First Solar (FSLR)

[explo 706]

Photon do some extensive output testing to compare with power rating of modules. Otherwise to see which module provides best IRR for a plant/roof with fixed area and fixed revenue per kWh produced during plant life-time I think it is best to simulate how much kWh the two configurations are expected produce in different location scenarios (not easy though) and convert that to discounted cashflow and compare the diff of those revenues with the diff in module and inverter cost for the two configurations and calculate the IRR diffs. I thought FSLR had been slipping here compared to 3-5 years ago, but might be wrong? Or maybe they've fallen behind, but guided that they'll catch up? I don't follow FSLR so any insight would be interesting. In the end all that matters are IRR power of the module and that is a function of how much kWh is produced during life-time, how fast those are produced (to reduce discounting effect) and the cost of it and its inverter.

[Guest Klothilde]

Please challenge me on the following framework and calculations I use to assess FSLR’s cost competitiveness. I want to sharpen my view so that I don’t lose money.

Imo the ultimate kpi for assessing competitiveness is LCOE. However I will use adjusted module production cost because it is more intuitive and allows an apples-to-apples comparison with the reported module production cost figures of Chinese peers.

My Chi benchmark is TSL because 1) they have traditionally been one of the most competitive Chi c-Si players and 2) to me they are one of the most trustworthy Chi players when it comes to the accuracy of financial figures (even though I don’t believe 100% of what they say )

My framework:

Adjusted module production cost (FSLR) =

Reported module production cost @full utilization

+/- scope adjustments

- non-production cost penalties

+ yield bonus

All within the context of utility in hot climate which is the target market for FSLR’s CdTe deployment.

Let’s run the numbers for 12Q4 and for 14Q4:

12Q4 Reported module production cost @full utilization

FSLR reported module production costs of $0.66 (12Q4cc) @full utilization and excl. one-time items. Trina reported production costs of $0.61 ($0.10 poly + $0.51 non-si, see 12Q4cc) at actual utilization rate. Trina’s utilization rate was roughly: [ 415 MW (shipments) - 47 MW (inventory depletion of $48.6M * 0.7 (FG fraction) / $0.72/W (12Q3ASP) ] / 600 MW (quarterly capacity) = 61%. With a quarterly depreciation charge of $27.8M ($111.1M yearly, see F-20p.F-10) this results in an underutilization charge of $0.03 and thus module production cost of $0.58 @full utilization.

12Q4 Scope adjustments

FSLR includes several cost items in its module production cost that its Chinese peers book under SG&A or don’t report at all. These cost items need to be stripped off the FSLR module production cost for apples-to-apples. Specifically we are talking about freight, warranty, and end-of-life (EOL) recycling provision. The total of these three items amounts to $0.10 (12Q4cc). Based on the split for these three items shown in the cost roadmap presented during their analyst day (p. 11) I assume 5 cents EOL provision, 3 cents freight, and 2 cents of warranty in 12Q4.

12Q4 Non-production cost penalties

Switching from c-Si to FSLR will result in higher BOS and module warranty cost that need to be accounted for in the apples-to-apples comparison. The additional module warranty cost is the easy part. This is approx. $0.01 as FSLR books 2% of revenue as warranty as opposed to 1% from the Chi c-Si players. To determine the BOS cost penalty we need to determine the difference in module efficiency between FSLR and c-Si and by what amount BOS cost is affected by this difference.

FSLR reported an average module efficiency of 12.9% for Q4 (Q4cc). However module data sheets reveal an average module efficiency of around 12.2%. I assume that the 12.9% average refers to the flash wattages of modules exiting production, and that the 12.2% average results from a downward adjustment of flash wattages to account for initial degradation of modules in the field. FSLR has indicated that this initial degradation can reach from 4-7% of initial flash wattages depending on the climate (FSLR field performance article, p. 3). For these calcs I will assume that FSLR adjusts the module wattages down by 5% relative to flash to determine the nameplate wattages. The assumed nameplate module efficiency average of FSLR in 12Q4 is thus 12.9%*0.95=12.26%.

