What’s Up with First Solar?

What’s Up with First Solar?:


First Solar, a world leader in the solar industry, made some pretty big restructuring and layoff announcements this week. In particular, this means scaling back manufacturing operations in Europe and Malaysia and reducing its global workforce by 2,000 employees (including approximately 120 U.S. employees). This is actually nothing surprising to those of us following the industry every day. Many things come to my head to discuss regarding this news, but some other top voices in the industry have already done chimed in with numerous good points, so I’m going to go ahead and share their words with you here.
Here are some key statements from the president and CEO of the Solar Energy Industries Association (SEIA), Rhone Resch, on the news:
“Today’s announcement from First Solar demonstrates the impacts that result from inconsistent policy. Policy certainty is critical for all energy markets, and the solar industry is no different. With drastic policy changes in the leading European markets, First Solar has chosen to focus its activities in areas that provide a higher level of policy stability and product demand, including the U.S., First Solar’s largest market.
“Due in large part to the federal investment tax credit that is in place until 2016, the U.S. is on track to become one of the world’s largest solar markets. In 2011 alone, the industry grew by 109 percent over the last year in the middle of tough economic times.
“The U.S. has an opportunity to encourage companies large and small to expand their businesses and create jobs through smart, consistent policy. Steady, equitable government policy for all energy technologies, including solar, will help ensure industry leaders such as First Solar continue to focus on the U.S. market, boosting local and national economic growth, creating jobs and enhancing energy security.”
Here are some follow-up facts from SEIA:

• The U.S. solar industry just completed its best year ever, growing 109 percent with nearly 1,900 megawatts of new capacity installed. This year, that number is expected to reach close to 3,000 megawatts installed;
• Employment in the industry has more than doubled since 2009, with more than 100,000 Americans currently employed in the U.S. solar market;
• Increasing economies of scale and intensified competition has led to dramatic cost reductions that have made solar accessible and affordable to more Americans than ever before;
• Unlike many other nations, the U.S. enjoys one of the most resilient and diverse solar markets, in which all three major market segments ? residential, commercial, and utility ? are growing;
• First Solar’s projects are continuing to drive the utility-scale market in the U.S. in line with its business plan and the U.S. remains First Solar’s largest market;
• There are more than 5,600 solar energy companies operating across the U.S. today, in all 50 states.

And, for a more nuanced look at what’s going on with First Solar, here’s a good post by Eric Wesoff of Greentech Media, a site largely focused on the business side of cleantech (the remainder of this post is Eric’s article):
First Solar (Nasdaq:FSLR) has revealed its consolidation plan.
The thin film market leader joins SunPower, the conversion efficiency leader, which is closing its 125-megawatt Fab 1 in the Philippines and moving some of those operation to Fab 2.
First Solar is closing its Frankfurt (Oder) manufacturing facility and indefinitely idling four production lines of the 24 lines in Kulim, Malaysia. The firm reports that it expects a savings of $100 million to $120 million annually as a result. First Solar also paid down $145 million in debt. The company is slashing headcount by 2,000 positions — about 30 percent of its workforce. The firm wants to get opex down to 8 percent of revenue.
Last quarter, First Solar closed four production lines at the Frankfurt Oder plant and put its Mesa, Arizona production facility on hold indefinitely.
First Solar stock is trading at $21.52. That’s up 3 percent, but still hovering near record lows.
This restructuring is being done “in response to deteriorating market conditions in Europe and to reduce costs and align its organization with sustainable market opportunities,” according to a statement by the firm. “After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders,” according to Mike Ahearn, Chairman and Interim CEO of First Solar in a statement.
Hari Chandra Polavarapu of Auriga USA offered this analysis: “We view the restructuring as a sensible and realistic response to dislocated market conditions in solar PV that are aided by fickle subsidy policies in Europe impacting demand, and abetted by asymmetric competition/subsidies on the supply side from China.”
First Solar expects to see a benefit in price per watt post-restructuring.


First Solar is still the largest solar module firm by market capitalization, the largest thin-film solar firm, one of the largest solar firms by capacity and shipments, and certainly by cumulative profits. The company is in the crosshairs of every other solar firm and continues to set the bar in terms of solar panel value and corporate performance.
Here are the highlights and lowlights from the most recent quarterly earnings call:

• Fourth-quarter production was 540 megawatts with net sales of $660 million, down from $1 billion last quarter.
• Net sales were $2.8 billion for 2011.
• Average conversion efficiency improved by 0.6 percent over the course of the year to an average of 12.2 percent — an encouraging number.
• Average module manufacturing cost was reduced to $0.73 per watt, down $0.02 from the fourth quarter of 2010.
• The company’s project pipeline is 2.7 gigawatts AC.

First Solar’s 2012 guidance:

• Net sales reduced from $3.7 billion to $4.0 billion down to $3.5 billion to $3.8 billion.