Growing Solar Energy Demand Benefits First Solar



Capacity to meet demand

According to research firm IHS, the demand for solar energy is expected to grow at a rate of 30% in 2015 to ~57 GW (gigawatts). First Solar (FSLR) stated that its orderbook in April 2015 was 3.9 GW—a rise of 200 MW (megawatts) in comparison to 2014.

Peer companies like SunPower (SPWR) and Yingli Green Energy (YGE) have been facing capacity constraints. In comparison, First Solar is placed better to deal with the growing demand. It has sufficient manufacturing capacity as well as improvements in panel efficiency on a continuous basis.

Article continues below advertisement

First Solar and SunPower set up a joint venture

In June 2015, 8point3 Energy Patners—a yieldco—was set up after a joint venture between First Solar and SunPower. It announced an IPO (initial public offering) where 20,000,000 Class A shares could be purchased at $21 per share. It has been listed under the symbol “CAFD” and investors could trade the stock after June 19, 2015.

First Solar and SunPower are two of the largest solar manufacturers in the US. They’re the first to create a yieldco. Yieldcos are firms that buy and hold projects in order to free development capital and return dividends that are tied to long-term contracts to sell electricity.

The cash proceeds from the IPO will be used towards cash distribution for both companies as well as towards future acquisitions. According to analysts, the yieldco was responsible for both firms’ falling revenue in 1Q15. The companies kept projects that would have normally been sold.

First Solar accounts for 0.02% of the SPDR S&P 500 ETF (SPY) and 0.09% of the Technology Select Sector SPDR Fund (XLK).


More From Market Realist