First Solar: Transitioning to post-subsidy PV

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First Solar has issued its 2012 guidance, which included a revising down of its net sales, from US$3 billion to $3.3 billion, to $2.8 billion to $2.9 billion. The company announced that this has resulted in an operating income of $575 million to $600 million, down from previous guidance of $650 million to $760 million. Capital expenditure was $50 million lower than previously forecast, presumable partly attributable to the halting of works at its Vietnamese plant.

First Solar’s guidance for 2012 is for net sales of $3.7 billion to $4 billion, delivering an operating income of $425 million to $450 million. The primary market for these projections will be North America, followed by Europe and India. Average module efficiency is to reach12.7 percent, by the fourth quarter of 2012.

Job cuts

The financial results for 2011 First Solar released today does not take into accounts write offs of equipment and goods, estimated at US$0.75 per fully diluted share and severance charges of up to $0.10.

The severance charges are resultant from 100 layoffs of, in First Solar parlance, "associates". This represents less than 1.5 percent of the company’s workforce.

Cost reductions in a post-FIT world

The layoffs are perhaps a demonstration of First Solar’s strategy for the future, as it aggressively pursues cost reductions in preparation for competition with other energy producers – without subsidies. In his 2012 guidance presentation, chairman and Interim CEO, Mike Ahearn described the shift away from feed-in tariffs (FIT) markets as being a "different game". Pursuing FIT markets, he described colorfully as the, "whack a mole game".

For First Solar to flourish in the future, Ahearn spelt out that the company will have to deploy 65 gigawatts (GW) of capacity in the next decade.

To achieve such capacities, the company has advised that it will pursue large-scale photovoltaic power plant development, of which it is developing two GW at present. Supplying integrated module and inverter solutions for such plants, First Solar is also reducing installed costs and increasing installation cycles, Ahearn claimed.

In his financial projections, CFO Mark Widmar demonstrated the cost reductions First Solar has achieved since 2008. In 2012, the company estimates its cost per watt will be down to $0.87.

Validation

Another part of First Solar’s strategy in this regard is to gain, "validation from the most reputable companies." As such, it must have been pleased with the recent sale of the 550-MW Topaz project to MidAmerican Energy Holdings, which itself is owned by the legendary Berkshire Hathaway. The price of this sale, three dollars per watt peak, was above market expectations.

Another milestone for First Solar in 2011 was the five GW of cumulative production, achieved in November. It also inaugurated its second German manufacturing plant in Frankfurt (Oder), east of Berlin.

However, 2011 has not been the easiest of years for the Arizona headquartered company. Chairman Ahearn assumed the reigns of the company in October after Rob Gillette resigned, shocking many in the industry. The decision to suspend construction of the Vietnamese plant followed shortly after.