This week is a big week for renewable and tech stocks. Earnings reports released this week will determine whether or not First Solar (FSLR +1.24%) is on track with its current shift in market strategies.
More than just solar panels
Formed in 1999, First Solar has quickly emerged as a major global player. The company is vertically integrated to offer cost and scale leadership in the market, while also leading the global market in thin film module manufacturing. The company touts notable "firsts", including:
- 1st to produce 1 gigawatt (GW) in a single year
- 1st to break the $1/watt manufacturing cost barrier
- 1st to implement a global PV module recycling program
- World-record-holder for CdTe thin film solar module (14.4%) and cell (18.7%) efficiency
First Solar shifting strategy
Prior strategy and direction for First Solar involved thin-film development. But with market competition and excess supply on the market due to "dumping" issues with China, the company has to evolve. Photovoltaic (PV) cell manufacturing costs are racing to the bottom, drawing competitors. First Solar recently sold off its Arizona solar module manufacturing facility for over $100 million in cash, taking a $55-$60 million loss on the sale and lowering annual operating expenditure by $10 million.
First Solar is making strong acquisitions and partnerships
By bringing in new CEO Jim Hughes last year, First Solar is moving away from panel manufacturing and focusing more on the acquisition and development of major, utility-scale solar power plant projects around the world. The current global strategy is to utilize mergers and acquisitions to grow its global footprint. First Solar is actively seeking out and evaluating potential markets, then locating firms within those desired markets that have already completed most of the legwork involved (including entity formation, permitting, land acquisition, and internal financing).
Source: Plunkett Research, Ltd.
Analysts are optimistic about the company's acquisition and project pipeline. JPMorgan recently made First Solar one of its top clean-tech picks, optimistic that it will achieve coming annual targets through robust contracts and projects with higher margins. As an example, First Solar recently acquired the 250MW Moapa Solar Project, the first large-scale solar project to be built on tribal land in North America just to the northeast of Las Vegas, Nevada.
In August, First Solar announced it had acquired a pipeline of U.S. and Mexican development assets from Element Power, including projects in California, Arizona, Texas, Georgia, North Carolina, Colorado, Louisiana and Illinois. It also includes several Mexican projects to take advantage of the emerging utility-scale Mexican PV market. "These U.S. assets are an excellent complement to our existing project pipeline," said Tim Rebhorn, First Solar's Senior Vice President of Business Development for the Americas.
"The mix of projects in emerging U.S. regions and an optimized pipeline in established markets will better position First Solar to secure customer off-take agreements. The Mexican project pipeline strategically positions First Solar for our entry into the market."
Also in August, the company announced a major technology and commercial partnership with GE (GE 0.39%). GE takes an equity interest stake in First Solar while helping to extend scale, manufacturing capabilities, and solar plant/grid improvement activities.
First Solar projects are moving forward across the board
First Solar recently announced that it will construct a 250MW solar power plant in Riverside County, California for NextEra Energy (NEE +0.08%). This plant is located near a 550MW Desert Sunlight Solar Farm currently under construction by First Solar.
In South America, after acquiring Solar Chile earlier this year, First Solar is finally moving ahead with its first major project in Chile's Atacama Desert. First Solar has a pipeline of projects under contract to utilities totaling 3GW, with 2GW under already under construction.
A ray of sunshine for First Solar
Things are looking up for First Solar, and this week's earnings report could be a strong one. I think we are in the bottom of a dip, and signs indicate an upside coming for this stock.
