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WIKI ANALYSIS
| Table of Contents |
| Intro and Overview |
| Introduction |
| Company Overview |
| Trends and Forces |
| Key Trends and Forces |
| Competition |
First Solar makes cadmium telluride (CdTe) glass substrate based thin film photovoltaic (PV) panels, which are used to convert sunlight into electricity. Unlike other solar cell manufacturers, which produce crystalline silicon PV cells, First Solar makes CdTe thin-film PV panels on glass substrates. It is the only manufacturer to do so in volume. Although this new technology converts sunlight to electricity less efficiently than traditional silicon PV modules, thin film PV cells have an advantage in producing electricity under lower light conditions. This means that when it's cloudy or early and late in the day, First Solar's thin film PV cells are still cranking away, producing electricity while their silicon counterparts sit idle. The ability to produce electricity under a wider range of light conditions makes these cells attractive to utility companies who require stable large-scale, utility-sized renewable energy production. In addition to this advantage, producers thin-film PV modules also enjoy a major cost advantage since they are not affected by the scarcity, and subsequent rising price of polysilicon. This has helped First Solar secure $6 billion of contracted sales (3.35GW) through 2012[1] with numerous European energy utilities and solar installers.
The company was the first PV company to manufacture and ship more than 1 GW of solar modules in 2009. It is also the world's largest solar module manufacturer and has expanded capacity from 75MW per year at the beginning of 2007 to more than 1GW in 2009.[2] First Solar was also able to lower the cost of manufacturing solar modules below $1 per watt in late 2008 and has continued to drive down manufacturing costs.[3]
In response to growing concerns over Global Climate Change, governments (State and Federal) in the United States and Europe have passed legislation to encourage the use of solar power, often through tax subsidies, while discouraging the use of dirtier forms of power. These incentives are by no means guaranteed and in some cases are designed to phase out as our country approaches a certain level of solar usage.
First Solar's cost advantage comes largely from that its manufacturing process uses little or no polysilicon. This advantage will diminish in 2009 and 2010 as more polysilicon manufacturing capacity comes on line. Lower polysilicon prices will allow First Solar's competitors to produce their solar cells at much lower prices.
Company Overview
First Solar's Financials
First Solar has demonstrated strong revenue growth over the past three years. Since 2004, it has more than doubled its revenue each successive year while turning a profit in 2008.
4Q 2009 Summary
In January 2010 First Solar announced plans to create a solar plant in Blanquefort, France it will be the company's second manufacturing plant in Europe.The plant will be run by First Solar, co-financed with EDF Energies Nouvelles and the entire production will be sold to EDF for the first ten years of operation. Construction is expected to begin in the second half of 2010 and full production capacity of more than 100MW a year is expected in 2012. Total investment in the plant is expected to be €100 million. The invest strengthens First Solar's interest in the French solar market and the fact that it expects the country to become a strong market in Europe.[5]
3Q 2009 Summary
For the third quarter of 2009 net revenue was down 8.5% to $481 million and income was $153 million. The drop in revenue was primarily due to the fact the First Solar had not closed a deal to sell a Canadian power plant by the end of the quarter. The company also reported that it was able to produce solar panels at an average cost of 85 cents per watt during the quarter.[6]
2Q 2009 Summary
In the second quarter of 2009 net sales and gross profit were $526 million and $298 million, respectively, doubling from the same period in 2008.[7] The company has reduced its cost for module manufacture from $0.93 for the first quarter of 2009 to $0.87 in the second quarter.[8]
At the end of the second quarter First Solar had contracts with fifteen European solar power project developers and system integrators, as well as a five year agreement with a developer and integrator in the United States. Currently these contracts account for a significant portion of planned production through 2013.[9]
