Year-to-date share-price increases for several solar industry companies have been huge, despite the recent corrections in the markets: Ascent Solar, up 543%; SunPower, up 246%; JA Solar, up 206%; Yingli, up 203%; Trina Solar, up 199%; Evergreen, up 86%. The biggest rise belonged to thin-film PV module pioneer First Solar (NASDAQ:FSLR), whose shares have shot up 543% so far this year and traded at just under $190 per share mid-morning Monday, November 12th.
First Solar, which uses a cadmium-telluride (CdTe) thin-film process manufactured on highly automated production lines, has been in a dealmaking and capacity expansion frenzy of late. Its financials reflect an escalating level of success. The company announced last week that its 3Q07 revenues hit $159 million, more than double 2Q07’s $77.2 million and almost quadruple 3Q06’s $40.8 million. Income hit $46 million for the most recent quarter, a new record.

First Solar’s long-term contracts for a variety of ground- and building mounted solar-power systems amount to more than $6 billion through 2012, according to the company. Factory building efforts will give the company more than 900 MW of ramped production capacity by the end of 2009, when the last of four planned Malaysian fabs come up.

The company held a conference call last week (featuring CEO/chair Mike Ahearn, president Bruce Sohn, and CEO Jens Meyerhoff), and Meyerhoff also spoke at the Pacific Growth Equities’ clean-tech conference (both of which are available via Webcasts). Here are some highlights of those presentations:

Ahearn said “demand remains robust, in excess of supply,” so it’s not surprising that First Solar’s module production more than doubled from quarter to quarter. The seven operational lines, hitting an average output of 39.6 MW each, are running at full capacity, including the new Frankfurt/Oder facility, which ramped considerably faster than planned because of the company’s “Copy Smart” process/factory replication strategy. Throughput and conversion efficiencies have been improved (production conversion numbers have reached 10.5%). Tools will be delivered during 4Q07 to the first Malaysian factory, with the other three factories there to follow in quick order. A total of 16 lines will be producing modules when all the Malaysian capability is up and running in late 2009.

Meyerhoff noted that the gross margin for Q307 was 51%, well up from the previous quarter’s 36%, due in large part to the rapid ramp of the new German fab. Manufacturing costs are at an extremely competitive $1.19 per watt (which includes four cents of stock-compensation expenses). Guidance provided for FY07 includes $480 million to $485 million in revenues, total manufactured output about 200 MW, and capital expenditures around $280 million. For FY08, Meyerhoff said they expect to hit $760 million to $800 million in revenues, output in the 370-390 MW range, and capex in the neighborhood of $450 million. The manufactured cost per watt should approach a buck, and the price tag for a fully equipped and operating plant will reach $165 million or so.

The question-and-answer session participants sounded like a who’s who of big-time market analysis/investment firms: Morgan Stanley, Deutsche Bank, Cowan, Piper Jaffray, Lazard, Goldman Sachs, et al.; despite their uppity pedigree, the analysts actually did ask some decent questions. Factoids revealed during the Q&A included First Solar’s average watts per module (70); year-over-year throughput improvement (3%); percentage of capacity devoted to new markets (<10% but flexible); improvement in cost per manufactured watt in Germany vs. Ohio plant (about 10 cents) and expected improvement in Malaysian plants (about 20 cents); split of business between ground-mounted and building-mounted systems (60:40, with any moves likely to add to the ground segment); and annual degradation of First Solar's module efficiency (about 0.5%, compared with industry average of 0.8%).

During his Pacific Growth presentation, Meyerhoff shared additional pieces of the First Solar story. The company is highly integrated, with capex costs per watt (including the building) at about a dollar. Since the company owns its coating-tool design/IP, this puts it much more “in control of its destiny, in terms of capacity” and less reliant on supply-chain perturbations. First Solar goes from glass to finished module in about 2.5 hours, another component of its “lowest cost per manufactured watt” claim. The company sees its CdTe module conversion efficiencies reaching 12% by 2010-2012, in line with its goal of being the first PV company to achieve unsubsidized grid parity by that same time-frame. On the elemental front, the company has identified “terawatt levels of tellurium availability,” so there is little concern of a critical material shortage.

When asked if First Solar intends to move higher up the solar value chain into the system realm, Meyerhoff said the company plans to play a “more active role in what happens beyond the module,” especially in the U.S. utilities sector—First Solar’s main developing-market target.

While Sharp has announced plans to have a 1-GW thin-film-on-glass plant ramped by 2010, First Solar should be closing in on the gigawatt level by 2009 and will probably control at least 20-25% of overall global thin-film manufacturing capacity. The Phoenix-based company’s business plan is solid, tactically and strategically; its technology and manufacturing efficient, proven, and scaleable; and its coffers are filling with money as revenues and profits escalate.

Make no mistake about it: First Solar is kicking butt and taking names, almost single-handedly driving thin-film PV market share—and TFPV’s share of the overall solar pie. Given its steady then spectacular performance over the past few years, I wouldn’t bet against First Solar’s chances of ultimately achieving grid parity before the rest of the entire PV pack—TFPV and crystalline-silicon players alike.

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