First Solar (FSLR)

[Guest Klothilde]

http://www.bloomberg.com/news/2013-01-31/first-solar-s-new-mexico-project-may-get-less-than-coal.html Horrible news for the Solar 11: FS signed a PPA for 5.79 uscents/kWh, which is less than the LCOE of new coal plants. Nice try to fool people with your "long-term" unsubsidized PPA price goal of 10-14 cents, FS !!! 5.79 uscents has the ITC in it, but take it out and you still get 8.3 uscents.

[explo 706]

Ok, just to straighten this out; what IRR at what subsidy free price would such a New Mexico plant achieve with FS modules?

[Guest eysteinh]

Klothilde how is this horrible news for the solar 11? First solar undercutting prices and getting little income for watts sold. Is not this a desperate move to still keep building new projects imho? Also I would like to see the economics of this. How the plant owner expect to turn a profit. Interesting news for sure. I am just not sure what to make of it yet.

[Guest Klothilde]

Ok, just to straighten this out; what IRR at what subsidy free price would such a New Mexico plant achieve with FS modules?

I ran a quick and dirty calculation WITHOUT ITC For a single-axis installation:

PPA rate: 8.3 uscent/kWh escalated at 3%/year for 20 years

Capex: $2140/kWdc, this includes 25% gross margin for FS (plant COGS= $1712/kWdc)

Opex: 1% of Capex, escalated at 2% annually

Yield: 2188 kWh/kWdc, annual degradation of 0.5%

Project IRR: 6.8%

Equity IRR: 10.1% at 80/20 Debt/Equity and Debt cost of 6%

I will try and do an in-depth LCOE comparison between FS and c-Si over the next weeks and would also appreciate your feedback/input

[dydo 1,558]

If we use efficiency as the leverage this is still good for everyone in the industry as the pv silicon is more efficient then thin-film. I think Klothilde is somewhat sarcastic, this is a great news for all of them. Finally Bloombergs are typing news which makes oil and coal magnates to sweat profusely and reach quicker for their scotch.

[Guest Klothilde]

@odyd: efficiency doesn't matter by itself. Ultimately it all comes down to LCOE or cost per kWh. Who provides the cheaper electricity, FS or c-Si from China? We will know over the next weeks. For now I just wanted the c-Si investors to panic a little bit.

[dydo 1,558]

@Klothilde, certainly, but wasn't the case in the past to build up 20% of more install to meet the plant expectation just in case? <p> Was there performance issues at stake as well. At the dawn of Chinese EPC, they will undercut any EPC project, and LCOE will follow. <p> FS margins will suffer a lot when they will go on with this model. Just from the floor perspective FS could be heading down while the Chinese seem to have way up only ahead of them, my two cents. Would like to see your analysis on costs in a short while. I am excited for FS.

[explo 706]

Thanks. I'll give it a detailed look later.

PPA rate: 8.3 uscent/kWh escalated at 3%/year for 20 years

I'm not very familiar with PPA structure, but is 3% inflation adjuster common in these agreements as opposed to FiT where price is fixed, giving a frontloaded discounted cashflow for the owner, allowing quicker ROI on these capex intense projects. From the purchaser side there's no capex so they can accept backloaded return on the (FiT) agreement.

[Guest Klothilde]

Screw you GE. Nobody does efficiency like FS ! http://files.shareholder.com/downloads/FSLR/2331822632x0x638729/b4ffa41c-6e79-476e-90a7-5879a96dda75/Q412_Earnings_Call_Presentation_FINAL.pdf

[Pop2mollys 417]

First solar losing market share to silicon Chinese solars... Ha ha what's new... Losing market share every Q...

[Guest larryvand]

FSLR getting crashed after hours. $28.10 is so far the low, from a $31.36 regular close (which was down 4% but now down 12% AH).

[Guest joshchang]

FSLR $0.66 cost per watt vs. TSL $0.61 cost per watt. FSLR's cost advantage is completely gone now.

[Guest joshchang]

projects development & pipeline is still way ahead of chinese competitors. but chinese peers will catch up quickly in this area I believe.

[Guest spiritcraft]

projects development & pipeline is still way ahead of chinese competitors. but chinese peers will catch up quickly in this area I believe.

This is the big deal... utility scale PV is going global fast and I don't think any of us dare to imagine it. The old inflection point that was once ten years off is very close indeed. Somehow our companies have to be ready price wise and performance wise or someone else will step in and do these globally. First Solar and SunPower are both way up due to the simple fact that they are utility scale companies with pipelines. Some think that FSLR may one day morph into a developer using Chi-Solar modules since Si PV offers more wattage per square foot.

[Pop2mollys 417]

Boy it really sounds like they are waving the white flag to Chinese solars. From there cc it really sounds like they are try to transform themself into a developer instead of a producer. Very good news... Demand is ramping again but they refuse to open closed down factories because they can't compete on a per watt production basis with solar 11. This is very interesting and good news

[Guest Klothilde]

FSLR $0.66 cost per watt vs. TSL $0.61 cost per watt. FSLR's cost advantage is completely gone now.

That's apples to oranges. If you look at apples to apples you'll get a different result.

[explo 706]

That's apples to oranges. If you look at apples to apples you'll get a different result.

