First Solar’s Growth Story

Amidst the Energy Policy debates, First Solar (FSLR) is another cleantech company worth watching. Founded in 1999 with the mission to provide an economic solution to the need for alternative energy sources, First Solar is now one of the fastest-growing solar module manufacturers in the world. First Solar is also the world’s largest manufacturer of thin-film solar modules, and in Q1’08 managed to achieve the lowest manufacturing cost per watt in the industry at $1.14/watt.  

Its recently announced Q2 revenues and EPS exceeded all analyst expectations. Revenues for the quarter were $267 million, against the Street’s expectation of $217 million, growing 35.6% sequentially and 246% over the year. EPS grew to $0.85, compared with the Street’s view of $0.57, and grew 49% sequentially. EPS in Q2 '07 was $0.07. 

Production grew 5% over the quarter and 30% over the year to 114.1 megawatts, and conversion efficiency increased to 10.7% from 10.6% in the previous quarter. However, the company’s cost per watt increased marginally to $1.18 from $1.14 in the previous quarter. The cost rise was primarily blamed on the higher set-up costs of the facility in Malaysia, where two plants are expected to be fully operational by the end of the year. 

For the year, the company expects to be able to sell 470-485 megawatts of energy and generate $1.175-$1.225 billion in revenues, with GAAP operating margins of 31%-33%.  

First Solar has a strong presence in European markets, where it is expecting further expansion, especially in Germany, France, and Italy.  

First Solar is also now expanding its presence in the U.S., where it is seeking to establish pilot projects to enable it to validate and demonstrate the cost and performance of utility-scale PV systems and to establish business relationships with U.S. utilities. The company has already announced a 7.5-megawatt AC pilot project in Blythe, California, which has the potential to ramp to 21 megawatts AC. It will construct and finance this project and sell the power to Southern California Edison, subject to an extension of the federal Investment Tax Credit [ITC]. 

It also announced the construction of a 10-megawatt AC project in Nevada in association with Sempra generation, and designed a 2-megawatt AC rooftop project in Southern California, which will be the largest rooftop PV system in the U.S. First Solar has various commercial models planned for the U.S., such as build-own-operate or build-own-transfer, but its growth plans in the country depend on how the ITC is structured.  

The company is well positioned to handle the solar industry growth rate with its improving efficiency gains, successful manufacturing ramps, and ability to contain production costs by setting up production facilities in relatively lower cost countries such as Malaysia. 

The stock rose 5% on the announcement of the results but has slipped since and is currently trading at $214.65. It is still expensive, but given its prospects, you may want to look for a buying opportunity.

 

Disclosure: None

Comments

[Mark Anthony:]

First Solar (FSLR)'s growth is confined by the tight global supply of tellurium, an exceedingly rare element on earth. I predict the total demise of FSLR as a going concern in a few years. Read my previous articles:

seekingalpha.com/autho...

2008 Sep 16 11:16 AM

[Fremont Rea...:]

It's hard to understand a player's future in the space unless you compare their why their approach to solar energy is superior to others. Is there a site that aggregates and tracks the cost per watt for the various energy production companies?

2008 Sep 16 11:47 AM

[rcraig:]

I still have more faith in geothermal than solar in the long run.
One solar requires a storage facility to provide power 24 X 7.
Wind has similar drawbacks.
Geothermal has a smaller total geological footprint than either per KW and provides reliable steady power 24 X 7 X 365.
Solar seems to be the lastest and greatest fad just like a D&B handbag for the women.

2008 Sep 16 01:28 PM

[creativforce:]

I think the 24/7 criticism of solar and wind is overstated. No one is suggesting that either of these power sources will be the one and only. Also, high capacity storage is becoming more available--look at the news from BCON that they have brought a 1 MW energy storage device online today using their flywheel systems.

2008 Sep 16 03:02 PM

[tessant:]

Solar is here to stay...I too get annoyed with the constant chatter and the micromanaging...silico... valley will not disappoint!

scott
solarfeeds.com

2008 Sep 16 04:45 PM