randy Furr CFO Since 2015 CFO at Spansion (semiconductor manufacturer), 2009-2015

CFO at Magellan Navigation (a portable GPS electronic company), 2008-2009

CFO at Aliph, Inc (Bluetooth device company), 2008-2008

Bill Kurtz Chief Commercial Officer Since 2015 CFO at Bloom, 2008-2015

CFO at Scient Corporation (professional services providers)

Susan Brennan COO Since 2013 VP of Manufacturing at Smyrna and Decherd at Nissan North American (automobiles) 2008, 2013

Director of Global Manufacturing and other management roles at Ford, 1995-2008

Swaminathan Venkataraman CTO and EVP of Engineering Since 2003 Principal Technologist at Aspen Technoligy, Inc (supply chain mgmt software providers),

Matt Ross Chief Marketing Officer Since 2011 Independent Consultant, 2010-2011

CEO of McCann WorldGroup EXP, 2009-2010

Corporate EVP at McCann, 2005-2009

William Thayer EVP of Sales Since 2005 VP of sales at American Power Conversion (provider of network critical infrastructure), 2003-2005

Shawn Soderberg General Counsel and Secretary Since 2016 General Counsel at Bio-Rad Laboratotires, (medical technology provider), 2013-2016

General Counsel at Aricent Group (sofware engineering company) 2006-2013

General Counsel of H&Q Asia Pacific (Private Equity firm), 2000-2006

Glen Griffiths EVP of Quality, Reliability and Sustainability Since 2014 Chief Quality Officer at Hewlett Packard (printing company), 2011-2014

VP of Global Engineering at Hewlett Packard, 2008 - 2011

Name and PositionYear Salary Bonus Stock Awards Option

Awards

Non-Equity

Incentive Plan

Compensation

All Other

Compensation

Total

KR Sridhar 2017 $524,039 $419,833 $13,138,908 $16,099,208 $26,477 $30,208,465

CEO 2016 $500,000 $722,600 $6,672,825 $25,092 $7,920,517

Randy Furr 2017

CFO 2016

Susan Brennan 2017 $344,616 $146,652 $352,977 $26,477 $870,722

COO 2016 $335,000 $230,768 $908,160 $24,012 $1,497,940

Glenn Griffiths 2017 $312,212 $110,685 $235,318 $13,077 $671,292

EVP of Qual, Rel & Sus2016 $305,000 $166,805 $880,537 $356,499 $12,684 $1,721,525

20 August 2018


Figure 45: Bloom Energy Board Compensation


Name Independent? Experience Audit Nominating &

Corporate

Governance

Compensation Tenure

KR Sridhar N CEO and Founder, Bloom Energy (Chair of board) YYYY

Kelly A. Ayotte Y US Senate (2001-2016) C Since 2017

Mary K. Bush Y President, Bush International (since 1991) C Since 2017

John T. Chambers Y Founder & CEO, JC2 Ventures x na

L. John Doerr Y General Partner, Kleiner Perkins (VC) x Since 2002

Colin Powell Y US Secretary of State (2001-2005) x x na

Scott Sandell Y Managing General Partner, New Enterprise Associates x C Since 2003

Peter Teti Y Managing Director, Morgan Stanley Since 2015

Eddy Zervigon Y Special Advisor, Riverside Management Group x Since 2007

20 August 2018


Financial Statements

Figure 46: Bloom Energy Income Statement


Income statement, $m unless specified 2016 2017 1Q18 2Q18 3Q18E 4Q18E 2018E 2019E 2020E

Product revenue (Upfront+Ratable) $ 76 $ 180 $ 121 $ 109 $ 148 $ 174 $ 552 $ 719 $ 892

Install revenue (Upfront+Ratable) $ 17 $ 63 $ 14 $ 26 $ 7 $ 7 $ 54 $ 27 $ 27

Service revenue $ 68 $ 77 $ 20 $ 20 $ 21 $ 22 $ 83 $ 92 $ 111

Electricity revenue $ 48 $ 56 $ 14 $ 14 $ 14 $ 14 $ 57 $ 57 $ 57

Total Revenues $ 209 $ 376 $ 169 $ 169 $ 191 $ 218 $ 746 $ 895 $ 1,087

guidance $ 169

Product COGS (Upfront+Ratable) $ 103 $ 207 $ 79 $ 78 $ 86 $ 105 $ 349 $ 376 $ 454