Estimating TSL’s average module efficiency is more complicated given the lack of information provided by the company and also given the complexity in its product portfolio. I decided to use YGE’s estimated average efficiency as a proxy for TSL’s because of its simpler product portfolio and more information on the mono/poly production split. I feel comfy with this proxy since traditionally YGE and TSL have been walking hand in hand w/regards to cost, module wattages, and product mix. Based on YGE’s data sheets I determined an average efficiency of 16.1% for Panda modules and 15.1% for multi modules. Based on the guided share of 15% for Panda within the product mix in 12Q4 (12Q3cc) I estimate an overall module efficiency average of 15.2% for YGE in 12Q4 which I use as proxy for TSL.

Next we need to determine the BOS cost affected by the lower efficiency from FSLR panels. For a 10MW fixed-tilted c-Si plant built in southern Europe in 12Q4 I estimate following BOS cost breakdown:

Inverter: $0.16

Mounting system: $0.18

Electrical systems: $0.08

Labor: $0.09

Grid connection: $0.07

Civil works: $0.04

Development & others $0.05

Total BOS cost: $0.67

The cost blocks affected by panel efficiency are mounting system, electrical systems, labor, and civil works, and amount to a total of $0.39. The BOS penalty in switching from TSL panels to FSLR is thus: $0.39 * [15.2% / [12.9%*0.95]] - $0.39 = $0.094

12Q4 Yield bonus

FSLR panels have a lower temperature coefficient and therefore will produce more energy than c-Si under hot climate conditions. FSLR talks about a 5-9% yield advantage in their field performance article (p.10). Juwi has independently determined a 5.4% yield advantage for their FSLR power plants in Europe (p.5). During the recent analyst day FSLR’s CTO Raffi Garabedian has claimed an overall yield advantage of 6% for their Blythe plant (38:07 in webcast), so I will use this figure for calcs. The monetized advantage of the 6% extra yield is simply 6% of the turnkey price of a c-Si power plant. Assuming a sustainable GM of 25% for TSL modules I get an ASP of $0.58 / 0.75 = $0.773 . Adding the $0.67 BOS cost and adding 10% developer margin on the total cost I get a plant ASP of $1.60 . The FSLR yield advantage is thus $1.60 * 6% = $0.096

12Q4 Full adjusted module production cost equation

Adjusted module production cost (FSLR) =

Reported module production cost @ full utilization....$0.66

+/- scope adjustments..........................................-$0.10

- non-production cost penalties.............................+$0.10

+ yield bonus.......................................................-$0.10

.........................................................................=$0.56

Bottom line, the adjusted module production cost of FSLR in Q4 2012 is slightly below TSL’s module production cost.

OMG !

[Guest Klothilde]

Now fast forward to 14Q4:

14Q4 module production cost @ full utilization

FSLR is targeting $0.52-$0.53 module production cost @full utilization for 14Q4 (p.11), I’ll take the midpoint of $0.525 for calcs. TSL has guided approx. $0.45 non-si cost for 13Q4 (10% reduction on $0,51 from 12Q4, see 12Q4cc), from which I’ll strip 4 cents (9%) to get to $0.41 in 14Q4. Assuming a low-case $20/kg poly in 13Q4 and 5.2g/W the module production cost comes to $0.51.

14Q4 Scope adjustments

From the FSLR cost roadmap (p.11) I deduce $0.02 for freight, $0.02 for warranty, and $0.00 for EOL provision for a total of $0.04 in scope adjustments

14Q4 Non-production cost penalties

Additional module warranty cost stays at $0.01. Average module efficiency in 14Q4is 14.9% according to efficiency roadmap (p.12). For Trina I estimate an average of 15.9% in 14Q4 (The ITRPV shows industry average cell efficiencies of 18.0% for mc-si and 18.8% hpmc-si in 2015 (p.25). Picking 18.5% as an average for 15Q4 and an average CTM-ratio of 99% (p.23) I derive an average module efficiency of 16.2% in 15Q4, then I interpolate to 14Q4 and use as proxy for TSL). BOS cost drops to $0.65 assuming costs stay flat unless affected by module efficiency (total efficiency-dependent BOS cost drops from $0.39 to $0.37). The BOS cost penalty is now $0.37 * [15.9% / [14.9%*0.95]] - $0.37 = $0.046

14Q4 Yield bonus

The TSL plant now sells for [[$0.51/0.75]+$0.65]/0.9=$1.48 and the FSLR yield bonus comes to $0.089

14Q4 Full adjusted module production cost equation

Adjusted module production cost (FSLR) =

Module production cost @ full utilization..................$0.525

+/- scope adjustments..........................................-$0.040

- non-production cost penalties.............................+$0.056

+ yield bonus.......................................................-$0.089

...........................................................................=$0.45

Accoding to my calcs FSLR’s adjusted module cost of $0.45 in 14Q4 will be approx. 10% below TSL’s projected module costs of $0.51 (calculated @$20/kg poly). If you are mad enough to believe that the poly price will rise to $30/kg by 14Q4 then the cost difference will be $0.45 (FSLR) to $0.56 (TSL) or 20% difference.

