First Solar on Wednesday reported a 54 percent jump in the third-quarter profit and sought to assure investors that most of its customers should do OK in 2009.
The thin-filmsolarpanel maker posted a profit of $99.3 million, or $1.20 per share, compared with $46 million, or $0.58 per share, in the same period a year ago. The Tempe, Ariz., company also posted a third-quarter revenue of $348.7 million, up 54.4 percent from $159 million in the year-ago period.
The company expects to generate $2 billion to $2.1 billion in sales in 2009. First Solar (NDSQ: FSLR) is now able to make panels at $1.08 per watt. In August, Lazard Capital Markets said the company was producing at $1.09 per watt, giving First Solar the highest profit margins in the industry. While discussing its second-quarter earnings in July, First Solar said it had reached $1.18 per watt.
Before First Solar executives discussed the company's 2009 outlook, investors and analysts were quite concerned about how the company will weather a global market beset by credit crunch and slumping economies. First Solar announced its earnings after the stock market closed and saw its shares fall nearly 7 percent before climbing nearly 15 percent to reach $132.70 per share in after-hours trading.
First Solar CEO Mike Ahearn told analysts during a conference call that a change to a government-owned bank in Germany, KfW Bankengruppe, that is unrelated to the financial market crisis will have some impact on the company's business. Starting on Jan. 1, KfW plans to eliminate the program that has allowed borrowers to get more than €10 million ($13 million) per solar project. The bank will continue to provide financing for up to €10 million ($13 million) for each project, enough money for a 4-megawatt development Ahearn said.
KfW's policy change will affect customers who are due to receive 15 percent of the panels First Solar intends to produce for the German market, Ahearn said. The company expects to ship about 70 percent of its panels to Germany in 2009.
Some of the other German banks are still loaning money for solar projects. But equity investors, who put up money for a stake in a project, might not be as willing to pony up, Ahearn said. Lending in Europe outside of Germany "has stopped in the time being."
The good news is the government-subsidized solar programs in key markets in Europe, such as Germany, Spain, Italy, Greece, France and the Czech Republic aren't likely to be cut as a result of the financial market turmoil, said Ahearn, who added that the company spent the past three weeks talking to government officials from those countries. Those programs have played a critical role in boosting solar energy developments, which are more costly than building conventional power plants.
In the United States, the recent passage of an eight-year solar investment tax credit will help to boost solar energy developments in the country. But with loans and equity investments more difficult to come by, it's hard to predict the growth in the U.S. market, Ahearn said.
Until now, the thin-film solar maker has sold panels to whole sellers or power-plant developers, or that it develops solar projects for utilities. First Solar continues to great opportunities in these types of businesses, but decided recently to expand into the residential solar market.
Earlier in the day, First Solar announced it had invested $25 million in SolarCity and has agreed to supply thin-film panels to the solar financer and installer.
The deal calls for First Solar to deliver 100 megawatts worth of solar panels to SolarCity over five years beginning in the first quarter of 2009.
SolarCity, based in Foster City, Calif., installs solar-power systems on residential and small commercial properties in California, Arizona and Oregon. The company also offers leasing options, paying part of the upfront cost of a system, which could set homeowners back roughly $30,000.
The $25 million in funding is part of a $30 million round the company raised, with investors including JP Morgan, Draper Fisher Jurvetson and DBL Investors. The round brings SolarCity's total capital to $56 million.
The thin-film maker's entry into the residential market - and its interest in SolarCity - is perhaps not surprising. Ahearn complimented SolarCity at the Solar Power International conference in San Diego two weeks ago during a panel that also included SolarCity CEO Lyndon Rive.
Speaking about the residential solar market, Ahearn said it wasn't far from being cost effective and efficient.
"You still have to be an enthusiast and get it done," he said. "SolarCity has done a better job than most."
Both Ahearn and Rive expressed concern that consumers might have trouble evaluating goods and services when the market is so new and new installers are popping up quickly.
"If you look at the warranties today, it will be difficult for consumers to understand where there is a claim proven and who's responsible," Ahearn said. "You can get wide-spread disappointment over time, and it will come back to bite us."
Some industry insiders expect the residential solar market to grow rapidly as a result of a recently passed federal tax credit, which can make a solar-energy system 30 percent cheaper (see Lawmakers Approve Energy Tax Credits, Bailout).
Residential solar installations may also see a boost from states and cities that are setting up their own incentive programs. San Francisco and Berkeley both set up financing programs this year that will make buying and installing solar energy systems more affordable for residents and businesses (see Berkeley to Launch Solar Financing Program and San Francisco Solar Incentives Become Official).
But whether more consumers will spend money on solar during the economic downturn remains to be seen (see Solar Mergers: Guarding Against a Slumping Economy).
SolarCity launched its residential leasing program in April 2008. By July, one of its executives said revenues from the program had surpassed all sales from 2007, when the company brought in $29 million in sales (see SolarCity Sees Sales Spike).
While the partnership with SolarCity marks First Solar's first announced deal with a residential installer, it's not its first foray into installation. First Solar in November acquired Ted Turner's company DT Solar, which installs commercial solar projects, for $34 million.
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