North Coast Solar Stocks

November 22, 2009

First Solar plant re-energized

Filed under: AEP, FSLR, PCG, SRE — Tags: , , , , , — Jason @ 10:00 am

Expansion reflects growth in demand across North America

First Solar Inc., which began in Toledo and is headquartered in Arizona, has its only North American factory in Perrysburg Township. The plant is expanding.

By GARY T. PAKULSKI
BLADE BUSINESS WRITER

A huge expansion of a solar panel manufacturing plant in Perrysburg Township is nearing completion just in time for a massive planned increase in solar energy use across the United States and Canada.

Utility-scale solar fields, mostly in the West and South, will consume the output of the First Solar Inc. (FSLR) plant through 2015 and probably will cause the company to import panels from its factories in Europe and Asia, an official said.

“We definitely have created demand in the United States far beyond what that single plant can supply and will need to supplement that with product from other plants,” said Alan Bernheimer, a company spokesman.

Executives launched an initiative two years ago to boost U.S. sales to correspond with the company’s growing manufacturing capacity and offset any cooling of a solar energy-building boom in Europe that consumed millions of Perrysburg Township-made panels. Those efforts are now bearing fruit.

Massive solar fields built by First Solar have been completed or are nearing completion outside Las Vegas, in southern California, and in Ontario along Lake Huron.

Five other big First Solar projects that probably will use panels from the suburban Toledo plant are under way or have been announced. They include one that would become the largest solar array in the nation, covering nearly seven square miles and producing enough electricity for 160,000 homes.

All of the projects are multiple-acre solar fields that will be connected to the nation’s electric grid.

An evolution
If the company moves forward on already-announced projects, the work would consume more than 18 million of the 2-foot-by-4-foot panels that First Solar produces.

“That’s great news,” said Steve Weathers, president of Toledo’s Regional Growth Partnership. “What we like to see with any company is growth in their customer base.”

He said the local plant’s growth demonstrates an evolution in the local economy as northwest Ohio and southeast Michigan shift to other industries and away from heavy reliance on jobs in auto manufacturing.

First Solar, which began in Toledo but is based in Tempe, Ariz., spent $100 million to nearly double the size of its single North American manufacturing facility, which is in Perrysburg Township.

A fourth production line that will boost capacity to 2.8 million panels a year from the current 2 million is to begin making products by March 31, officials said. The plant will be able to annually manufacture panels capable of making 212 megawatts (or 212 million watts) of electricity.

The expansion project, which is to be finished by early next year, also includes a research center and added office space. It is expected to boost employment to about 840 from 700.

The plant became First Solar’s first factory in 2000. The company grew out of collaboration between Toledo glass pioneer Harold McMaster and Wal-Mart retailing heir John Walton.

Since perfecting its product at the Perrysburg Township factory, First Solar has grown into a $2 billion-a-year manufacturer of a new, cheaper-to-produce panel made with thin-film technology. The firm has expanded to Europe and Asia, with manufacturing complexes in Frankfurt/Oder, Germany, and Kulim, Malaysia.

Possible problems
Large government subsidies have made Europe the destination for most panels produced by the company, including those from Perrysburg Township.

But Spain and Germany, the top two users of solar power, have scaled back on incentives in the past two years, according to the Solar Energy Industries Association.

Coupled with increasing manufacturing capacity in the United States and around the world, the industry faces the prospect of unsold inventory and lower prices, experts warn.

In this environment, another metro Toledo start-up, Willard & Kelsey Solar Group LLC, Perrysburg, has had difficulty obtaining financing to begin large-scale production of solar panels.

A third Toledo start-up, Xunlight Corp., is hunting for customers for its sheetlike solar panels.

Stock of First Solar took a hit last month after executives announced third-quarter sales were $481 million, about 9 percent less than the $530 million expected by Wall Street.

Even with quarterly profit of $153 million, First Solar shares lost 17 percent — or $25 each — to close at $126.67 in New York Stock Exchange Trading on the day after the earnings announcement. The stock fell to $121.18 at the close of trading Friday.

Still, the firm remains one of the most respected manufacturers of solar panels in the world. It is negotiating with the Chinese government to build a massive solar field there.

And the company last month was added to the Standard & Poor’s 500 Index, a widely watched stock-market barometer that consists of leading U.S. companies.

First Solar executives say their efforts to promote domestic demand have met with success.

The firm, which branched out from panel production into solar plant development and management, has announced projects with a capacity to produce 1.3 gigawatts (1.3 billion watts) of electricity.

They represent about one tenth of the 14.3 gigawatts now in development nationwide, said Monique Hanis, spokesman for the Solar Energy Industries Association.

“This is the most we’ve had in the pipeline in the United States,” she added.

