First Solar Outlook Brightens With New Arizona Plant

First Solar recently announced plans to build a solar module factory in Mesa, Ariz. The factory will boost First Solar’s annual production capacity by more than 250 MW when completed around the third quarter of 2012.First Solar competes with other solar industry players like SunPower, Suntech Power and Yingli Green Energy Holding. We have a price estimate of $155 for First Solar’s stock, which is roughly in line with the stock’s market price.First Solar Adds Production CapacityFirst Solar had total production capacity of 1.8 gigawatts at the end of February 2011, with manufacturing plants in Perrysburg (Ohio), Frankfurt (Germany) and Kulim (Malaysia). The company has already announced its intention to establish additional manufacturing plants at Blanquefort, France and Dong Nam Industrial Park, Vietnam that are expected to increase the company’s production capacity to 2.9 GW by the end of 2012.The addition of the newly announced factory at Mesa would give First Solar 3.2 GW production capacity by 2012. With countries around the world focusing on renewable sources of energy to reduce their carbon footprint, First Solar is looking to ramp-up production to full capacity to meet the expected increase in demand for solar photovoltaic modules.Arizona Works Hard On ‘Solar Portfolio’Arizona has been progressive in attracting companies in the solar industry, with new regulations adding to the state’s attractiveness. Arizona’s requirement that utility power plans quantify and include environmental costs when seeking approval to establish a plant improves the competitiveness of solar plants against those using fossil fuels.Upside to First SolarOur base case forecasts suggest shipment of 2.5 GW of solar modules for First Solar in 2012 – with 0.73 GW from sales to customers in Germany, 0.42 in sales to U.S. customers, and the remaining 1.3 GW to other international customers. The addition of new capacity at Mesa could result in an increase in sales to international customers by about 0.2 GW, raising our estimate for 2012 to 1.5 GW. This change would likely persist through our forecast period, presenting 5% upside to our $155 price estimate for First Solar stock.See our full analysis of First Solar hereNotes: First Solar to Build Solar Module Factory in Mesa Arizona, First Solar Press Releases, March 17 2011 SEC 10-K Filing, First Solar, 2011 New Arizona law ?will support solar entrants? says EnviroMission, NewEnergyWorldNetwork, Nov 5 2010 05.04.2011, First Solar