First Solar pushes for exit strategy

"We expect solid growth in the European markets for the first half of 2011 and tightened economics in the second half," said CEO Robert Gillette during a call with analysts. "We are diversifying geographically and by segments."

The Arizona company now expects to generate $3.7 to $3.8 billion in sales and earnings of $9.25 to $9.75 per share. Back in December, it was looking at $3.7 to $3.9 billion in sales.

First Solar saw $609.8 million in fourth-quarter sales, a 24 percent drop from the previous quarter and a five percent drop from the fourth quarter of 2009. Its net income was $155.9 million, a 12 percent decline from the third quarter and a 10 percent rise from a year ago. The company said the declines were a result of lowered panel prices and revenues from its project development business. The company also brought in $2.56 billion in sales for 2010, up 24 percent from 2009, while net income was $664.2 million for 2010, up 3.8 percent from 2009.

In comparison, some of its peers reported a much sharper hike in sales and profits. Trina Solar produced $641.8 million in fourth-quarter sales, a 26.3 percent growth from the previous quarter, and a nearly 105 percent jump from a year ago. Fourth-quarter net income reached $145.3 million, a 75 percent rise from the third quarter and roughly tripled the amount from a year ago. SunPower also reported huge leaps in sales and net income.

First Solar has stepped up efforts to develop new markets beyond Europe, where declining feed-in tariffs and talks of cutting those incentives further have created more uncertainty about its prospect.

"This creates risks going forward and highlights the importance of global market development and project pipelines," Gillette said.

New markets

Germany has been First Solar’s biggest market, but it will likely make up 30 to 35 percent of the company’s business in 2011, versus nearly 50 percent in 2010. So the company has turned to India, China, Australia and the Middle East for new opportunities.

India is growing in importance for First Solar. The country represented one percent of the company’s business in 2010 and will likely account for eight percent in 2011, Gillette said. In the last three months, First Solar has announced two solar panel supply agreements with Indian companies: 15 megawatts (MW) to ACME Tele Power and 25 MW to Moser Baer Clean Energy. The Indian government last year launched the National Solar Mission that aims to install 20 gigawatts (GW) by 2022. Several states within the country, such as Gujarat, also have their own incentive programs.

China also could be a key market for First Solar, though the country’s solar power development hasn’t happened as explosively as some companies and analysts had hoped. In 2009, First Solar and the Chinese government said they would build two GW of solar power plants in Inner Mongolia. Securing government permits has delayed the project, however. First Solar reported progress about building the first 30 MW of that proposal last month and is now teaming with state-owned China Guangdong Nuclear Solar Energy Development Co. for the project. In China, only state-owned companies can apply for and secure permits to build power plants.

First Solar is building a booming project development business that is largely a melding of project pipelines it has bought in the last three years. It now has a 2.4 GW of project pipeline in North America, and those projects already have contracts to sell power to utilities.

In addition to buying unfinished projects, the company also is thinking about moving beyond fixed-tilt arrays. It has bought RayTracker for an undisclosed sum.

The project pipeline acquisitions have enabled First Solar to develop and build high-profiled projects. It completed the largest PV project in the United States last year: the 48 MW Copper Mountain in Nevada. The company also completed the 80 MW Sarnia Solar Project in Canada, making it the largest PV farm in the world

Additionally, it expects to start building the 290 MW Agua Caliente Solar Project in Arizona this year and is now finalizing a loan guarantee of $967 million with the U.S. Department of Energy to help finance the project. It will sell the project to NRG Energy after the loan guarantee is done, and that’s likely to happen by the end of the second quarter this year, Gillette said.

The company plans to complete around 400 MW of projects in 2011, he added. It also is looking for project development opportunities in Europe, particularly those in the mid- to late-stage of development, according to Jens Meyerhoff, president of the utility project business.