First Solar Wins Project - Analyst Blog

First Solar Inc. (FSLR) has signed a contract with Pacific Gas & Electric Company (PCG) to supply renewable electricity from a 300 MW utility-scale photovoltaic solar power facility in Southern California . The Desert Sunlight project is near the Desert Center in eastern Riverside County, California.

First Solar will develop the project with a total capacity of 550 megawatts, enough to power approximately 160,000 area homes – or about 480,000 residents. The other 250 MW portion of the project is already under contract to Edison International (EIX). First Solar’s power purchase agreements with Pacific Gas & Electric and Edison however are subject to the approval of the California Public Utilities Commission.

First Solar will build the Desert Sunlight project using its thin-film photovoltaic solar modules and providing its project development, engineering, procurement and construction capabilities. Work on the project is expected to start by the end of fiscal 2010 and completion is expected by fiscal 2013.

First Solar has always focused on long term sales contracts with its customers who are primarily European and U.S. solar power system project developers and system integrators.

Based in Phoenix, Arizona, First Solar 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.

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 in the United States.

First Solar enjoys a distinct cost advantage over its peers due its reliance on low cost thin-film cells. However, the advantage is ebbing fast due to falling polysilicon prices. First Solar’s growth potential and that of the solar industry in the aggregate requires a prudent long-term focus on technological enhancements, capacity build-out and cost minimization. Balancing all the three aspects would be an uphill task.

Competition in the industry is becoming tougher by the day for U.S. solar players such as First Solar, who have a huge German exposure in their top line compared to Chinese counterparts such as, Suntech Power Holdings Company Ltd. (STP) and ReneSola Ltd. (SOL) both of whom mainly thrive in their domestic market.

Solar subsidies in Germany are falling fast, and First Solar is actively scouting for new markets for its products. We maintain our market Neutral recommendation on the shares.