On September 8, 2009 First Solar announced it had received initial approval from the Chinese government to build a solar field, through a 10 year contract, that could span 25 square miles in a large desert north of the Great Wall. The field will be able to generate 2 GW, enough to power three million homes. It has been reported that a project of this size would cost between $5 and $6 billion if it were built in the U.S., however it will likely be cheaper due to lower labor costs in China.[10]
At the end of October 2009 First Solar announced plans for a a 186-hectare, 20MW solar farm near Belmont, London. The project stems from First Solar's acquisition of OptiSolar Farms Canada in April of 2009. The farm has the potential to power 3000 homes.[11]
4Q 2008 Summary
In the fourth quarter of 2008, First Solar saw net sales of $433.7 million, up 24.4% quarter-on-quarter.[3] Net income was $132.8 million, up 33% from the last quarter.[12] The company was also able to lower its manufacturing costs per Watt to 98 cents, below the longtime industry milestone of $1 per Watt.[3]
2Q Summary
In the second quarter of 2008, the company's conversion efficiency increased by 10 basis points, to 10.7%.[13] Production was 114.1 MW, an increase of 5% from the 1st quarter and 30% year-on-year.[13] Net sales rose 35.6% from the 1st quarter, to $267 million.[13] ASP per watt increased from $2.47 to $2.57. Operating income was $88.7 million, up from $58.1 million.[13]
1Q Summary
In the first quarter of 2008, First Solar saw net sales of $196.9 million - up $130 million year-on-year but down $3.9 million from 4Q07. Gross margins were 53% - down 2.3% from 4Q07. The company's backlog is worth $6 billion. It is important to note that First Solar derives a significant percentage of its revenues from a small core group of customers primarily within Europe, and specifically, Germany. International operations accounted for 95% of net sales in 2008 and 98.8% in 2007. 74% of sales in 2008 resulted from solar module sales in Germany.[14]
Losing sales in Europe could have an adverse effect on the business, but as First Solar develops additional customer relationships outside of Europe and in other markets, it will reduce the company's customer and geographic concentration and dependence.
Acquisition
In April of 2009 First Solar acquired OptiSolar Inc., a solar power project development business. The acquisition expanded the company's ability to sell power systems including solar modules directly to systems owners and provide solutions that reduce solar electricity costs.[8] More importantly, it gave the company access to OptiSolar's impressive pipeline. The pipeline includes a $1 billion, 550MW solar plant project for a power-purchase agreement with PG&E. OptiSolar was also in negotiations for 1,300MW of solar projects with additional utilities and it also gave First Solar land rights to 136,000 acres with the potential for utility-scale solar power projects. The acquisition was through issuance of First Solar common stock which equated to about $400 million.[15][16]
First Solar Sells Two Projects in Development
In Ocober of 2009 First Solar sold a 20 MW solar project in Ontario to a Canadian oil pipeline company called Enbridge Inc. The project was one that the company acquired when it bought OptiSolar in April of 2009.[17]
At the end of November 2009 the company announced that it would sell a 21 MW project that it constructed in Blythe, California to NRG Energy. This project stemmed from its acquisition of Turner Renewables in December 2007.[18]
First Solar announced commercial production of the plant at the end of December 2009. Electricity from the solar facility is being sold to Southern California Edison under a 20-year power purchase agreement. The plant is the largest thin film PV project in the U.S. and is five times the size of the next largest PV project in California. At peak capacity the plant can supply enough power for 17,000 homes and will generate over 45,000 megawatt-hours.[19]
In response to the opening of the Blythe plant, California Governor Arnold Schwarzenegger acknowledged First Solar's accomplishment and the strong potential of solar energy by stating: "It is no surprise that America's largest thin film solar project was built right here in California, where my Administration has successfully created a climate where green businesses can thrive. It is forward-thinking businesses such as First Solar that will help California reach its nation-leading greenhouse gas reduction and Renewable Portfolio Standard goals, as well as create the new green jobs that will help spur our economic recovery."[20] The statement demonstrates strong government support and focus on solar energy companies in California. This may help to drive interest in First Solar projects and solar modules.
