First Solar, Inc. (FSLR) has installed its 10 millionth solar photovoltaic ("PV") module at the 550 megawatt (“MW”) AC Desert Sunlight Solar Farm. This solar project is being constructed by First Solar for NextEra Energy Resources, a subsidiary of NextEra Energy, Inc. (NEE) and GE Energy Financial Services, a unit of General Electric Company (GE).
The project is located 35 miles west of Blythe and six miles north of Desert Center in the Chuckwalla Valley on approximately 3,800 acres of land. It was sold to NextEra Energy and GE Energy Financial Services in September 2011. Both had acquired the project in a 50-50 partnership. However, First Solar will continue to build and subsequently operate and maintain the project.
Per two long-term power purchase agreements, of the 550 MW of solar power generated, 300 MW will be sold to Pacific Gas and Electric Company, a subsidiary of PG&E Corp. (PCG) and the remaining 250 MW of energy will be sold to Southern California Edison, a subsidiary of Edison International (EIX).
The project is a part of First Solar’s 2.7 gigawatt (“GW”) utility-scale solar pipeline projects in North America that will continue to create construction jobs over the next several years. During its construction period, the Desert project will create 400 jobs.
The project will also help California in meeting its target of generating 33% of its power from renewable sources by 2020. The project would power approximately 160,000 California homes and remove 300,000 metric tons of greenhouse gas emissions per year, which is equivalent to taking 60,000 cars off the road. It will generate $27 million in sales and property tax revenue. Moreover, the project will contribute $336 million as total indirect local economic benefits.
First Solar has produced almost 80 million advanced thin-film solar modules. These modules are sufficient to generate 6 GW of energy, power 3 million homes and remove more than 4 million tons of Co2 per year.
Besides supplying modules, First Solar is busy building solar power projects. Once completed, in 2015, the Desert project will be one of the two largest PV solar projects in the world. Another 550 MW project called Topaz is under construction in San Luis Obispo County by the company’s Engineering, Procurement and Construction (“EPC”) team.
Based in Phoenix, Arizona, First Solar Inc. designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology. As of December 31, 2011, the company had an annual global manufacturing capacity of approximately 2.4 GW at its three manufacturing plants. Overall, the company expects to increase its manufacturing capacity by fiscal-end 2012 to approximately 2.5 GW. However, solar module producers, across the board, are experiencing a steep decline 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, in order to counter the weak trend, the company is focusing more on utility-scale electricity power projects. Moreover, the decline in margins will be compensated by a broader geographic revenue base, technological enhancements and cost minimization. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
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