First Solar to add eight CdTe lines; targets sales US$2.9 billion in 2010 (updated)

Taking note of the focus that investors and the solar industry in general were waiting to hear from the guidance given today by First Solar about its operational performance expectations for 2010, the thin film leader kicked off its investor meeting in New York by announcing a capacity expansion plan that includes the build-out of another eight production lines at its manufacturing hub in Kulim, Malaysia. Fiscal year 2010 net sales are projected to be $2.7 billion to $2.9 billion.

Approximately US$365 million will be allocated to the two new production plants that each will have four manufacturing lines, with the new capacity starting to come online in the first half of 2011. This expansion is expected to increase First Solar's annual capacity by 424MW, assuming the third-quarter 2009 reported annual line run rate of 53MW.

Interestingly, its previously announced 100MW-plus, two-line contract manufacturing plant to be built in France for EDF will not be started until the new expansions in Malaysia are completed. However, the company will announce the site details before the end of this year, and expects to ramp those factories in 2012.

First Solar says it will add a total of 10 new production lines by 2012, increasing capacity by over 48% from current levels, reaching 34 lines and a minimum of 1.8GW based on current production levels.

"First Solar is expanding capacity to satisfy a global contracted and advanced pipeline of over 6GW from 2010-2012," said Rob Gillette, First Solar's CEO. "In 2009 we increased our contracted North American pipeline by approximately 1.5GW, expanding our penetration in transition markets. This drives further capacity needs around a demand pool that is less volatile and more predictable than the traditional feed in tariff-based markets."

(UPDATE) The 1.8GW capacity number for 2012 may turn out to be quite conservative. The company says its roadmap calls for improvements in factory throughputs of 8-10% per year which, combined with higher yields and conversion efficiencies, would push its overall capacity closer to 2.3 or 2.4GW.

On the EPC/project development side of the business, First Solar says its contracted project pipelinetotals 3.2GW for 2010-2012 (the majority of which is in Europe and the "rest of world" categories), with 1.349GW of the total indicated for 2010. The company's combined contracted and advanced pipeline numbers run to 6.3GW for the period, with the 2010 figure jumping to more than 1.8GW and more than 2.22GW seen for 2012.

The company said that it has significantly improved its balance-of-system design and reduced BOS costs. First Solar also claimed it has cut EPC (engineering/procurement/construction) cycle times for system installation by 50%, and now sees its capabilities in that area as largely superior to what's out in the market.

The company forecasts the total global market demand for solar will be approximately 7.5GW in 2010, 9.7GW in 2011, and 12.1GW in 2012, reflecting a 35% compound annual growth rate during the period. The United States and Canada as well as China, France, and the ROW will show the most prodigious growth, according to First Solar's projections for PV module demand.

First Solar noted that it expects the German feed-in tariff to be reduced twice in 2010, once at the beginning of the year and then again sometime midyear, although it would not speculate on how large the reductions might be or reveal what FIT assumptions it has built into its own financial model.

(Additional reporting by Tom Cheyney)