The company continues to develop 1,300 MW of PV solar projects in California and the Southwest. The selling of these two projects signals that the company may rather construct and sell power plants, rather then try to be both a plant owner and equipment manufacturer. This strategy exposes the company to less risk by quickly covering construction and installation costs and enabling quicker returns on its investments.[18]
Conversion Efficiency
Thin film PV modules are not as efficient in converting sunlight energy into usable forms of electricity, however, in specific situations such as large-scale utility-sized solar plants, thin film PV is not only cheaper but provides electricity under a variety of light conditions leading to more stable energy production. You can see the average manufacturing costs $/watt for thin film PV vs. silicon PV modules in the "Markets & Competition" section.
| Manufacturer | Conversion Efficiency |
|---|---|
| SunPower(Polysilicon) | 22%[21] |
| Sharp (Polysilicon) | 17.5%[22] |
| Evergreen Solar (String Ribbon) | 15%[23] |
| First Solar (CdTe Thin Film) | 10.8%[24] |
| Sanyo(c-Si and a-Si Thin Layer) | 23% [25] |
(Read More about First Solar's Key Trends and Forces...)
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References
- ↑ First Solar, Pacific Growth Equities 2007 Clean Technology & Industrial Growth Conference
- ↑ "Zacks Analyst Blog Highlights: First Solar Inc., Suntech Power Holdings Company Ltd, ReneSola Ltd, FactSet Research Systems Inc. and RiskMetrics Group, Inc.," Zacks.com, December 17, 2009
- ↑ 3.0 3.1 3.2 Seeking Alpha - First Solar, Inc. F4Q08 (Qtr End 12/27/2008) Earnings Call Transcript
- ↑ Hoover's Financial Statements- First Solar, accessed May 22, 2009
- ↑ "First Solar and EDF Energies Nouvelles finalise deal for France’s largest PV manufacturing plant," RenewableEnergyMagazine.com, January 18, 2010
- ↑ Randazzo, Ryan, "First Solar shares drop in 3Q," October 28, 2009
- ↑ First Solar 10Q 2Q 2009 Pg. 3
- ↑ 8.0 8.1 First Solar 10Q 2Q 2009 Pg. 28
- ↑ First Solar 10Q 2Q 2009 Pg. 29
- ↑ "Solar Is Gaining Momentum: Will the U.S. Be Left in the Dark?," SeekingAlpha.com, September 10, 2009
- ↑ Olson, Syanne, "First Solar Canada will be first company to undergo Ontario’s process for renewable energy projects," pv-tech.org, October 26, 2009
- ↑ First Solar, Inc. Announces 2008 Fourth Quarter and Year-end Financial Results
- ↑ 13.0 13.1 13.2 13.3 "First Solar, Inc. Q2 2008 Earnings Call"
- ↑ First Solar 10k 2008 Report Pgs. 38, 50
- ↑ First Solar 10Q 2Q 2009 Pg. 38
- ↑ Ritch, Emma,"First Solar buys OptiSolar's pipeline of projects for $400M," Cleantech.com, March 2, 2009
- ↑ "First Solar Sells Project to NRG," Zacks.com, November 25, 2009
- ↑ 18.0 18.1 "Pre-Thanksgiving Sale: First Solar Sells Project to NRG," Greentechmedia.com, November 23, 2009
- ↑ "First Solar and NRG Energy Open Largest Solar PV Power Plant in California," evwind.es, December 26, 2009
- ↑ First Solar & NRG Open 21-MW Blythe Project," RenewableEnergyWorld.com, December 22, 2009
- ↑ Dolan, Kerry, "Squeezing Energy From The Sun," Forbes.com, September 10 2009
- ↑ Sharp Solar Systems Product Profile Brochure, Sharp
- ↑ ESLR 2007 Earnings Call Transcript, Page 1
- ↑ Osborne, Mark, "First Solar first to US$1 per watt manufacturing cost," PV-tech.org, February 25, 2009
- ↑ Osborne, Mark, "Sanyo a ‘HIT’ with 23% solar cell efficiency record," PV-tech.org, May 22, 2009
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