The solar rush
The rush to boost solar, propelled in part by laws in many states requiring utilities to produce a portion of power from renewable sources, helped catapult the United States past Japan to third in development of new solar plants last year, the organization reported.

Still, in total capacity, the United States (1.6 gigawatts) ranks fourth behind No. 1 Germany (5.3 gigawatts), Spain (3 gigawatts), and Japan (2.2 gigawatts).

If all planned projects come to fruition, U.S. use of solar power would grow steeply, but projects face potential roadblocks, the industry spokesman cautioned.

Financing for solar plants became more difficult after the credit and banking crisis that swept across the nation late last year. And it is unclear if all planned projects will attract lenders and investors, Ms. Hanis added.

First Solar officials say, however, that they have not had trouble finding investors and buyers for their projects.

One example is the El Dorado Solar plant outside Las Vegas in Boulder City, Nev., a city established in 1932 to provide housing for workers building the Hoover Dam.

The Perrysburg plant provided 167,000 panels to the plant, which was completed late last year.

With a capacity to produce 10 megawatts of power, the plant is owned by Sempra Generation (SRE) of San Diego and has a long-term contract to supply power to Pacific Gas & Electric (PCG), which serves customers in northern and central California. It is the nation’s third-largest facility powered by solar panels behind plants in Arcadia, Fla., and in Clark County, Nevada, according to the Solar Energy Industries Association.

“It’s been performing quite well,” said Art Larson, a Sempra spokesman. “We’re in an area where the sun shines almost every day.” The facility employs one person.

Pacific Gas & Electric has agreed to buy an additional 48 megawatts of power, and Sempra is awaiting approval from the state Public Utilities Commission to begin a plant expansion, Mr. Larson said.

First Solar announced last month that it has sold to Enbridge Inc. (ENB) of Toronto a solar field nearing completion near Sarnia, Ont. The facility will produce 20 megawatts of power, which is enough to provide electricity to 3,200 homes.

The Ontario Power Authority has signed a contract to purchase electricity from the solar installation for 20 years.

Enbridge and First Solar wouldn’t discuss the sale price of the Sarnia plant which, when completed, will be Canada’s largest solar field.

Wyandot County
The Midwest’s largest solar installation is being built with 160,000 First Solar panels on a longtime soybean field near Wyandot County’s Upper Sandusky, which is 75 miles south of Toledo. The 10-megawatt system will be owned by PSEG Solar Source of Newark, N.J., and is to supply electricity to customers of American Electric Power (AEP) Ohio, Columbus.

Frames that will hold solar panels for the ground-mounted system are rising on an 83-acre, county-owned site at County Road 44 and State Rt. 199.

It is to begin producing electricity next year.

“From the county’s perspective, we are excited,” said Eric Romich, economic development director. “It puts Wyandot County in the spotlight. … We’re hoping we can springboard this project to foster other development.”

More developments
Another First Solar project, to be completed by the end of 2009, is in Blythe, Calif., 225 miles east of Los Angeles. The plant will produce 7.5 megawatts for customers of Southern California Edison.

First Solar will supply 500,000 panels to a solar field to be built in Colfax County in northern New Mexico near the village of Cimarron on a hunting preserve and guest ranch owned by media mogul Ted Turner.

The solar farm, where construction is to begin in April and is to be finished later in 2010, will produce enough electricity to supply 9,000 homes. Tri-State Generation & Transmission Association Inc., a rural electric cooperative in Westminster, Colo., that serves the western United States, has committed to purchasing the power for 25 years.

The 250-acre plant will be on Mr. Turner’s storied Vermejo Park Ranch, where hunters pay $12,000 each for the chance to hunt elk and other game.

Before the CNN founder bought the 920-square-mile property in 1996, it had been a retreat for Hollywood celebrities in the Roaring ’20s and, later, a corporate-owned cattle ranch.

Other projects, which have yet to receive environmental and other permits, are a 550-megawatt field planned for San Luis Obispo County, California, and twin projects of 250 megawatts and 200 megawatts each in Riverside and San Bernardino, Calif., First Solar officials said.

To aid its effort to boost development of solar fields in the United States, First Solar has made a number of strategic acquisitions. In 2007, it paid Mr. Turner $34 million for New Jersey-based DT Solar, which boosted the firm’s engineering, procurement, and construction capabilities.

Then last April, it traded $400 million in First Solar stock for the massive project portfolio of California-based Opti-Solar, which brought to the company most of the projects now in development.

The deal included a 50-person sales and project-development team in Oakland.

And in yet another transaction, First Solar last year signed a supply agreement with California-based Solar City, a large installer of home solar systems, as part of which Solar City will install up to 1.4 million First Solar panels on residential rooftops over the next five years.

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