Installation COGS (Upfront+Ratable) $ 18 $ 59 $ 10 $ 28 $ 35 $ 30 $ 103 $ 130 $ 168

Service Revenue $ 155 $ 82 $ 24 $ 19 $ 25 $ 39 $ 107 $ 112 $ 109

Electricity Revenue $ 36 $ 39 $ 10 $ 9 $ 10 $ 10 $ 39 $ 39 $ 38

COGS - excl SBC $ 307 $ 386 $ 124 $ 134 $ 157 $ 183 $ 598 $ 657 $ 769

Gross profit - excl SBC $ (98) $ (10) $ 46 $ 35 $ 34 $ 34 $ 148 $ 238 $ 318

guidance $ 35

GM% - excl SBC (47.0)% (2.7)% 26.9% 20.6% 17.7% 15.8% 19.9% 26.6% 29.2%

R&D - excl SBC $ 42 $ 46 $ 13 $ 13 $ 12 $ 6 $ 44 $ 62 $ 66

S&M - excl SBC $ 24 $ 28 $ 7 $ 7 $ 9 $ 13 $ 36 $ 47 $ 47

G&A - excl SBC $ 50 $ 43 $ 12 $ 12 $ 13 $ 13 $ 49 $ 54 $ 56

Total Opex - excl SBC $ 116 $ 117 $ 32 $ 32 $ 34 $ 32 $ 130 $ 163 $ 170

Opex as % of revenues 55.6% 31.1% 18.8% 19.1% 17.8% 14.6% 17.5% 18.2% 15.6%

EBIT - excl SBC $ (214) $ (127) $ 14 $ 2.6 $ (0) $ 3 $ 18 $ 75 $ 149

guidance $ 2.3

Stock based compensation $ 28 $ 30 $ 8 $ 8 $ 48 $ 56 $ 120 $ 221 $ 108

EBIT - incl SBC $ (242) $ (158) $ 6 $ (5) $ (48) $ (54) $ (102) $ (146) $ 40

D&A Total $ 43 $ 46 $ 11 $ 11 $ 11 $ 11 $ 44 $ 47 $ 51

memo: EBITDA (ex stock comp) $ (171) $ (81) $ 24 $ 13 $ 11 $ 14 $ 62 $ 122 $ 199

EBITDA margin % (82.0)% (21.6)% 14.5% 7.9% 5.7% 6.4% 8.3% 13.6% 18.3%

(-) Total Interest expense $ (81) $ (109) $ (23) $ (25) $ (19) $ (19) $ (87) $ (74) $ (51)

(-) Other non-operating income (expense) - includes FX, derivative liabilities, etc..$ (13) $ (15) $ (5) $ (20) $ - $ - $ (24) $ - $ -

Pretax income $ (337) $ (281) $ (22) $ (50) $ (67) $ (73) $ (212) $ (221) $ (10)

(-) Tax benefit (expense) $ (1) $ (1) $ (0.3) $ (0.1) $ 4 $ 4 $ 7 $ 15 $ 2

(+) Loss attributable to NCI $ 57 $ 19 $ 5 $ 5 $ 5 $ 4 $ 18 $ 18 $ 18

Net income $ (281) $ (263) $ (18) $ (46) $ (59) $ (65) $ (187) $ (187) $ 10

Net income (Ex stock comp) $ (253) $ (233) $ (10) $ (38) $ (11) $ (9) $ (67) $ 34 $ 118

EPS diluted $ (3.17) $ (2.97) $ (0.20) $ (0.52) $ (0.54) $ (0.59) $ (1.85) $ (1.32) $ 0.06

EPS diluted, ex stock comp $ (2.85) $ (2.63) $ (0.11) $ (0.43) $ (0.10) $ (0.08) $ (0.72) $ 0.18 $ 0.70

Diluted sharecount (if dilutive) 88.4 88.4 88.4 88.4 109.3 109.4 98.9 152.5 168.3

