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First Solar in Large Power Projects

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First Solar, Inc. (FSLR) has decided to build a photovoltaic (:PV) solar power project in Hagerstown, Maryland with a generation capacity of 20 megawatt (“AC”). The company will have full ownership of the Maryland Solar plant.

Under a contract, the electricity and renewable energy credits will be sold to a unit of FirstEnergy Corporation (FE). To generate clean and renewable energy, the plant will use First Solar’s advanced thin film PV modules. The energy generated on an average will be able to provide power to approximately 2,700 Maryland homes. The power from the eco-friendly plant will displace approximately 23,000 metric tons of CO2 annually which is equivalent to taking 4,400 cars off the road each year.

First Solar is expected to begin the construction of the power plant in the second quarter of 2012 with completion scheduled for the fourth quarter.

In a recent agreement, First Solar cut a deal with NRG Energy, Inc. (NRG) under which it will build a 26 megawatt Avra Valley solar project for the latter. Under a 20-year power purchase agreement, the electricity generated from the project will be sold to Tucson Electric Power.

In February 2012, the company reported fourth quarter and fiscal 2011 results. First Solar fell below the Zacks Consensus earnings per share estimate of $1.57 by 31 cents to clock adjusted earnings of only $1.26 in the reported quarter.  First Solar’s quarterly revenues were $660 million, up $50 million from $610 million in the fourth quarter of 2010. Quarterly revenue however fell behind the Zacks Consensus Estimate of $812 million. On a year-to-year basis, fourth quarter module Average Selling Prices (“ASP”) decreased 2% and third-party ASPs declined 24%.

Like its peers, the company is witnessing an oversupply of photovoltaic products leading to a drop in ASPs. Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. In this scenario, the aforesaid utility-scale electricity power projects would help counter the headwinds facing solar module producers in general.

The company presently retains a short-term Zacks #3 Rank (Hold). We have a long-term Underperform recommendation on the stock.

First Solar Inc. designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. First Solar also focuses on designing and deploying commercial solar projects for utilities.

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