Care to share?

[Pop2mollys 417]

Ummm that's about a direct comparison as you can get ... Just look at the 9 cent gap between fslr and SOL and tell me how they are not in trouble. That gap is only going to extend throughout 2013 too

[Guest larryvand]

All you have to know to figure out that FSLR is in trouble is the fact that they did not want to give guidance for 2013.

[Guest eysteinh]

First solar has more cost than both rec and trina solar. (Rec 0.65 Trina 0.61 First solar 0.68) If you add opex costs things get even more interesting. Only strenght of First solar now is low interest on debt, but this is in no way enough to compensate. Btw, Rec produced a system in q4 at 1euro per watt = 1.3$/watt. First solar according to the conference call has a cost of 0.68 for module and BoS cost of 0.73 for a system cost of attleast 1.41 $/watt. (http://seekingalpha.com/article/1227281-first-solar-s-ceo-discusses-q4-2012-results-earnings-call-transcript?page=4) If REC can produce system cheaper than First Solar I am pretty sure Trina solar can too. And since system cost was the advantage first solar has claimed so far, this is very dramatic for first solar.

[Guest larryvand]

eysteinh, what does BoS stand for? Thanks.

[Guest spiritcraft]

I take a stab at that... Balance of System

[Guest eysteinh]

Correct. Things like inverters and wire cables.

[Guest spiritcraft]

It's usually installation costs also... labor, "soft costs" like permitting, fees, profit etc. We concentrate so much on trying to figure out who can squeeze a penny or two here and there and often overlook BOS costs. It is really stunning how low BOS costs are in Germany as compared to the US. Germany has a union-like, well paid and experienced workforce and their BOS costs for utility scaly install is like 35% of that in the US. I can't quote the exact figures but have read much about it somewhat recently. Perhaps Boss could help or if ABC is lurking as he was the expert in this area. Whatever the figure, it is astonishing. Here in the US, if we could get BOS costs under serious control, you could see unsubsidized utility scale development expand into the 10's of GW annually. I do remember that "soft costs" were crazy high here as opposed to Germany. I suspect there is a corporate skimming off the top by the sponsor, developer? My 20 years in Real Estate development, working on multi-million dollar projects makes me immediately suspect that "soft costs" here may be greatly enhanced by developer fees and profits that actually hinder economic feasibility. (I have seen it all) I can't figure out what else might cause the huge discrepancy as it certainly isn't labor costs. I also don't believe it is land, site acquisition costs... especially if we are talking areas of desert in the SW. The gist of it is that we seem to forget sometimes that BOS costs in the US in particular are really holding back massive installations since we are now talking about grid parity rather than reliance on subsidies. That's my rant...

[Guest littleguyintucson]

All you have to know to figure out that FSLR is in trouble is the fact that they did not want to give guidance for 2013.

FSLR just reported blow out number that no other solar even comes close to. They have a matrue proect pipeline to drive margins. Q1 pushing 25% GM is phenominal. Only other of the C11 coming close in the near future is CSIQ and their close is like $1 EPS.

[explo 706]

All you have to know to figure out that FSLR is in trouble is the fact that they did not want to give guidance for 2013.

The fact that they can buy a module with 15% conversion efficiency, saving a lot of BOS cost compared to their own 13%, for 65 cents while having a 68 cent cost to make their own inferior modules, says that their module production is holding back their project profitability. Modules too bad, sad but true? Projects too good to be true, over time?

[Guest nanofrogfish_spf]

We concentrate so much on trying to figure out who can squeeze a penny or two here and there and often overlook BOS costs. It is really stunning how low BOS costs are in Germany as compared to the US.

spirit, you hit on a very important topic, that people seem to be simply ignoring...that we're down to pennies on the modules, while there are nickles, dimes and quarters to be saved on the BOS side.

I believe most of the inefficiency happens before construction starts. This includes both design and permitting requirements. In the US, permitting is erratic from state to state, and usually involves multiple agencies with long delays. Many companies have been working more towards cookie-cutter designs and details to help cut down on the design side....for instance, a residential solar comapny can sell kits that come in 5kW increments, but nothing in-between unless you pay a premium...

On the red-tape side, over time this will become more efficient as the industry matures and the process is streamlined...something Germany has a huge head-start over the US. I think you'll find the same dynamic unfold in all new markets...it's just part of the industry's maturation process.

We should really pay more attention to the BOS side, as lowering this will help fuel future growth. I've posted this comment before from an article in REW about module costs, but I think it's worth repeating because it supports this theme;

Shah adds that most developers today are “not looking for price reductions,” citing significantly lowered costs as the primary reason. “The difference between getting a 70 cent a watt module and a 65 cent a watt module is just not that big of a deal anymore for system costs,” Shah said. “People are now looking at non price features for making decision on who to buy from.”

[Guest MichaelZhao]

load...

[explo 706]

Please elaborate

[Guest littleguyintucson]

The fact that they can buy a module with 15% conversion efficiency, saving a lot of BOS cost compared to their own 13%, for 65 cents while having a 68 cent cost to make their own inferior modules, says that their module production is holding back their project profitability. Modules too bad, sad but true? Projects too good to be true, over time?

So what you are stating is, they have room to grow margins.