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With new tax law, First Solar may increase US manufacturing

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With new tax law, First Solar may increase US manufacturing

First Solar Inc. CFO Alexander Bradley said the company may consider producing more solar panels in the U.S. to take advantage of some of the provisions in the tax law that President Donald Trump signed in late 2017.

The lower corporate rate and immediate expensing of qualified equipment make "the option of adding additional U.S. manufacturing capacity more attractive," Bradley said Feb. 22 on a conference call discussing First Solar's financial results for the fourth quarter of 2017.

First Solar CEO Mark Widmar said the Arizona-based company could add "a few hundred megawatts or so" in U.S. capacity. An existing plant in Ohio, which is expected to start mass-producing Series 6 panels in the second quarter, has a nameplate capacity of 600 MW. A plant in Malaysia and two in Vietnam, each of which has 1,200 MW of capacity, will start rolling out the new panels over the next year.

While the new tax law should be a "net positive" for First Solar, its impact on the company, which operates globally, is "complex and varied," Bradley said. The lower corporate tax rate, for example, could reduce the availability of tax-equity financing, which the renewable energy industry has relied on a source of project funding.

"We may see some short-term impact to the U.S. project development and financing markets as capital structures and sources adapt to the new tax regime," Bradley said.

First Solar reported a fourth-quarter 2017 net loss $432.5 million, or a loss of $4.14 per share, compared to a loss of $750.8 million, or a loss of $7.22, a year earlier. The results included a $408 million charge related to the new tax law. Accounting for restructuring and asset impairment charges and the impact of the tax overhaul, First Solar reported a non-GAAP loss of 25 cents per share.

The company is operating in an industry that has been roiled by a trade case that resulted in tariffs on imported solar cells and panels. First Solar's thin-film technology is not subject to the duties, which could provide a competitive advantage for the company.

However, First Solar, which is "largely sold out" into 2020, is being careful not to appear too aggressive now that competitors' products could be subject to import tariffs. "It is a marathon. It is not a sprint. We want to have long-term relationships with our customers," Widmar said.

"What I'll tell you is that when I look at ... the [average selling prices] that are out there, relative to our roadmap of Series 6 and where we're going with that technology, I'm pleased," he added.

First Solar made headlines recently when it was selected by Arizona Public Service Co., or APS, to build a solar-powered battery system to provide electricity during peak demand. APS is a subsidiary of Pinnacle West Capital Corp.

"With the economics of solar plus storage increasingly approaching parity with traditional dispatchable generation, as demonstrated by the recent APS announcement, we believe competing for firm power represents among the most compelling growth opportunities for [First Solar] over the long term," Oppenheimer & Co. Inc. analysts wrote in a Feb. 23 note.