First Solar Closes Germany Plant, Cutting 2000 Employees

Citing deteriorating market conditions in Europe, First Solar,  (Nasdaq: FSLR) which led the world in production in 2011, announced it will reduce costs by closing manufacturing operations in Germany, idling four production lines indefinitely in Malaysia, and shedding jobs in the U.S.

About 2,000 people will be laid off – 30% of its workforce.

The company, known for its low-cost leadership, is reeling along with the solar industry overall, from European subsidy cuts, low natural gas prices, and low priced competition from China.

The solar industry has about 44 GW of capacity, twice the demand expected this year. Yet, demand in Germany is surprisingly resilient – 1.8 GW were installed in the first quarter, almost triple that of the same period last year.

SunPower (Nasdaq: SPWR) also announced this week it would close a 125 MW factory in in the Philippines and relocate some of that production to its 575 MW factory there. 

First Solar says it will save $30-60 million this year and $100-120 million annually, cutting the cost of its thin film solar panels to $0.70-$0.72 per watt in 2012, and to $0.60 to $0.64 per watt in 2013.

The company has a robust pipeline, worth $3.4 billion in cash gross profit over the next three years from system sales.

"After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders," laments Mike Ahearn, Chairman and Interim CEO.

"The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage," he says.

"After a period of robust growth, First Solar is scaled to operate at higher volumes than currently exist following the reduction of subsidies in key legacy markets. As a result, it is essential that we reduce production and decrease expenses to reflect the smaller volume of high-probability demand we forecast. These actions will enable us to focus our resources on developing the markets where we expect to generate significant growth in coming years."

First Solar anticipates making 1,500 to 1,800 MW of panels this year.

Germany’s plant will close in the fourth quarter of this year, and Malaysia’s lines will stop in May, reducing production by 144 MW out of the 1688 MW total.

Germany’s plant is closing after First Solar doubled capacity last November. The 560 megawatt (MW) plant is about 20% of the company’s 2.5 gigawatt (GW).

Last November, First Solar, after lowering guidance for the year and letting it’s CEO go because of industry pricing pressure, said it would accelerate efforts to raise module and manufacturing efficiency, rather than new manufacturing plants.
It postponed a planned Vietnam factory and said it would  expand its Mesa, Arizona factory to supply its 2.7 GW pipeline in North America, which includes the Agua Caliente, Desert Sunlight, Antelope Valley Solar Ranch and Topaz projects.

The company received $4.5 billion in Department of Energy (DOE) loan guarantees for three mammoth solar thin-film projects in California, the largest offered to a single company.  

First Solar’s Projects Moving Forward

In the US, First Solar’s Antelope Valley Solar Ranch One project received the first advance of the loan guaranteed by DOE. 
The 230 MW project, in northern Los Angeles county, will power 75,000 homes, and is one of the largest solar projects in the world. First Solar sold the project to Exelon, but is building and maintaining it. The first phase will be operating later this year, with full operation planned for late 2013.

The company is building the largest solar PV plant in Australia, Greenough River Solar Farm. The 10 MW plant, consisting of 150,000 solar panels, is relatively small but is seen as the kick-off to utility-scale solar there.

In India, 500,000 First Solar modules are now supplying energy to 70,000 people in the state of Mumbai. The 40 MW project was built in just five months. It’s the first project in a 100 MW order from Reliance Power.