First Solar shares soar on restructuring news

The company's global restructuring efforts resonate with investors.

By Benzinga Apr 17, 2012 7:10PM
Image: Solar panel (© Russell Illig/PhotoDisc/Getty Images)By Ilir Shkurti, Benzinga Staff Writer


First Solar (FSLR), the largest U.S. solar manufacturer, announced Tuesday a major restructuring to make its operations sustainable in the face of current market conditions.


The company said it would indefinitely idle four production lines in Malaysia while it shuttered manufacturing operations in Germany. Anticipated to cost between $245 million and $370 million in 2012, the program should yield expected annual savings in the range of $100 million to $120 million. First Solar will shed about 30% of its workforce, or 2,000 positions.


In a statement released while shares were halted, First Solar said that it was taking the measures to adapt to deteriorating market conditions in Europe. The company had previously scaled its capacities to meet growth that until recently had been robust, in significant part to government subsidies in key legacy markets such as Germany and Italy. 


The notable reduction in those subsidies left the company with higher capacities -- and expenses -- in markets where demand was once considered a sure thing.


Solar demand grew about 40%, according to Reuters, in 2011 before it was hit by an overabundance of supply and declines in government subsidies in its two biggest markets, Germany and Italy. 


This, according to Reuters, has resulted in favorable prices for consumers, especially in lieu of reduced subsidies, but has put tremendous pressures on margins. Although First Solar is one of the lowest-cost producers in the world, lower volumes have made the depressed margins unsustainable.


First Solar shares resumed trading at $22.07, up 6% on Monday's close, and closed the day up 10.28% at $22.96. 


Investors appear satisfied to see the company trim excess fat. Shares have shed well over 90% of their value from their 2008 heyday, and in Tuesday trading were down about 88% from their high last year.


More from Benzinga

8Comments
Apr 17, 2012 8:15PM
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People can't afford to save money on energy. The start up is to expensive.
Apr 17, 2012 11:26PM
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And oh by the way did our Gov. subsidize Henry Ford?
Apr 17, 2012 11:23PM
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Can any Gov. afford to subsidize an industry that can't compete economically?
Apr 18, 2012 9:30AM
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As long as the various so-called "green energy" options remain much more expensive to produce than the burning of coal or gasoline, there is no reason for our government or any government to subsidize it.  This applies to electric cars also, though natural gas and perhaps hydrogen fuel cells remain the best potential options.  In reality the only green electricity option that likely does make financial sense is nuclear, and while the left loves green energy... their lunatic fringe are afraid of nuclear as an option.  President Obama is stuck instead with the promotion of public policy scams like Solyndra, the Chevy Volt, and sea weed.  Frankly, other than nuclear, the smart green option today is the use natural gas to power semi trucks... but the Teamsters are against it so the democrats need to be also.

Apr 17, 2012 10:11PM
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Solar was viable when European governments gave it massive subsidies. Unfortunately, some of those governments, Spain in particular, can't afford them anymore.
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Solar, on the whole makes more long term sense than most other energy resources.  Part of the problem is that the entrenched providers and the owners of the architecture are all fighting the 'new' comers, Solar and Wind.

 

For example, in the US, there's been more than one wind farm project scuttled because the owners of the power lines wouldn't allow the wind farms to connect to the grid.  Residential solar would be more economically attractive if ALL utility systems were required to pay, FULL PRICE, on the excess we put on their grid, AND, there was no limitations to the amount paid.  There are utility systems where the large providers aren't required to buy/pay for the excess energy generated, or if they do pay, they have it arranged where they're never going to have zero balance, or credit on your monthly electric.

 

If the big guys would play fair, it would work better than it does now.  I'd invest 5k per year for 5 years building an array on the roof of my home and have total ROI in less than 10 years after completion given the current rate I'm paying, IF, my provider were paying me the same rate they charge me for the excess power I'd be generating.  As it stands, my provider doesn't have to pay me for that excess, so my ROI would take 20 to 25 years.

 

Also, let's remember the first coal plant, the first hydroelectric, the first nuclear, the first natural gas powered plants ALL would have been serious money losers, or more correctly WERE without some massive subsidy.  All the damns, most of the coal fired, and all of the nuclear plants received some form, local, state, or federal subsidy for construction and then later on once online.  So pissing and moaning about how renewable requires subsidy is just so much hypocritical hot air.

 

Hell, had Tesla gotten his way, we wouldn't even PAY for electricity now...

 

 

Apr 18, 2012 1:28AM
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What does it costs to maintain  solar panels over 10 years?  5k-10k or more?

Apr 18, 2012 7:48AM
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To much success in states like NJ has killed the market. The credit market (SREC) has fallen more than 80%. It now cost much more to get your electricity from solar. Unless the states fix the credit system, solar has no future. A.J. - Should be close to 0.
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