First Solar, Inc. Decides Not To Spin Off Solar Assets

First Solar earnings

First Solar, Inc. (NASDAQ:FSLR) will not spin off its solar power plants to form a separate public traded entity like some of its competitors its chief executive noted on Thursday. The company’s stock dropped more than 6% following the announcement from CEO Jim Hughes during the third-quarter earnings call.

First Solar strong without ‘Yield cos’

In the past, various solar companies such as SunEdison and NRG Energy have unified their solar assets and formed a separate subsidiary known as ‘Yield cos.’ These units own as well as operate the solar assets that have long-term power contracts with utilities, which ensures a decent cash flow or dividends to the investors getting reinvested into new plants by the parent company.

“We do not feel that we are missing either gross margin opportunities or market share capture opportunities because we do not have a yield co today,” Hughes told analysts on the call.

First Solar manufactures solar panels as well as builds solar power plants, and sells the energy to power producers. According to Hughes, it will keep the unit within the company. On the call, Hughes said that the company has already completed several lines at its Malaysian solar panel factory and could boost the production capacity by 46% next year.

Demand for solar panels is expected to surge before the U.S. tax credit for solar projects expires by the end of 2016, and First Solar wants to be prepared to benefit from that demand, according to Hughes.

Full-year guidance updated

The Tempe, Arizona-based company posted a quarterly profit of $88.4 million or 87 cents per share compared to $195 million, or $1.94 per share, a year ago. Revenue for the company came in at $889.3 million while the estimated revenue was $1.049 billion.

For the full-year, the Solar Company has guided earnings per share between $2.40 and $2.80 and maintained the guidance for operating cash flow to be between $300 million and $500 million. The solar panel maker updated its previous guidance of gross margins between 18% and 19% to between 19% and 20%. First Solar is expecting revenue to fall between $3.6 billion and $3.9 billion, a marginal decline from the previous guidance of $3.7 billion and $4 billion. The company also revised its capital expenditures projections from $300 million and $350 million previously to $250 million and $300 million.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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