These cost projections hinge to a large extent on FSLR’s ability to deliver on their efficiency roadmap. If they implement the roadmap and hit the efficiency targets then I see a very high probability that FSLR develop a significant cost advantage relative to c-Si peers. Should they fall behind their efficiency targets then they may have a lower (or up to insignificant) cost advantage relative to c-Si peers. However imho the probability that they fall behind significantly in cost competitiveness is very small, and entails that FSLR fail miserably in delivering against the efficiency roadmap. Given the track record that they’ve shown so far in hitting efficiency targets and given the progress in the lab manifested by their recent efficiency records both at cell and module level I’m quite confident that they’ll advance the technology to at least maintain cost competitiveness.

[Guest eysteinh]

Great post. But fslr has also a higher land cost/construction cost due to more modules. Also the temperature coefficient is not the same for all producers. Finally im looking at rec 0.48$/Watt cost in q22014. (0.53 at end of q4 2013 and keeping up the same historical trend of price reductions is how I get this number.) This does include freight and i will ask the investor relation if it also includes warrenty and insurance but I assume yes. But also one positive you forget to mention is fslr interest cost per watt. It is extremly low. I also recommend you read the photovoltaic collection of thin film research paper called the rise of thinfilm technology its from 2010 and many articles are about the fact that at the time thin film was much cheaper than modules. (Source: http://www.solarmediastore.com/technical-annuals/the-rise-of-thin-film-solar-technology.html) But they needed to be. One article mentiones a need to be around 20-30% cheaper because of the extra costs like construction. Im sure many things has changed since 2010 but it gives a good historical perspective. My own conclusions about FSLR is that they are well suited for large desert areas where land costs is not high, but must be near infrastructure so the construction costs is low. FSLRS biggest challange is to drive down construction costs by using more automatic production like robots laying out the modules etc. They have one brilliant concept in the central operating center that is monitoring all of the systems they sell. This is a very clever market advantage.

[Guest Klothilde]

Great post. But fslr has also a higher land cost/construction cost due to more modules.

Thanks Eystein. I factored in the extra construction cost under "non-production cost penalty" and account for extra costs in mounting systems, electrical systems, labor, and civil works. The total in 12Q4 comes to 9 extra cents. The extra land costs are not that large, since FSLR utility plants get built in high irradiation (i.e. also arid) areas with cheap real estate, but also because the differenc in efficiency relative to c-Si is not prohibitive. For example if land rent is at $200 per acre and year and you need 5 acres to build a 1MW c-Si plant then the NPV (6.4% DR) of your yearly rent payments of $1000 over 25 years comes to $13099 or $0.013/W. Switching to FSLR will result in 25% higher land usage (ratio of efficiencies of 15.2%/12.2%) and thus only in $0.003/W higher land cost. By 14Q4 the efficiency gap between FSLR and c-Si will have closed to 1.7 points (15.9% vs. 14.2%) and the additional land costs will be $0.002/W.

...Finally im looking at rec 0.48$/Watt cost in q22014. (0.53 at end of q4 2013 and keeping up the same historical trend of price reductions is how I get this number.) This does include freight and i will ask the investor relation if it also includes warrenty and insurance but I assume yes.

$0.53 in 13Q4 means $0.50 all-in module production cost w/out freight. This is even 5 cents below the $0.55 that TSL is targeting for 13Q4 ($0.10 poly + $0.45 non-si). How do you think of this REC target? To be frank it runs against my intuition that says that a Chinese Tier 1 player producing in China will have lower costs than a western, relatively newcomer to Asia who produces in Singapore... Unless of course the 45 cents non-si targeted by TSL are overly conservative and the company can go down below 40 cents non-si by 13Q4... (which I don't think)

...One article mentiones a need to be around 20-30% cheaper because of the extra costs like construction...

