First Solar: 2011 Sales to Jump 46%, Still the Low Cost Leader


It’s been a sport for analysts and competitors to speculate when cadmium-telluride thin-film solar panel maker First Solar (s FSLR) might no longer be the industry’s low-cost leader. Particularly given the industry has seen a dramatic decline in pricing for solar panels made with traditional crystalline silicon. That speculation won’t end in 2011, because First Solar executives said Tuesday that they will continue to beat their competitors in costs by around 30 percent.

First Solar is undergoing a huge factory expansion plan that will see new production lines in the U.S, Vietnam and Germany over the next few years. The company plans to spend as much as $1.1 billion to almost double its production capacity from 1.4 GW in 2010 to 2.7 GW by the end of 2012, maintain its existing factories and build other related services, according to its 2011 guidance issued Tuesday.

“Our advanced thin-film module is expected to maintain a cost advantage of at least 30 percent in 2011 compared with crystalline silicon competitors’ guidance,” said Rob Gillette, CEO of First Solar, during a conference call with analysts Tuesday afternoon.

Originally First Solar also had plans for a factory in France, but that was called into question by an announcement by the French government last week suspending an incentive program for solar energy generation projects larger than three kilowatts in size. Gillette said his staff is “working to resolve this uncertainty with the French government as soon as possible,” but the company doesn’t have a firm plan to build a factory in France for now. He also noted the factories under development in the U.S. and Vietnam will have room to expand.

The Tempe, Ariz., company expects its 2011 sales to fall between $3.7 billion and $3.9 billion, or $8.75 to $9.50 per share. The midpoint of the sales forecast, at $3.8 billion, would be a 46 percent jump from the midpoint of the 2010 forecast of $2.6 billion. The forecast exceeded Wall Street’s expectation.

The solar panel maker, which became a project developer in recent years, anticipates generating between $2.8 billion and $2.9 billion in sales from its solar panel business, and between $0.9 billion and $1 billion from its project development division.

First Solar also announced Tuesday that it’s selling a 290-megawatt project, called Agua Caliente, to NRG Solar. The project, located in Arizona’s Yuma County, is set for completion in 2014 and will deliver electricity to utility Pacific Gas and Electric Co. NRG plans to invest up to $800 million in equity in the project.

The agreement calls for First Solar to install, operate and maintain the project. The company’s chief financial officer, Jens Meyerhoff, said a few months back that the project would cost more than $1 billion, but he has declined to be specific. During the conference call Tuesday, Meyerhoff said the company is in the final stages of negotiating a loan with the U.S. government to help finance the project. The negotiation is likely to conclude late first quarter or early second quarter, he added.

As we noted in a post last month, NRG had shown a huge appetite for solar energy projects in the past two years. It recently agreed to spend up to $450 million on a 250-MW California project being developed by SunPower (s SPWRA).

First Solar executives repeated some of the market outlook and strategies they discussed in the third-quarter earnings in October. They plan to produce about 2 GW of solar panels in 2011, half of which are destined for Europe. Germany has long been the largest market for the company, but its declining government incentives are forcing First Solar and many other manufacturers to look for customers elsewhere. About 25-30 percent of First Solar’s panels will go to Germany next year, down from 45 percent in 2010.

The project development business provides a channel for First Solar’s own panels and helps to offset any decline in sales to customers. North America remains the focus of its project development business. The company has built 189 MW of solar projects to date, and its installation speed has “more than doubled” since it installed the 10-MW El Dorado project for Sempra Generation in Nevada in 2008, Gillette said.

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Photo courtesy of First Solar

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