First Solar Financial Result Evaluation: System Projects Rule the Company

published: 2013-11-22 18:44 | editor: | category: Analysis

Among all global first-tier PV manufacturers, First Solar’s gross margin was 27% in 2Q13, which was next to REC Group with the highest gross margin. Overall, 3Q13 was a very successful quarter for First Solar. The company’s 3Q13 financial result was released on October 31st, 2013. The gross margin turned out to be 28.8%. Although it only grew by 1.8% compared to last quarter, net sales and net profit both increased substantially. The net sale in 3Q13 was $1.266 billion, a 143% rise compared to $520 million last quarter. As for net profit, it was $195 million in 3Q13, a 481% rise compared with $34 million in previous quarter.

First Solar’s financial affairs of the first three quarters of 2013:

 

Source: Companies’ financial results/ collected by EnergyTrend

The significant increase in net sales was due to higher systems business project revenues– initial revenue recognition of the project “Desert Sunlight” and the sale of the ABW projects in Canada. As a percentage of total sales, First Solar’s systems revenue, including both EPC revenue and solar modules used in the systems projects, increased from 85% last quarter to 95% this quarter.

The current ratio in 3Q13 was 2.2 and quick ratio was 2.01. Both ratios obviously increased compared to 2Q13. The debt-to-asset ratio was 36%, which showed the company’s excellent financial structure.

The utilization rate in 3Q13 was 80%, a 5% rise compared to 75% last quarter. The increased utilization rate caused production capacity to also go upward, reaching 426MW DC. Compared to 406MW of shipment in 3Q13, First Solar’s business development team booked 860MW DC of new business. Given this, the book-to-bill ratio turned out to be greater than 1. In addition, from the beginning of 2013 to now, the company’s total outstanding bookinghas increased from 2.6GW DC to 2.7GW DC.

First Solar’s module production cost declined from $0.67/W last quarter to $0.59/W this quarter, a 12% drop. This could be the most substantial cost drop since 2007. Meanwhile, the company’s best production cost this quarter was $0.56/W with average module conversion efficiency reaching 13.3%. The company projected that the module conversion efficiency will reach 14% in the next four quarters. Currently, they have tested modules with 14.1% conversion efficiency (Please check the figure of First Solar’s module efficiency improvement in the previous years.)

Last quarter, the thing that caught people’s attention the most was First Solar’s partnership with TetraSun and General Electric. First Solar successfully acquired TetraSun, and paid 1.75million shares of stocks in exchange of GE’s cadmium telluridePV intellectual property rights. However, the focus this quarter has been on the projects acquired.

First Solar acquired Nevada’s Moapa project from K Road Power in September and signed a 25-year Power Purchase Agreement with Los AngelesDepartment ofWaterandpower. The construction of the project will begin in 4Q13 and is projected to complete by the end of 2015. In the mean time, the company started a joint venture with Belectric, working on PV projects in Europe, North Africa, and USA with both companies committing to long-term partnership. 80% of the modules used on the 1.4GW systems installed by Belectric were from First Solar. Furthermore, First Solar also signed an agreement with NextEra to work on California’s McCoy project of 250MW AC. The construction is estimated to begin in 2014 and will finish by the end of 2016.

Apart from the ABW project that already been sold to General Electric, First Solar announced on the same day they released the financial results that they will sell the 150MW Silver State South to NextEra. However, First Solar will continue provide EPC service and modules for the project. It’s estimated that the construction of the project will begin in the end of 2014 and will complete by the end of 2016.

The project that has already been completed was the 13MW DC project in Dubai, which is First Solar’s first utility-scale power plant located in Middle East. It’s also the largest PV station operated in the region.

Judging from the geographical distribution ofdemand, First Solar’s demand outside of the US market reached 4.2GW, representing 55% of the total demand. By observing the recent PV development in Japan and China, 3Q13 is the rebound season for PV industry in overall. There can be improvement for the industry while challenges remain. Last but not least, the industry has to especially watch out for next capacity expansion. If expanding too much, the oversupply situation may happen once again. 

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