This sounds to me like one of the usual generalizations of a few years back where all thin-films were thrown together. FSLR plans on developing a solid efficiency lead over mc-Si and hpmc-Si in the next years, so that in the end c-Si will require more construction and BOS than FSLR... Check out the presentation by the CTO given during the recent analyst day, it is quite something...: http://files.shareholder.com/downloads/FSLR/2401933772x0x652328/d0af6554-e193-47e4-9dd0-59b02968272b/FSAnalystDay_TechnologyUpdate.pdf

[Guest sony1]

For Trina I estimate an average of 15.9% in 14Q4 (From the ITRPV

On what page in the ITRPV report did you find 15.9% in 14Q4? Btw interesting that you're using Trina modules that are lagging the pack, and not LG Neon modules with 18.3% efficiency in 13Q4. ;)

[Guest Klothilde]

On what page in the ITRPV report did you find 15.9% in 14Q4? Btw interesting that you're using Trina modules that are lagging the pack, and not LG Neon modules with 18.3% efficiency in 13Q4. ;)

Thx for your feedback. I use the ITRPV to estimate a likely future average efficiency for TSL, i.e. just as a proxy. I describe above how I do that. Regarding the choice of TSL as benchmark: I want to compare FSLR with the most cost competitive alternative PV-Technology for utility power plants. What I've seen in terms of reported costs and in terms of real world deployment leads me to believe that the mainstream competitor is mc-Si. As previously mentioned I picked TSL because of its traditional cost leadership and because it is more trustworthy to me than other peers. I should have mentioned in my first posting that I also want to look at a largely integrated player (wafer-cell-module) where reported production costs refer to real in-house production cost incl. depreciation. Players that source large volumes of components from the spot market have been able to show spot purchases at or below producer cash cost as part of their production cost, which distorts the real cost image. Why do you think that TSL has been lagging the pack? They've been suffering financially from high OPEX and their decision not to diversify into projects, but that is not relevant in assessing their module competitiveness. Regarding LG Neon: I'm impressed with their technological achievement but I assume they would right now not be the most cost competitve technology for utility deployment because n-type mono is a fairly costly technology.

[explo 706]

Klothilde, I'll have a look at this later, but just a quicky. Competitive c-Si heads for 250w average panels at 55 cents all-in cost in 2013. This is around 25% higher efficiency than FSLR panels. Price per watt reference level is around 60 cents for FSLR panels (?). Efficiency premium is rougly propoprtional so 0.25 x 60 = 15 cents higher value for the c-Si efficiency than the CaTe. Translating this to cost gives c-Si a 40 cents efficiency adjusted cost when compare to CaTe. Rough model a la SPWR claims, but not completely off right? Adjust for nisch strengths like temparture adjusted efiiciency. Btw, do you have the FSLR's external module sales growth (or rather market share growth)? This should work as a simple validation of the competitiveness trend of FSLR panels.

[Guest Klothilde]

Klothilde, I'll have a look at this later, but just a quicky. Competitive c-Si heads for 250w average panels at 55 cents all-in cost in 2013. This is around 25% higher efficiency than FSLR panels.

Thx. for your feedback. Yes, I'm assuming an average efficiency for TSL of 15.2% which translates to a 251W standard module. My benchmark TSL costs are 55 cents in 12Q4 and 51 cents in 13Q4.

Price per watt reference level is around 60 cents for FSLR panels (?). Efficiency premium is rougly propoprtional so 0.25 x 60 = 15 cents higher value for the c-Si efficiency than the CaTe. Translating this to cost gives c-Si a 40 cents efficiency adjusted cost when compare to CaTe. Rough model a la SPWR claims, but not completely off right? Adjust for nisch strengths like temparture adjusted efiiciency.

If you have a chance please go over my framework to discuss in more detail. I go beyond rule of thumbs to determine a.o. the exact cost penalty due to lower efficiency (currently 10 cts relative to c-Si) and the bonus for higher yield.

Btw, do you have the FSLR's external module sales growth (or rather market share growth)? This should work as a simple validation of the competitiveness trend of FSLR panels.

I don't think that external panel sales is a good indication of cost competitiveness. FSLR has the choice to use their modules in their projects and reap >25% GM on the project volume or sell the modules on the market and reap 0-5% GM at par with their chinese peers. So naturally they go for their own projects. Just like that also CSIQ wants to expand their own project business, and just from their shifting a larger amount of modules into the project business nobody would claim that their competitiveness is going down. Don't you agree?

