First Solar to reach nearly US$4 billion in sales in 2011:  French plant cancellation threatened

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Updated: In an attempt to nearly double capital expenditure by as much as US$1.1 billion over the next two years, First Solar hopes to achieve sales of between US$3.7 billion and US$3.9 billion in 2011 as new capacity comes on stream. The financial projection was given as part of its conference call to discuss 2011 operating performance for the thin-film PV leader. First Solar also expects net module sales of US$2.8 billion to US$2.9 billion with US$0.9 billion to US$1.0 billion of EPC/project development sales in 2011.

“First Solar revenue and profit is continuing to grow in 2011,” said Rob Gillette, First Solar CEO, in a statement. “We are benefiting from diversifying global partner demand and an increase in revenue from utility scale projects.”

Update 1.

First Solar announced that NRG Energy has agreed to acquire the 290MW (AC) Agua Caliente solar project from First Solar, currently the largest planned PV power plant in the world. The project is scheduled to be completed by 2014 and has a 25-year power purchase agreement with Pacific Gas and Electric Co. NRG plans to invest up to US$800 million of equity in the project through 2014.

“Solar power is critical to transitioning our nation to having a greater emphasis on large-scale clean energy technologies, and it is going to be projects of the scale of Agua Caliente that will help us achieve this ambitious goal,” said David Crane, president/CEO of NRG Energy. “This investment significantly increases our presence in the state and benefits the residents of Arizona while providing attractive returns to NRG’s stakeholders.”

The deal is contingent on securing a U.S. Department of Energy federal loan guarantee in connection with the financing of the project, which is expected to be one of the first in the U.S. to start construction under the program.

During the question-and-answer period, outgoing CFO Jens Meyerhoff said that the capital structure of the Agua Caliente deal was not locked in, because of the ongoing status of the DOE loan guarantee.

He added that the company had completed the loan guarantee application process with DOE and that the documents were was now in interagency review, with feedback expected within two weeks.Once that happens, First Solar’s current assumption is that it will take another 60-90 days before the loan closes, or sometime late in Q1 or early in Q2 2011, with possible revenue recognition during that quarter.

Preliminary construction has already begun on the site, such as ground preparation and initial switchyard work, according to Meyerhoff.

Update 2.

Approximately 2GW of production would be supplemented by alternative module purchases to meet demand. First Solar said that 1.9GW had been secured in contracts for next year, while internal production would top 2GW.

U.S. PPA projects in 2011 would range between 500 and 700MW, with strong demand that has already resulted in a further increase in the contracted U.S. pipeline to 2.1GW.

Update 3. Gillette noted that due to the feed-in tariff uncertainty in France and other punitive proposals, its previous plan to build a JV manufacturing plant in the country could be postponed or cancelled altogether and that a decision would be made after discussions with the French government. Equipment ordered for the French fab would be absorbed by other plants that are under or soon to be under construction should that plant be cancelled.

Various capacity expansion plans as previously guided were on track, with the Frankfurt-Oder expansion ahead of schedule and the new German production lines now set to begin shipping in Q3 2011. The company also said that Ho Chi Minh City will be the location of its plant in Vietnam, which should start shipping modules by the second half of 2012. The site selection process to determine the new U.S. manufacturing site continues.

Barring the cancellation of the French factory, the company will add 12 production lines in 2011, with another 10 coming online in 2012, nearly doubling the manufacturing capacity to 46 lines from the current 24 lines.

Bruce Sohn, First Solar’s president, said the historical trend of 8-10% annual gains in conversion efficiencies and run-rate/throughput, as well as reductions in the cost per manufactured watt, will continue, as materials and process improvements–including the rollout of the new Series 3 module technology–take effect throughout the company’s production facilities.

The company will also increase REquipment ordered for the French fab would be absorbed by other plants under or soon to under construction should that plant be cancelled.

The company will also increase R&D/SG&A spending in 2011, jumping from $421.5 million in 2010 to an estimated $555 million in 2011. The research and development focus will be on on advanced technologies and conversion efficiency improvement pathways, while IT infrastructure improvements, project development expansion, and new market development will receive more funding on the selling, general, and administrative side of the ledger.

Additional reporting by Tom Cheyney

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