Solar Industry Update: New Projects In Arizona And Increased Activity In India

Analysts project solar photo voltaic market demand to grow at 33% per year from 2009–2012 to reach 17.2 gigawatts. During the current year, market demand is expected to grow to 13.5 GW in 2010 from 7.2 GW a year ago. Despite feed-in tariff cuts, growth in 2010 was fuelled by German demand. Germany saw PV market demand grow from nearly 4 GW to 7.2 GW. However, in the coming years, the market is expected to diversify globally as the German market declines. In 2011, the German market is expected to fall to 5.9 GW, expediting the need for solar players to expand globally.

First Solar’s Financials
For the quarter, First Solar’s (NASDAQ:FSLR) revenues grow 66% over the year to $798 million, ahead of the Street’s projected revenues of $778.8 million. EPS of $2.04 also managed to exceed expectations of $1.95.

For fiscal 2010, First Solar is projecting revenue of $2.58 billion–$2.61 billion, exceeding the Street’s expected revenues of $2.58 billion. EPS of $7.50–$7.65 is also more than the Street’s projected $7.46.

First Solar’s Operating Metrics
During the quarter, production grew 20% over the year and 2% over the quarter to 350 MW, and the annual capacity per line increased to 59.6 megawatts. Conversion efficiency of 11.3% was marginally better than the 11.2% efficiency recorded a quarter ago. The manufacturing cost per watt of $0.77 was down 10% over the year but grew by $0.01 over the previous quarter.

First Solar’s Global Expansion
The company is expanding capacity and adding two new four-line manufacturing locations with 477 megawatts of annual run rate capacity in 2012. The plants will be located in the United States and Vietnam. They have also received approval from the Chinese government to start preperatory work on their 30-megawatt  photovoltaic project in Inner Mongolia. First Solar expects the Chinese market to be worth at least 20 GW by the year 2020.

Besides China, First Solar is also expanding in India. Indian central and state government programs are driving acceleration in PV deployment, and the goal is to reach 22 GW by 2022 from the existing capacity of 30 MW. First Solar is already investing resources and working with partners in India to deploy several projects in 2011.

The stock is trading at $126.75 with a market capitalization of $10.9 billion. It touched a high of $153.30 earlier last month.

SunPower’s Financials
SunPower (NASDAQ: SPWRA) recently reported a better than expected Q3 performance. Revenues of $550.6 million grew 18% over the year and were significantly higher than the Street’s projected $471.7 million. EPS of $0.26 also came in higher than the market’s expected return of $0.13.

For the current quarter, SunPower is projecting revenues of $870 million–$970 million compared with the Street’s projections of $935.6 million. EPS of $0.95–$1.15 is in line with the market expectations of $1.10. SunPower expects to end the year with revenues of $2.15–$2.25 billion and EPS of $1.45–$1.65. The Street was looking for EPS of $1.43.

SunPower’s Growth
SunPower has been looking on expanding in markets other than Germany. They are growing within the United States, and after being awarded a 20 MW federal government project earlier this quarter, recently won a 10 MW contract from LS Power to build the largest solar plant in Delaware. They were also awarded a 3.5 MW roof top contract for Macy’s Arizona fulfillment center, which is the largest single rooftop contract in the country.

Outside of the U.S., SunPower completed the sale of 28 MW of Italian power plants and announced the availability of their Oasis power plant block in Europe. The solar industry has been plagued by financing trouble due to the financial crisis. In a bid to search for alternate funding sources for their Montalto solar park, SunPower recently offered 200 million euro of debt bonds for sale. Analysts claim this to be the first solar bond for a large solar project.

The stock is trading at $12.31 with a market capitalization of $1.2 billion. In August of this year, it touched a 52-week low of $9.61.

The current year has been tough for the solar industry. Besides having to deal with feed-in-tariff cuts, growing price pressure, and increased competition from Chinese players, the industry is also looking at the expiry of the solar grant program within the U.S.; the program was initiated last year as part of the American Recovery and Reinvestment Act. The program has been credited with having contributed to the installation of over 1,000 MW of solar-electric capacity, sustained jobs, and supplied power for up to 220,000 homes. But,most analysts believe that Congress will not grant an extension because many of its members are not convinced that the stimulus program has worked efficiently. All of these factors have forced solar players to look beyond their traditional markets of Germany and the U.S. In the coming years, it will be interesting to watch how these players adapt themselves to growing in these two markets.

In his recent visit to India, President Obama helped clean energy projects gain access to financing. He has initiated a U.S.–India Energy Cooperation Program, a public-private partnership to leverage business resources in the United States and India for commercial clean energy projects and initiatives. His visit has also helped accelerate the setting up of a Joint Clean Energy Research and Development Center aimed at mobilizing public and private sector funding for research and development actitivies in the clean energy sector. The center hopes to raise funding of up to $100 million over the next five years.

India’s Export-Import Bank has also agreed to provide financial support for exports of U.S. goods and services required for development of renewable energy and natural gas projects in India. As part of this initiative, the bank has signed a memorandum of understanding with India’s Reliance Power to provide $5 billion credit line for exports from U.S. for goods and services required for development of renewable energy power plants.

Further, the U.S. Overseas Private Investment Corporation (OPIC) has agreed to provide $100 million in financing in solar, wind, hydropower, advanced biofuels, and natural gas projects, with a focus on India. The OPIC is also looking at a pipeline of over $280 million worth of clean energy and energy efficiency projects in India, making the country a possible strong market for solar players.