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First Solar Inc. (FSLR - Analyst Report) announced that it has acquired Solar Chile, a Santiago-based solar development company. Solar Chile has a portfolio of early-to-mid stage utility-scale photovoltaic power projects totaling about 1.5 gigawatts or GW in northern Chile, including the Atacama Desert region. Pursuant to the agreement, the five-person Solar Chile team is joining First Solar.
With over 600 megawatts of PV power projects globally, First Solar has a global development pipeline of projects under contract to utilities totaling 3 GW, with 2 GW under construction.
First Solar is the only stand-alone solar player in the S&P 500 Index. Based in Phoenix, Arizona, the company designs, manufactures and sells solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity.
Though First Solar’s solar cells convert sunlight to electricity less efficiently than traditional silicon PV modules, thin film PV cells enjoy the advantage of producing electricity even in lower light. This ability to produce electricity under a wide range of light conditions makes these cells attractive for utility companies that require stable large-scale, utility-sized renewable energy production.
First Solar sells its products to project developers, system integrators and operators of renewable energy projects, primarily in Europe with a distinct focus on Germany. First Solar also focuses on designing and deploying commercial solar projects for utilities.
Currently, the solar industry is experiencing a steep drop in average selling prices. Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. However, First Solar stands out among the pack due to its stable liquidity position, which is in sharp contrast to its cash-strapped peers. Moreover, in order to counter the weak trend, the company is focusing more on utility-scale electricity power projects. It is partially compensating for its drop in margins through a major restructuring of its operations.
In April 2012, First Solar announced major restructuring of its operations in order to streamline its production levels with the ongoing downward trend in demand and drive operating cost efficiencies. The company initially envisioned the closing of its German facility at Frankfurt. It also reduced its employee headcount by 550 at its Malaysia plant at Kulim in May. However, with solar fortunes improving in Europe the company extended the life of the German facility. Overall, the company expects the restructuring to reduce costs in the range of $30 million– $60 million in fiscal 2012 itself and annual savings of around $100 million–$120 million going forward.
First Solar presently retains a short-term Zacks Rank #3 (Hold) rating. Over the longer term, we also maintain our long-term Neutral recommendation on the stock. This is in line with other solar peers like ReneSola Ltd. (SOL - Analyst Report) and Canadian Solar Inc. (CSIQ - Analyst Report).