[explo 706]

Couldn't they produce more modules if they would sell well at a price sufficently above their production cost to add to profits? Are they capacity strained and capital strained (disabling expansion option)?

[Guest Klothilde]

They were running at 83% and 84% utilization in Q3 and Q4. This is high compared to peers, but they still would have had the opportunity to crank out approx. 100 MW of additional modules for the market if they wanted. This imo doesn't mean at all that they are uncompetitive. Companies can decide purposely to reduce sales to prevent ASP erosion. For example TSL had a production cash cost of 53 cents in Q4 and would have generated extra cash on any ASP > 56 cts (53 production cash cost + 3 cts shipping) but they decided purposely to stick to ASP discipline (ASP=67 cents) at the expense of lower cash and a low utilization of roughly 60%. FSLR had a production cash cost of 43 cents in 12Q4 but had a similar ASP as Chinese Tier 1s (see index), so I assume the same reasoning against price erosion on their side.

[explo 706]

Whether a company decides to take a bid depends on price and credit risk. SOL for example sold above own capacity with no credit loss in Q4. This indicates they get many and high quality bids for their products, which in turn indicates a competitive product. If FSLR idles capacity it means that they to don't get enough good bids for their products (or has some high cost capacity) to maximimze profits (by adding incremental gross profits to cover fix expenses), i.e. their producta could be more competitive.

[Guest Klothilde]

Whether a company decides to take a bid depends on price and credit risk. SOL for example sold above own capacity with no credit loss in Q4. This indicates they get many and high quality bids for their products, which in turn indicates a competitive product. If FSLR idles capacity it means that they to don't get enough good bids for their products (or has some high cost capacity) to maximimze profits (by adding incremental gross profits to cover fix expenses), i.e. their producta could be more competitive.

According to your logic TSL would be significantly less competitive than SOL because they only had 60% utilization in 12Q4. I don't think that applies, do you? At full utilization TSL even would have had a lower CPW than SOL (58 vs. 60 cents), however they chose not to accept low bids in order to maintain a higher ASP. That apart I'm not too concerned with current utilization rates but more so with the long-term cost position of CdTe.

[Guest solarcat]

Klothilde, I think explo was not just talking about utilization but credit risk. You have companies that are at 60% utilization yet they still posted credit loss in Q4. You would think if it was true that they didn't want to accept low bids they could at least get credit worthy clients. But instead they are accepting high bids from credit risky clients. The end result is both underutilization AND credit losses. Beats me how that can be considered "competitive".

[explo 706]

Yes, my point was exactly as described by solarcat. I'll stop punch FSLR now, since they are the most profitable solar right now, but my point is that their profits now are more due to strategic decision to go downstream and ability to win a lot of projects (at good ASP). But my impression from you Klothilde is that you still see their strength as a module maker.

[Guest Klothilde]

Klothilde, I think explo was not just talking about utilization but credit risk. You have companies that are at 60% utilization yet they still posted credit loss in Q4. You would think if it was true that they didn't want to accept low bids they could at least get credit worthy clients. But instead they are accepting high bids from credit risky clients. The end result is both underutilization AND credit losses. Beats me how that can be considered "competitive".

C'mon guys, now TSL is uncompetitive because they booked a doubtful accounts provision in Q4 and SOL didn't? Do we know what percentage of 12Q4 SOL sales will never be collected in the future?

[explo 706]

Both SOL and TSL have good historical collection. Some don't. Check the 20-F's.

[Guest Klothilde]

But my impression from you Klothilde is that you still see their strength as a module maker.

Yep. I don't care about the project business. I don't see any sustainable competitive advantage in it. There's nothing in the FSLR project business that any Chi company cannot do at the same or lower cost. By the same token the project business is no haven for the Chi companies either because competition will lead to very slim margins. I'm focused exclusively on module technology because I think this is the only source of sustainable competitive advantage. If FSLR delivers on their efficiency and cost reduction roadmap I see a good chance that CdTe will develop an almost irreversible cost advantage relative to mc-si and hpmc-si. One thing I need to understand more is the cost reduction potential of c-Si. Eysteinh postulated some figures that are simply spooky. What are your estimates for best-in-class cost per watt in the coming years?

[Guest eysteinh]

One thing I need to understand more is the cost reduction potential of c-Si. Eysteinh postulated some figures that are simply spooky. What are your estimates for best-in-class cost per watt in the coming years?

