First Solar sees flat first quarter

Arizona-based First Solar generated $567.29 million in sales for the first quarter, down slightly from $567.96 million from the year-ago quarter. It posted $115.97 million in net income, or $1.33 per share, down from $172.35 million, or $2 per share, from the first quarter of 2010. The company’s sales and earnings outlook remain unchanged, however. It expects to report $3.7-$3.8 billion in sales and earnings of $9.25-$9.75 per share for 2011.

The financial results are perhaps unsurprising considering that the political drama over solar incentive policies in key markets such as Germany, Italy and France has been unfolding for months. Germany and France finally settled on how much they want to cut the subsidies, but Italy continues to have trouble making up its mind. The latest proposal from the Italian government would cut spending up to 33 percent from June this year through the end of 2012.

"With a lot of pending changes, the market started out really slow in 2011," Rob Gillette, CEO of First Solar said. "We expect the European industry demand to go through a period of adjustment in the second and third quarter."

Despite policy changes, Germany and Italy will remain markets much larger than, say, the United States, for some time. To expand its market reach, First Solar is now targeting projects as small as 10 kilowatts with its newer, 85-watt panels. It previously focused on systems 30 kilowatts and up. The rooftop segment current accounts for 30 percent of the company’s business, Gillette said.

But, for a company with more than one gigawatt (GW) of annual production capacity, First Solar has to line up new markets for its solar panels before the European market slows considerably. Staking a claim in new territories takes time, after all. In recent months, First Solar executives have repeatedly emphasized their efforts to gain a footing in regions such as India, China, Australia and Middle East.

India has emerged to be a beacon of hope. The thin film company, which shipped 10 megawatts (MW) of solar panels in 2010, now expects to send more than 100 MW to India in 2011, Gillette said. The new market has its own challenges, however, including high capital costs and "immature financing market," he added.

First Solar already has announced a few solar panel supply deals: 15 MW with ACME Tele Power and a 25 MW with Moser Baer Clean Energy. The Indian government last year launched the National Solar Mission that aims to install 20 GW by 2022. Several states within the country, such as Gujarat, also have their own incentive programs.

The company isn’t the only major player eyeing the Indian market, of course. Suntech Power on Tuesday announced it had signed an agreement to supply a 100 MW of its solar panels to SunBorne Energy for Indian projects in the next two years. Project developer, juwi Group, also set up an office in India.

First Solar continues to plug away at its power project development business in North America. This relatively new line of business helps the company to counter fluctuating demand for its solar panels in Europe. First Solar is negotiating to secure a $978 million loan guarantee from the U.S. Department of Energy to build a 290 MW project in Arizona called Agua Caliente, which will be sold to NRG Energy. In all, First Solar is planning on completing 450 MW of projects – or even 600 MW – for 2011.

The solar panel maker is continuing plans to build factories in Germany, Vietnam and Arizona. First Solar expects to expand its annual production capacity to 2.3 GW by the end of 2011 and 2.8 GW by the end of 2012.

The company’s production cost didn’t budge from the fourth quarter of 2010 to the first quarter of this year and remained at 75 cents per watt. The efficiency of the solar panels to convert sunlight to electricity improved from 11.6 percent to 11.7 percent.