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In more than name only: First Solar’s latest results officially push it to the head of the PV class

19 February 2010 | By Tom Cheyney | Chip Shots

It’s official: First Solar is now the first in solar. The just-released financials of the company that made thin-film PV bankable find 2009 revenues passing $2 billion, annual output hitting 1.1GW, and production costs dropping to 84 cents per watt. The executive team’s 2010 guidance doesn’t deviate from the numbers they offered in mid-December, with the high end of revenue expectations coming up just short of $3 billion. A few data points and assumptions in the latest presentation warrant closer scrutiny and extrapolation.

first_solar_perrysburgFirst Solar always cites the most recent annualized production-line run-rate figures when it projects likely capacity in the coming years, yet its long-term roadmap calls for 8-10% growth in throughput each year. In the year just ended, the line run rate reached 53.4MW, a 12% increase from the final quarter of 2008, when the rate was 47.7MW.

Using that 53.4MW amount as the multiplier, with 24 operational lines in 2010, 32 in 2011 (as the eight new lines come online in Malaysia), and 34 in 2012 (with the addition of two more lines in France), the company projects production capacities (rounded) of 1.28GW, 1.71, and 1.82GW, respectively, in those years.

But why not factor in the throughput increases that we’ve been told to expect? For simplicity’s sake, let’s reproject capacity using a 10% pop in annualized line run rate each year. The upgraded forecast sees capacities rising to 1.409GW in 2010, nearly 2.1GW in 2011, and about 2.4GW in 2012.

Seen another way, the 34 factory lines scheduled to be operational in 2012 would be producing the equivalent of 45 of today’s lines at the current annualized run rate. Plus, the prospect of First Solar being the first (again) to reach the 2GW production mark, in less than two years, seems plausible.

A key part of First’s inexorable capacity climb is an ever-increasing module conversion efficiency. The company ended the year with 11.1% efficiencies, representing a 0.3% percentage point uptick compared to the final number in 2008.

This actually falls short of the CdTe crew’s benchmark of a half-percentage (0.5%) annual increase. Last year, First’s execs exuded confidence that efficiencies would reach 12.5% in 2012. But for that to happen, the improvement rate must pick up steam, since an extrapolation of a similar annual increase would only result in conversion efficiencies of 12% by Q42012 and 12.3% by Q42013.

Sure, a return to that 0.5% yearly pop would get the efficiencies up to 12.6% by the end of 2012, but that will be no easy feat, since, as management has admitted, the company’s now-prodigious and still-growing scale makes it a bit harder to grind out those higher efficiencies across the enterprise.

The cost-per-watt produced famously dipped under a dollar to 98 cents during the final quarter of 2008, and has dropped another 14% over the past year, to reach 84 cents. First has said it expects that cost to continue downward at a similar clip; last year, the new roadmap showed an expected cost per watt somewhere in the 52 to 63 cents range by 2014.

But if the costs were to stair-step 3.5% per quarter/14% per year over the next several years, the number would be more like 72 cents by the end of this year and all the way down to 40 cents per manufactured watt by 2014—a sobering figure for any wannabe low-cost manufacturer, thin film or crystalline, looking to measure themselves against the big boys.

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A couple of items of a more purely financial nature are worth mentioning. One chart comparing the relative balance sheet strength of First Solar with Suntech, SunPower, SolarWorld, and nine other solar PV competitors.

While Team CadTel shows a robust and positive cash position, net of debt, of $939 million on its books (total cash, etc. of $1.114 billion, total debt of $195 million), the combined debt burden of the Other Dozen adds up to a dismal negative--$4.966 billion (although not all the companies have reported their final results, so the deficit is an estimate).

That said, First has seen its operating income as a percentage of sales erode significantly over the past year, from 37.2% in Q42008 (and a peak of 40.2% in Q1) to 22.6% in the just-completed quarter. But the company’s net income of $144.7 mill in the final quarter still looks pretty good, given the lack of profitability found in many solar PV companies.

First has stuck to its previous guidance guns when it comes to the big picture—the industry PV module demand forecast through 2012. The company still sees 7.5GW this year, 9.7GW in 2011, and 12.1GW in 2012.

A closer look at the chart reveals a sea-change in the regional breakdown coming in a few years. The German portion of the market will decrease—no surprise there, what with the coming FiT changes and the like—and will be surpassed in size by the combined U.S.-Canada (really Ontario) sector in 2012.

And who figures to grab a big chunk of that greenback-loonie change? First Solar, sitting pretty with more projects in the pipeline in North America than anyone else—16% of the 8.6GW in solar contracts announced for 2010-2015 in the U.S. alone.

Few would have predicted that a once-struggling thin-film solar company that audaciously rebranded itself would one day live up to its new name in resounding fashion.

Reader comments

On 24 February 2010 Jermonte wrote:
Finally an informative article. Instead of the regular, Germany market is shrink and FIT is going down, sell FSLR they are bad. This company looks to me to a good growth company. The market for the company looks manipulated low on shorts and the selling phenomena. It's like a reverse bubble.
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