First keep in mind I am a REC stock owner, actually i am also running for a board position in the company for the general assembly this 3 may 2013, so my views are obviously positive towards REC. The reason I am running towards a board position is to respect the small time stock owners that have united to make sure we are also looked after in any decisions done by the company. You can safely say there is a very active ownership of many small time stock owners of REC. http://www.recgroup.com/PageFiles/156/REC_investor_presentation_Feb%202013.pdf page 37. Deduct 6 from sg&a (opex) and you get 41 euro end of q42013. (0.53 $/watt converted to dollar at 1.3 euro to dollar) You asked why REC is doing much higher costs reduction? Fully automated production lines. Mostly all is inline production and very little batch process. If you just assume 10% reduction in 2014 down from 19% currently estimated reduction in 2013 you end up with 0.37 euro per watt or 0.48$/watt. This is apples to apples, it includes depreciation and also freight. Again I have sent a question to IR to verfy that it also includes warrenty and insurance but as of now I cannot say this for sure. Historically REC has cut prices much more than this in every single quarter. How will the costs be done? New doping (more selective emittors) and new MWT designs. Perhaps also a new backside passivation design. Anyhow since REC has done custom orders in Japan now then this could influence costs targets. Tomorrow REC report quarterly result and i expect a positive shock in the market. I mean the analytical corps belive revenue will be as low as 1300 mil nok in the quarter..No way! One off on silane comming in at 27 mil $. http://www.recgroup.com/view?feed=R/136555/PR/201302/1680281.xml q2 there will be an one off on tax payback after court settlement of 16 mil $ (http://www.columbiabasinherald.com/politics/article_4297eee8-7d33-11e2-8daa-001a4bcf887a.html?mode=jqm) or a tax benifit of the same amount. Higher ASP for modules expected. Allready sold out 25% of volumes for the whole year in projects announced. (this one not yet announced but found by the rec interest community: http://www.adb.org/sites/default/files/projdocs/2013/46934-01-tha-iee.pdf Signs of contract manufacturing from taiwan since there is now a boat with rec modules going from taiwan to california. http://importgenius.com/suppliers/rec-modules-pte-ltd There is one cloud in the sky, and this is rec polysilicon ASP. Some chinese reports claim toll authorities have statistics of 12$/kg sale price of polysilicon from USA. If this is true the rec is toast. But I find it hard to believe. (Source: http://translate.googleusercontent.com/translate_c?depth=1&ei=h7hYUe31JOX24QST-IHQCw&hl=en&prev=/search%3Fq%3D%25E5%25A4%259A%25E6%2599%25B6%25E7%259F%25BD%25E4%25BE%259B%25E6%25B1%2582%25E4%25BF%25A1%25E6%2581%25AF%26start%3D40%26hl%3Den%26sa%3DN%26biw%3D1920%26bih%3D955&rurl=translate.google.no&sl=zh-CN&u=http://solar.ofweek.com/2013-04/ART-260001-8420-28675206_2.html&usg=ALkJrhhwqbbZWBPOUrXpRjmkEgvQuzAQFw

"Look at the import price of imports from the three countries: South Korea 19.87 U.S. dollars / kg, U.S. $ 12.57 / kg, Germany 21.6 U.S. dollars / kg. Different degrees of decline in import price in Germany and the United States in February 2013 compared with January 2013, were $ 21.6 / kg and 12.57 U.S. dollars / kg, while South Korea's import price rose to 19.87 U.S. dollars / kg."

[dydo 1,560]

C'mon guys, now TSL is uncompetitive because they booked a doubtful accounts provision in Q4 and SOL didn't? Do we know what percentage of 12Q4 SOL sales will never be collected in the future?

Provision does not necessary mean that money will not be recovered. Provision assumes for no recovery.

SOL could be netting losses out if it doubtful accounts and not to take provisions for it before. Accounts receivable drop, we think they turn this to cash but in reality they do not. Let’s see that 20-F before Q1.

[explo 706]

Yep. I don't care about the project business. I don't see any sustainable competitive advantage in it. There's nothing in the FSLR project business that any Chi company cannot do at the same or lower cost. By the same token the project business is no haven for the Chi companies either because competition will lead to very slim margins. I'm focused exclusively on module technology because I think this is the only source of sustainable competitive advantage. If FSLR delivers on their efficiency and cost reduction roadmap I see a good chance that CdTe will develop an almost irreversible cost advantage relative to mc-si and hpmc-si. One thing I need to understand more is the cost reduction potential of c-Si. Eysteinh postulated some figures that are simply spooky. What are your estimates for best-in-class cost per watt in the coming years?

