High customer concentration
So far, First Solar’s (FSLR) customer base has mostly concentrated in the US. In fiscal 2014, three companies accounted for around 60% ($2.1 billion) of First Solar’s net revenue. While First Solar hasn’t disclosed its revenue by customer, it has noted that the following three companies accounted for over 10% of its fiscal 2014 net revenues:
Southern Company (SO) is an electric utility holding company headquartered in Atlanta, Georgia. It’s involved mostly in the regulated utility business in the southeastern United States. It serves a 120,000-square-mile territory in Alabama, Florida, Georgia, and Mississippi.
First Solar is currently undergoing two projects exclusively for Southern Company. Southern Company is rated A/Negative by S&P and Baa1/Stable by Moody’s.
Headquartered in Juno Beach, Florida, NextEra Energy (NEE) is the largest renewable electricity generator in the US. NextEra operates approximately 17% of installed wind capacity and 14% of installed solar capacity in the US. NextEra Energy is rated A-/Stable by S&P and Baa1/Stable by Moody’s. First Solar is constructing two projects exclusively for NextEra Energy with a combined capacity of 500 MW to complete in 2016.
MidAmerican Energy Company is located in Des Moines, Iowa, and it serves parts of Iowa, Illinois, South Dakota, and Nebraska. It’s a Berkshire Hathaway portfolio company, along with other companies—like PacifiCorp and NV Energy. MidAmerican is rated A3/Stable by Moody’s.
NEE, and BRK-B are part of the S&P 500 index (SPY). While First Solar’s customer and geographical concentrations are high, all its key customers are investment-grade companies, partially mitigating the company’s concentration risk.