Key Metrics

Acceptances, 100s kW 687 622 166 181 225 320 892 1,330 1,890

Acceptances, MW 69 62 17 18 23 32 89 133 189

Cumulative Acceptances, MW 235 297 314 332 354 386 386 519 708

ASP - Product+Install, $/kW $ 7,705 $ 4,460 $ 7,745 $ 7,073 $ 6,573 $ 5,450 $ 6,490 $ 5,405 $ 4,719

COGS - Product+Install, $/kW $ 10,127 $ 5,059 $ 5,095 $ 5,591 $ 5,175 $ 4,066 $ 4,847 $ 3,660 $ 3,186

Services, GWh 1,422 1,732 494 529 566 602 2,191 2,792 3,726

20 August 2018


Figure 47: Bloom Energy Balance Sheet


Figure 48: Bloom Energy Cash Flow Statement


Balance sheet 2016 2017 1Q18 2Q18 3Q18E 4Q18E 2018E 2019E 2020ECash and cash equivalents (incl restricted) 218 207 164 150 227 220 220 252 319

Accounts receivable 35 30 59 37 41 50 50 77 100

Inventories 83 90 97 136 128 129 129 120 141

Net Fixed Assets - Bloom 76 67 65 63 67 74 74 88 109

Net Fixed Assets - PPA 463 430 422 414 407 399 399 367 335

Deferred COGS - ST & LT 182 253 237 204 204 204 204 204 204

Other current and long term assets 147 142 141 152 152 152 152 152 152

Total assets 1,204 1,221 1,185 1,158 1,227 1,228 1,228 1,260 1,361

Accounts payable 42 49 48 54 60 60 60 65 70

Debt - Bloom (ST&LT) 417 581 594 609 400 411 411 439 453

Debt - PPA (ST&LT) 378 360 357 351 345 338 338 281 224

Derivative Liabilities 136 157 164 188 188 188 188 188 188

Deferred Revenue - ST & LT 336 428 406 396 396 396 396 396 396

Other current and long term liabilities 156 147 133 124 129 134 134 155 176

Total Liabilities 1,463 1,722 1,700 1,723 1,518 1,528 1,528 1,525 1,508

Total Equity (259) (501) (516) (565) (291) (300) (300) (265) (147)

Total Liabilities & Equity 1,204 1,221 1,185 1,158 1,227 1,228 1,228 1,260 1,361

balance sheet check (0) 0 - - - - - - -

-

Days receivable 62 29 31 20 20 21 24 31 34

Inventory days 99 85 71 93 75 65 79 66 67

Days payable 50 46 35 36 35 30 36 36 34

Total Debt 794 941 950 960 745 750 750 720 677

Net Debt 576 734 787 810 518 530 530 469 358

Cash Flows 2016 2017 1Q18 2Q18 3Q18E 4Q18E 2018E 2019E 2020E

Net income $ (198) $ (232) $ (18) $ (46) $ (59) $ (65) $ (187) $ (187) $ 10

D&A $ - $ 46 $ 11 $ 11 $ 11 $ 11 $ 44 $ 47 $ 51

Stock based compensation $ 22 $ 30 $ 8 $ 8 $ 48 $ 56 $ 120 $ 221 $ 108

Interest non-cash $ - $ 47 $ 7 $ 7 $ 12 $ 12 $ 38 $ 47 $ 26

Other adjustments $ 41 $ (43) $ 13 $ - $ - $ (29) $ - $ -

Change in working capital $ (8) $ 78 (42) 22 10 (10) $ (19) $ (12) $ (39)

Cash flow from operations $ (184) $ (67) (34) 16 22 5 $ (34) $ 117 $ 156

Co Guidance CFO (34.5) (3.7) 4.3 32.0 (1.9) 120.0

Capex $ - $ (5) (0) (1) (7) (10) $ (19) $ (30) $ (40)

Safe harbor prepayment $ - $ (27) 7 5 - - $ 11 $ - $ -

Cash flow from investments - (32) 7 3 (7) (10) (7) (30) (40)

Co Guidance CIO (0.2) (2.5) (7.6) (10.0) (20.3) (29.4)

Debt Financing - Bloom $ - $ 92 (0.1) 0.8 (216) 5 $ (211) $ 2 $ 9

Debt Financing - PPA $ - $ (20) (4.7) (5.8) (6.3) (6.3) $ (23) $ (57) $ (57)