Thanks for clarifying that. I'll take another stab at this later. You've never viewed the project business success as an opportunity to exit before collapse? How have insiders been acting?

[Guest Klothilde]

You've never viewed the project business success as an opportunity to exit before collapse?

Nope but it seems to me you did. At the time FSLR developed their US pipeline they had a huge cost advantage relative to c-si and nobody thought that poly could ever come down to $15. They developed the US pipeline for market development purposes, i.e. to create demand in the U.S. which was very small at that time (2008-2009). Also if they wanted to exit the module business it wouldn't have made sense to pump hundreds of millions into R&D.

How have insiders been acting?

I don't know. What do you know?

[Guest Klothilde]

http://www.recgroup.com/PageFiles/156/RE…_Feb%202013.pdf page 37. Deduct 6 from sg&a (opex) and you get 41 euro end of q42013. (0.53 $/watt converted to dollar at 1.3 euro to dollar)

Yes, and if you deduct 3 cents for shipping which are included in those 53 cents you reach 50 cents module cost in Q42013. Considering that Tier 1s like YGE and TSL are aiming at 55 cents module cost in Q42013 the REC target is simply paradigm shifting in my eyes. Don't all of us believe that c-Si production in China is inherently cheaper than anywhere else? Odyd mentioned that it gives you 20% cost advantage instantly. And didn't you Eystein also assume that the Chinese will always be able to be cheaper than REC? Seems to me I'm missing a big part of the picture here guys. Any other thoughts on REC potential relative to Chi ?

[Guest eysteinh]

Yes I do think china has the cost advantage somewhat. GMT saw best in class cost for china at 0.47$/w in 2014. Also while REC has delivered on cost reduction so far these are just targets. Obviously I hope they will be true but as of now we dont know. I think a major contributor is 1/10 th the number of workers per watt. Another is the fbg granules used. A third is the patented reuse of crucibles. Also the high slurry and other material recycle affects costs.

[Guest Klothilde]

http://www.newenergyworldnetwork.com/investor-news/renewable-energy-news/by-technology/solar/first-solar-sells139mw-campo-verde-solar-project-to-southern-company.html Seems like Ted Turner is hooked on FSLR...

[Guest sony1]

Regarding technological competiveness I was a bit surprised to see this chart from BNEF, with solar termal taking a big chunk of the market in the future. http://grist.files.wordpress.com/2013/04/bnef-new-mj.jpg?w=470&h=345 Looks like molten salt storage is really making CSP competitive again, or maybe not http://qz.com/77898/californias-big-solar-dreams-fizzle-in-the-desert/

[explo 706]

Quoted from "explo"

How have insiders been acting?

I don't know. What do you know?

http://www.nasdaq.com/symbol/fslr/insider-trades#.UXhetUqo28E

Looks like they are exiting. Btw, I did not mean that FSLR was using project strategy to exit module strategy. I meant that the success with projects (short-term breather), while failing on modules (long-term key), gave owners of stock a chance to exit at decent level before historical profit level becomes harder to defend.

[explo 706]

Regarding technological competiveness I was a bit surprised to see this chart from BNEF, with solar termal taking a big chunk of the market in the future. http://grist.files.wordpress.com/2013/04…jpg?w=470&h=345

Big chunk? It's so small I cannot see it. If you're going to be bearish find something bearish. You're just reading bullish charts upside down here.

[Guest sony1]

Ok, maybe I'm slightly color blind, I thought the upper yellow area was solar thermal.

[Guest Klothilde]

Btw, I did not mean that FSLR was using project strategy to exit module strategy. I meant that the success with projects (short-term breather), while failing on modules (long-term key), gave owners of stock a chance to exit at decent level before historical profit level becomes harder to defend.

I wouldn't consider production costs at par with or slightly below Chi Tier 1 a failure. As to the exiting option: I chose FSLR as an investment precisely for the long-term profit potential of their CdTe technology. I think FSLR has a high chance of achieving a sustainable competitive advantage with this technology (in essence higher efficiency than mc-Si at lower cost), and only a sustainable competitive advantage can deliver superior profitability.