First Solar Offers Rosy 2013 Outlook

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By CASSANDRA SWEET and KRISTIN JONES

Bloomberg News

First Solar's projects, such as in Yuma County, Ariz., are expanding.

Solar-panel maker First Solar Inc. FSLR -0.88% on Tuesday said it expects 2013 revenue and earnings that exceed analysts' forecasts amid a rosy outlook for its power-plant development business, and the company unveiled a new type of panel it plans to make.

First Solar predicted 2013 earnings of between $4 and $4.50 a share on sales of between $3.8 billion and $4 billion. Analysts polled by Thomson Reuters recently projected per-share earnings of $3.51 on revenue of $3.12 billion. The company predicted 2015 earnings of $4 to $6 a share on revenue of $4.2 billion to $4.8 billion, following plans to start making solar panels using silicon technology developed by San Jose, Calif.-based TetraSun Inc., which First Solar said it was in the process of acquiring.

"We believe in the company, we believe in the industry [and] we believe that the energy world is just beginning to understand the capabilities of photovoltaic products," First Solar Chief Executive James Hughes said during a webcast presentation.

First Solar, of Tempe, Ariz., anticipates total 2013 shipments of solar panels, or modules, of between 1.6 gigawatts and 1.8 gigawatts. Systems sales, in which modules are sold into power plants being built by First Solar, are expected to account for around $3.6 billion of net revenue.

The company expects 2013 gross margin of between 20% and 22%, down from about 27% in 2012, said finance chief Mark Widmar. Operating expenses for the year are expected to range between $380 million and $400 million, Mr. Widmar said.

Shares jumped 48% to $39.90 in recent trading. The stock is up 30% since the start of the year.

Some analysts expressed skepticism about First Solar's optimistic predictions for 2015 earnings, which were based to some extent on power plant sales for which contracts have not been signed.

"The company is ascribing a lot of credit to project wins in the future," said Pavel Molchanov, an analyst at Raymond James Financial Inc RJF -1.32% . "Companies can certainly be aggressive about setting guidance, but my bias would be to the downside."

Mr. Hughes said he was confident First Solar would reach its goals, given the growing level of demand in the global solar market.

"There's a significant portfolio of opportunity we're seeing and, with general market conditions, we felt we had enough visibility to give the market our outlook as to how we saw the years developing," Mr. Hughes said in an interview.

First Solar said it expects to recognize revenue for its Desert Sunlight solar-power generating plant beginning in the second half of 2013, and ending by late 2014.

The U.S. solar firm's optimism contrasted sharply with some of its competitors, particularly China-based Suntech Power Holdings Co., STP +1.43% which filed for bankruptcy protection last month after the Chinese company defaulted on a $541 million bond payment.

First Solar and its rivals' profits have slumped in recent quarters, as they have struggled with falling prices and a global oversupply of solar panels and manufacturing capacity. However, First Solar has benefited recently from stronger-than-expected demand for its solar power plants. The company makes thin-film solar panels, and it develops and builds large-scale solar-power plants that it then sells to large energy companies.

Mr. Hughes said the company has been expanding aggressively into emerging solar-power markets, including Chile, Australia, India, China, South Africa, Saudi Arabia, Dubai and other countries, particularly those with ample sunshine and high liquid fuel prices.

In countries such as Chile, where power generation fuels can be expensive, utilities and industry are giving solar panels a closer look as a way to avoid burning fuel during the day, and this is breathing new life into demand for First Solar's generation plants, Mr. Hughes said.

Utilities in Chile are looking at generating solar power during the day to avoid having to burn natural gas, which can fetch between $12 and $13 per million British thermal units in that country, Mr. Hughes said. By contrast, U.S. natural gas prices were recently trading Tuesday around $4 a million BTUs

"That opens up potential for demand for [solar panels] that no one has really thought about historically," Mr. Hughes said.

First Solar said its acquisition of TetraSun would enable the company to compete in the rooftop solar market and other applications of solar panels in which the power they generate is used where the system is located. These will be new markets for First Solar, which has traditionally focused on building large-scale power plants for utilities that require transmission lines to ship the power to market. TetraSun's silicon panels convert more sunlight into electricity than First Solar's thin-film panels, whichn are made from Cadmium-Telluride, and can compete better with rival solar panels made from silicon, First Solar said.

First Solar is acquiring TetraSun using cash from its balance sheet, and won't need to raise money from the equity or debt markets to complete the deal, Mr. Hughes said. The solar giant decided to buy TetraSun after looking at more than two dozen other startups, many of which had through venture capital funding and were looking for buyers, Mr. Hughes said.

"This really arose out of the fact that industry conditions generated a significant number of opportunities to acquire new technology," Mr. Hughes said.

Looking ahead to 2014, First Solar projected per-share earnings of between $2.50 and $4, and between $3.5 billion and $4 billion in sales. Analysts recently expected 2014 per-share earnings of $3.27 and revenue of $3.35 billion.

For 2015, the company expects per-share earnings of $4 to $6, and $4.2 billion to $4.8 billion in sales.

Write to Cassandra Sweet at cassandra.sweet@dowjones.com and Kristin Jones atkristin.jones@dowjones.com

A version of this article appeared April 10, 2013, on page B