Equity $ - $ (1) (0.5) 0.0 284 - $ 284 $ - $ -

Other $ (10) (3.8) (7.8) - -

Cash flow from financing $ - $ 62 (9.1) (12.8) 62 (2) $ 50 $ (55) $ (48)

Co Guidance CFO (9.0) (1.3) 229.9 (4.2) 215.4 (23.9)

FX $ - $ - - - - - $ - $ - $ -

Net change in cash $ (184) $ (37) $ (37) $ 6.3 $ 77 $ (7) $ 9 $ 32 $ 68

Beginning cash $ 402 $ 218 $ 181 $ 144 $ 150 $ 227 $ 181 $ 190 $ 221

Ending cash $ 218 $ 181 $ 144 $ 150 $ 227 $ 220 $ 190 $ 221 $ 289

FCF $ (184) $ (99) $ (35) $ 15 $ 15 $ (5) $ (53) $ 87 $ 116

20 August 2018


Companies Mentioned (Price as of 16-Aug-2018) A O Smith (AOS.N, $58.22) AES Corporation (AES.N, $13.87) AT&T (T.N, $33.09) Acuity Brands (AYI.N, $142.35) Apple (AAPL.OQ, $213.32) Australian Mines (AUZ.AX, A$0.063) Babcock & Wilcox Enterprises (BW.N, $1.33) Ballard Pow Syst (BLDP.OQ, $3.1) Bloom Energy (BE.N, $23.13, NEUTRAL[V], TP $24.0) Briggs (BGG.N, $19.64) Caterpillar Inc. (CAT.N, $136.26) Clean TeQ (CLQ.AX, A$0.56) Costco Wholesale (COST.BA, A$248.15) Cox Communications (Unlisted) Cummins Inc. (CMI.N, $140.76) Doosan (000150.KS, W110,000) Equinix, Inc. (EQIX.OQ, $443.6) FedEx Corporation (FDX.N, $246.25) First Solar (FSLR.OQ, $50.86) FuelCell Energy (FCEL.OQ, $1.14) Generac Hldg (GNRC.N, $54.8) Home Depot (HD.N, $195.39) IDEX (IEX.N, $152.03) Intel Corp. (INTC.OQ, $47.17) Kellogg Company (K.N, $72.7) Lockheed Martin Corporation (LMT.N, $325.86) Morgan Stanley (MS.N, $48.3) NRG Energy (NRG.N, $33.79) NextEra Energy Partners (NEP.N, $47.62) NioCorp (NB.TO, C$0.68) Nordson (NDSN.OQ, $135.33) Pattern Energy (PEGI.OQ, $19.91) Platina (PGM.AX, A$0.095) Plug Power (PLUG.OQ, $1.97) Public Service Enterprise Group (PEG.N, $53.8) Regal Beloit (RBC.N, $81.5) Scandium Intl (SCY.TO, C$0.18) Southern Company (SO.N, $47.5) SunPower (SPWR.OQ, $6.6) Terex Corporation (TEX.N, $37.73) TerraForm Power (TERP.OQ, $11.25) Vistra Energy (VST.N, $22.45) Walmart Inc. (WMT.N, $98.64) Xcel Energy (XEL.N, $98.64)

Disclosure Appendix

Analyst Certification Michael Weinstein, ERP, and Maheep Mandloi each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and Asia stocks (excluding Japan and Australia), ratings are based on a stock’s total return relative to the average total return of the relevant country or region al benchmark (India - S&P BSE Sensex Index); prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolu te total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stoc ks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform wh ere an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

20 August 2018


Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 48% (63% banking clients) Neutral/Hold* 37% (58% banking clients) Underperform/Sell* 12% (54% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stoc k ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual fact ors.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for Bloom Energy (BE.N)

Method: Our Neutral rating and $24/sh target price is based on a three-stage DCF of cash flows including 32% deployment CAGR through 2023 due to ITC in the US, a 10% per year growth through 2030 due to cost cuts, followed by terminal growth rate of 2%. We assume an equity discount rate of 8%.

