Trump Solar Tariffs Give Old First Solar Panels New Lives

(Bloomberg) -- First Solar Inc. took the wraps off its long-awaited Series 6 panel Tuesday, but it isn't turning its back on the workhorse model that's been sustaining the company.

Unexpected demand for its Series 4 product boosted 2017 revenue, especially in the second half, and will help the solar company earn as much as $2.30 a share in a year when it had been bracing for a loss.

The biggest U.S. solar manufacturer was expecting 2017 to be a transition period as it wound down production of the aging Series 4 and pushed hard to shift its factories to the new model. But an unforeseen trade case filed in April has roiled the U.S. solar industry, boosting prices and driving some developers to hoard panels, and the company suddenly had customers clamoring for anything it could make. President Donald Trump may impose tariffs on imported solar panels, with a final decision expected by mid-January.

First Solar will continue to make the Series 4 “as long as there's demand,” Chief Executive Officer Mark Widmar said during a company event at its factory in Perrysburg, Ohio. “We came to this really unexpected place where supply and demand came into balance and prices stabilized,” he said in an interview.

The company showed off the first Series 6 at the event and said the panel will go into production in the second quarter. By 2020, it expects to be making 5.4 gigawatts of them a year, at the Ohio factory and facilities in Vietnam and Malaysia. The Malaysia plant is also where it's still producing the Series 4. First Solar shares gained 4.5 percent to $63.97 at 10:28 a.m. in New York.

“We were surprised by the magnitude of cost reductions that have made S4 attractive compared to Chinese competition even without the potential regulatory advantage, with gross margin expectations of 15 to 20 percent including freight and warranty costs,” Jeff Osborne, a New York-based analyst at Cowen & Co., said in a research note Wednesday.

Revised Forecast

First Solar is forecasting sales of $2.3 billion to $2.5 billion in 2018, and earnings of $1.25 to $1.75 a share. That will be down from this year -- the company expects revenue of $3 billion to $3.1 billion and earnings of $2.05 to $2.30 a share.

The 2017 forecast is very different from the numbers Widmar announced a year ago. In November 2016 he introduced a major strategic shift, killing plans to roll out a new panel this year to go straight to the Series 6. That move led to more than $700 million in charges for the fourth quarter of last year and he predicted a loss of as much as 80 cents a share for this year.

“The company is in the best position ever in its history,” Widmar said. “Our Series 4 is the lowest cost panel in production and Series 6 will be better than that. I'm thrilled that there's still demand for it.

--With assistance from Brian Eckhouse

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Will Wade, Steven Frank

©2017 Bloomberg L.P.