19 February 2010


First Solar grows 33% sequentially, but project development hits profits

First Solar Inc of Tempe, AZ, USA, which manufactures thin-film photovoltaic modules based on cadmium telluride (CdTe) as well as providing engineering, procurement and construction (EPC) services, has reported revenue for 2009 of $2,066m, up 66% on 2008’s $1,246m. Net income rose from $348.3m to $640.1m.

In particular, fourth-quarter 2009 revenue was $641.3m, up 48% on $433.7m a year ago and up 33% on Q3’s $480.9m (driven by higher module production volumes, system revenue recognition for the 20MW AC Sarnia and 21MW AC Blythe projects, offset party by lower module ASPs). Production was 311MW (up 6.4% on Q3), boosting 2009 to 1.1GW (up 121% on 2008) and more than 2GW cumulatively. First Solar reckons that it has hence doubled its share of the solar market year-over-year to 18–19%.

Gross margin has fallen from Q3’s 50.9% to 41.5%, but this is due to the rise in lower-margin EPC/project development business (to 14% of sales). During Q4, First Solar sold more than 100MW of projects, including the 20MW Sarnia project to Enbridge plus a 60MW expansion, and the 21MW Blythe project to NRG Energy. Project development includes acquiring Edison Mission Group solar sites in southwestern USA (a dozen projects on private land, of 20–150MW each), and beginning construction of two new utility-scale plants — the 48MW Copper Mountain project (an expansion of El Dorado for Sempra Generation) and the 60MW Sarnia Ontario expansion — as well as receiving BLM fast-track priority for the 550MW Sunlight project, which will start construction in Q4/2010.

Q4 net income was $141.6m, up from $132.8m a year ago but down on $153.3m in Q3.

After $280m of capital expenditure, full-year 2009 free cash flow was $395m. Of this, $345m came in Q4 (operating cash flow of $414m minus $69m of CapEx). Cash and marketable securities were boosted by $284m to $1.1bn.

Due to energy conversion efficiency rising from 11% to 11.1%, lower material costs and annualized capacity per line rising from 53MW to 53.4MW, module manufacturing cost has been cut further, from $0.85/Watt to $0.84/Watt (or $0.80/Watt, excluding the impact of about $0.02 due to expanding the plant in Perrysburg, OH to four lines and $0.02 due to stock-based compensation).

For 2010, First Solar expects sales to rise about 35% to $2.7–2.9bn (including module sales of $2.1bn and EPC/project development sales of $600–800m). The firm also expects gross margin of 38% (including 48–50% for modules and 5–6% for EPC/project development), and $730–790m of operating cash flow.

Free cash flow should be $180–290m, after total capital spending of $500–550m (almost double that of 2009) plus start-up expenses of about $25m to expand the firm’s manufacturing center in Kulim, Malaysia. Of the $500–550m in CapEx, First Solar is investing $365m in Malaysia to add eight production lines (in two production plants — plants 5 and 6 — consisting of four manufacturing lines each), starting operation in first-half 2011 at 427MW (bringing total annual capacity to 1.7GW).

Together with the two-line factory in France being built with Paris-based EDF Energies Nouvelles (announced in July, and projected for full annual production of 107MW by 2012), First Solar expects to add 10 production lines during 2010–2011, raising capacity by over 48% from current levels. With the total number of lines to rise from 23 to 34, this should bring annual or announced production capacity to about 1.8GW by 2012 (based on current production levels). Annualized capacity per line should rise to 80MW by 2014.

First Solar began full commercial operation of its initial manufacturing line only in late 2004, and annual production capacity was not much more than 500MW as recently as 2008, before doubling to more than 1GW in 2009. Revenue more than doubled from $504m in 2007 to $1,246.3m in 2008, so 2010’s projection of $2.7–2.9bn is more than double that.

See related item:

First Solar raises full-year revenue guidance to high end of prior range

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