Risk: Key risks to our Neutral rating and $24 target price include: (i) Timely execution of power system installations, (ii) Cost reduction in time to offset declining tax credits in the US, (iii) Potential disruptions in rare-earth material supply (Scandium), (iv) Customer concentration risk, (v) decline in utility retail rates.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): BE.N, LMT.N, NRG.N, WMT.N, CAT.N, EQIX.OQ, INTC.OQ, HD.N, NEP.N, K.N, SPWR.OQ, AES.N, TEX.N, MS.N, FSLR.OQ, T.N, VST.N Credit Suisse provided investment banking services to the subject company (BE.N, NRG.N, WMT.N, INTC.OQ, HD.N, NEP.N, SPWR.OQ, AES.N, TEX.N, MS.N, T.N, VST.N) within the past 12 months. Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non-investment-banking, securities-related: LMT.N, NRG.N, WMT.N, INTC.OQ, HD.N, NEP.N, SPWR.OQ, AES.N, TEX.N, MS.N, T.N Credit Suisse has managed or co-managed a public offering of securities for the subject company (BE.N, NRG.N, WMT.N, HD.N, NEP.N, SPWR.OQ, AES.N, T.N, VST.N) within the past 12 months. Within the past 12 months, Credit Suisse has received compensation for investment banking services from the following issuer(s): BE.N, NRG.N, WMT.N, INTC.OQ, HD.N, NEP.N, SPWR.OQ, AES.N, TEX.N, MS.N, T.N, VST.N

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20 August 2018


Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (BE.N, PEGI.OQ, LMT.N, NRG.N, BW.N, WMT.N, CAT.N, EQIX.OQ, INTC.OQ, CMI.N, HD.N, NEP.N, SO.N, K.N, SPWR.OQ, AES.N, TEX.N, MS.N, FSLR.OQ, T.N, VST.N) within the next 3 months. Within the last 12 months, Credit Suisse has received compensation for non-investment banking services or products from the following issuer(s): LMT.N, NRG.N, WMT.N, INTC.OQ, HD.N, NEP.N, SPWR.OQ, AES.N, TEX.N, MS.N, T.N Credit Suisse or a member of the Credit Suisse Group is a market maker or liquidity provider in the securities of the following subject issuer(s): AES.N, T.N, BW.N, BE.N, CAT.N, CMI.N, EQIX.OQ, FDX.N, FSLR.OQ, HD.N, INTC.OQ, K.N, LMT.N, MS.N, NRG.N, NEP.N, PEGI.OQ, SO.N, SPWR.OQ, TEX.N, VST.N, WMT.N A member of the Credit Suisse Group is party to an agreement with, or may have provided services set out in sections A and B of Annex I of Directive 2014/65/EU of the European Parliament and Council ("MiFID Services") to, the subject issuer (BE.N, PEGI.OQ, LMT.N, NRG.N, BW.N, FDX.N, WMT.N, CAT.N, EQIX.OQ, INTC.OQ, CMI.N, HD.N, NEP.N, SO.N, K.N, SPWR.OQ, AES.N, TEX.N, MS.N, FSLR.OQ, T.N, VST.N) within the past 12 months. CS served as Financial Advisor to Pattern Energy Group (NASDAQ and TSX: PEGI) on their sale of the company’s operations in Chile to affiliates of Arroyo Energy Investors. Credit Suisse acted as financial adviser to Global Infrastructure Partners on its announced agreement to acquire NRG Energy's ownership interest in NRG Yield and NRG's renewable development and operations platform Credit Suisse is advising Walmart in relation to the announced combination of Sainsbury’s and Asda Group Limited, Walmart’s wholly owned UK retail subsidiary. Credit Suisse acted as Exclusive Financial Advisor to AT&T (T.N) on their acquisition of AlienVault.

For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=375465&v=-3axk7my1stucep2kfkzdvx9u7 .

Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse Securities (USA) LLC ...................................................................................................... Michael Weinstein, ERP ; Maheep Mandloi

Important disclosures regarding companies that are the subject of this report are available by calling +1 (877) 291-2683. The same important disclosures, with the exception of valuation methodology and risk discussions, are also available on Credit Suisse’s disclosure website at https://rave.credit-suisse.com/disclosures . For valuation methodology and risks associated with any recommendation, price target, or rating referenced in this report, please refer to the disclosures section of the most recent report regarding the subject company.

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20 August 2018


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