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First Solar boosts panel production amid tech acceleration

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First Solar boosts panel production amid tech acceleration

First Solar Inc. plans to manufacture about 43% more solar panels than previously expected over the next three years as the company extends production of a legacy solar panel at the same time as it rolls out its new technology. Faced with plunging prices, the manufacturer and power plant developer said last November that it was canceling production of its Series 5 solar panel and leapfrogging instead to Series 6, a high-efficiency product that is expected to deliver better gross margins.

The plan had been to quickly phase out the Series 4 module to make way for the new line, but customers lined up for the old modules in a year that saw project developers racing to secure equipment under the cloud of a looming trade case. Counting freight and warranty expenses, "Series 4 is the lowest-cost product in the market today," First Solar CEO Mark Widmar told analysts Dec. 5 at the company's manufacturing plant in Perrysburg, Ohio. "[We] have more demand than we can currently supply."

The company anticipates producing more than 13,700 MW of solar panels through 2020, up from the approximately 9,600 MW previously forecast. The Perrysburg facility, which is being retrofitted for Series 6 production, is expected to be in commercial operation by the second quarter of 2018. Along with plants in Vietnam and Malaysia, First Solar expects to be able to make approximately 5,400 MW of Series 6 panels annually by 2020.

"We're expecting an on-time launch and ramp of the Series 6 technology," First Solar Chief Technology Officer Raffi Garabedian said at the event. The transition to Series 6 is expected to cost First Solar more than $1 billion.

The company's shares closed at $61.21 on Dec. 5, up almost 7%.

Tax code jitters

Solar companies have spent the better part of 2017 wrestling with the uncertainty created by a U.S. trade case that could lead to steep tariffs on all imported crystalline silicon solar cells and panels. The petitioners, Suniva Inc. and SolarWorld Americas Inc., say an unexpected flood of cheap imports decimated U.S. manufacturers. Early on, First Solar was viewed as a potential winner if tariffs are imposed since its thin-film technology is not covered by the case.

Adding to industry jitters, a bill in the U.S. Senate to overhaul the tax code could limit the supply of tax equity for renewable energy projects.

"I think we're still cautiously optimistic that there will be an outcome which allows there to be enough tax equity in the market to support our business," First Solar CFO Alexander Bradley told analysts on Dec. 5. "However, it is clearly a challenge."

Widmar said the company would be partially shielded from harm if financing is constrained in 2018 because many of its bookings are with utilities, which don't rely on tax equity to fund development. "And we think we're going to see more utility-owned generation as we move forward ... which somewhat normalizes, potentially, the impact that we could see with the availability of tax equity," he said.

First Solar is not the only manufacturer planning to increase solar panel production in coming years, though the company said its use of cash to fund the build-out sets it apart.

"To create a competitive advantage you look to scale," Widmar said. "The view is, 'I can't differentiate myself on my technology, but I can differentiate myself on scale.' What that has resulted in then is a tremendous amount of capacity expansion, highly levered balance sheets in order to fund that growth and subpar economics and an oversupplied market."

First Solar, on the other hand, can charge a premium because its panels have a higher "energy value" than competitors', Widmar said.