First Solar, Inc. FSLR recently revealed plans to boost its production capacity of solar modules by investing $1.2 billion to bolster America’s domestic solar manufacturing capacity. Through this investment, the company strives to enhance its production capacity to more than 10 gigawatts-direct current (GWdc) by 2025.
Details of the Investment
First Solar’s ambitious new investment plan highlights its strategy to enhance its manufacturing capacity by investing $1 billion in the construction of its fourth, fully vertically integrated domestic factory in the U.S. Southeast, which boasts an annual capacity of 3.5 GWdc. The new factory of solar modules is anticipated to commence its operation in 2025, subject to regulatory approval.
The company further intends to invest $185 million in its Northwest Ohio manufacturing facility to scale up its existing production capacity by 0.9 GWdc. The investment plan also involves the upgradation and expansion of two of its facilities in Perrysburg and Lake Township, Ohio, by 0.6 GWdc to 3.6 GWdc of annual Series 6 module capacity.
Further, its production ramp-up investment plan also highlights the enlargement of its third Ohio factory to 3.5 GWdc, which will aid in increasing its annual Series 7 module capacity. FSLR’s consistent investment strategy to elevate its production capacity in Ohio will take the total investment in its Ohio manufacturing facilities to more than $3 billion. This, in turn, will constructively contribute to its annual production capacity, thus taking it to 7GWdc by 2025.
Undoubtedly, such an expansion plan will favorably act for its long-term growth trajectory and enable the company to duly achieve its targets. It should also enable First Solar to maintain its position as the largest U.S. solar module manufacturer.
Rationale Behind the Investment
The Biden Administration’s recent Inflation Reduction Act of 2022 entails an investment of $369 billion in climate and clean energy investments and emphasizes scaling up domestic solar production capacity to ensure the sustainability and timely delivery of key materials.
FSLR’s recent investment plans align with the United States’ current focus on reducing reliance on China for solar technology and fasten its pace of transition to renewable sources of energy.
Going forward, we may expect First Solar to make additional investment plans for incremental capacity, contingent on the demand scenario. This, in turn, will enable the company to expand further in the domestic production of solar modules and strengthen its revenue generation prospects.
Peers to Benefit
The current environment of a continuous focus of the U.S. Government on reducing dependence on fossil fuel and supporting the development of clean energy technology favors the prospects of a few solar players in the industry, as given below:
Enphase Energy ENPH enjoys a strong position as a leading U.S. manufacturer of microinverters and fully integrated solar-plus-storage solutions. Enphase residential and commercial systems were deployed in more than 140 countries in the last reported quarter.The company is also adding an automated line at Flex's factory in Romania, which boasts a quarterly capacity of approximately 750,000 microinverters, starting in the first quarter of 2023.
Enphase boasts a long-term earnings growth rate of 47.1%. ENPH shares have delivered a return of 64.5% in the past year.
SunPower SPWR is one of the most forward-integrated solar companies, having more than a decade of experience in designing, manufacturing and supplying large-scale solar systems. The company added 19,700 customers in the second quarter of 2022, reflecting growth of 51% year over year, and expects its residential customer volume to grow by more than 35% in 2022 over 2021.
The Zacks Consensus Estimate for SunPower’s 2022 sales suggests a growth rate of 26.1% from the past-year reported figure. SPWR shares have appreciated 12% in the past year.
Canadian Solar CSIQ has one of the world’s largest utility-scale solar project development platforms. It shipped 5.06 gigawatt (GW) of solar modules in the last reported quarter. The company expects total module shipments in the range of 6.0 GW-6.2 GW, including approximately 140 megawatt (MW) of the company's projects in the third quarter of 2022.
The Zacks Consensus Estimate for CSIQ’s 2022 earnings indicates a growth rate of 135.4% from the prior-year reported figure. Canadian Solar’s shares have risen 17.7% in the past year.
In the past year, shares of First Solar have rallied 30.4% compared with the industry’s growth of 1.6%.
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First Solar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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