Annual Report 2007 First Solar Overview
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Annual Report 2007 First Solar Overview First Solar‘s mission is to create enduring value by enabling a world powered by clean, affordable solar electricity. To achieve this, we are focused on reducing the cost of manufacturing photovoltaic modules to levels that enable solar electricity prices to compete with traditional fossil-fuel-based electricity. We believe reducing solar electricity costs to these levels requires both enabling technology and operating scale. First Solar was formed in 1999 to commercialize an advanced thin film semiconductor technology capable of supporting low manufacturing costs. We achieved steady state production with our first manufacturing line in 2004. Our rapid expansion since that time has enabled us to become the lowest cost manufacturer in the industry and one of the largest manufacturers of solar modules in the world. We remain focused on continuously improving our technology and increasing our operating scale in order to continue to lower our production costs. In addition, First Solar, through its acquisition of Turner Renewable Energy Systems, recently expanded its activities to include reducing the costs of the additional solar system components beyond the solar module. Our goal is to become one of the fi rst companies to offer a solar electricity solution that competes economically with conventional fossil-fuel-based electricity. This report contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this report do not constitute guarantees of future performance. Those statements involve a number of factors that could cause actual results to differ materially, including risks associated with the company’s business involving the company’s products, their development and distribution, economic and competitive factors and the company’s key strategic relationships and other risks detailed in the company’s fi lings with the Securities and Exchange Commission. First Solar assumes no obligation to update any forward-looking information contained in this report or with respect to the information described herein. Letter From The Chairman Dear Shareholders, In the course of accomplishing these milestones, First Solar has delivered strong fi nancial results and provided signifi cant First Solar’s progress since reaching commercial production economic stimulus to the communities we serve. By the end scale in 2004 has brought the promise of widespread solar of 2008, First Solar will have created over 3,000 new jobs electricity closer to reality. and made cumulative capital investments of approximately $1 First Solar expects to surpass 1 gigawatt (GW) of installed billion. Beyond these direct contributions, First Solar is enabling solar power over the next 12 months and reach an annual signifi cant job growth and capital investment for its market manufacturing capacity of 1GW by the end of 2009. partners — the suppliers, customers and service providers This production ramp, along with continuous technological worldwide that form an integral part of the First Solar team. and operational improvements, has enabled dramatic cost reductions over the past several years. In 2007, our average The Path Forward manufacturing costs were $1.23 per watt, more than 50% We cannot applaud our accomplishments without below industry norms, indicating our progress in reducing acknowledging that First Solar has been dealt an solar electricity prices to levels that compete without extraordinary hand of good fortune over the past several years. Since the time First Solar achieved commercial manufacturers of solar modules in the world. large subsidies. scale in late 2004, the solar industry has operated with These cost reductions have been accomplished while a shortage of silicon feedstock that has constrained maintaining an emphasis on quality, a First Solar priority production and elevated manufacturing costs for from our inception. The quality and performance of traditional crystalline silicon cell manufacturers. At the large-scale solar generation systems powered by First Solar same time, the industry has experienced a rapid increase have been established over multiple years of operation in demand, led by revisions to the German EEG law through First Solar’s extensive system engineering and data and the expansion of feed-in tariff programs throughout analysis programs, and validated by leading project developers, Western Europe. As the low-cost producer in the industry project lenders and project investors throughout Europe. and with no dependence on silicon feedstock, First Solar First Solar has also implemented the industry’s fi rst has benefi ted from this window of opportunity, fully funded product collection and recycling enabling us to grow more rapidly and profi tably uct program. As a result, we can proudly offer od M than otherwise would have been possible. Pr sign a De S te a sustainable electricity solution that: ou r r ia c l But current market subsidy levels in Western in — Reduces life cycle greenhouse gas g g Europe are intended only to bridge cost n i emissions by 97%+ as compared to l c reductions that will eventually enable conventional coal-fi red generation y c e the industry to compete economically and by 93%+ as compared to R Product g n combined cycle gas generation; i with conventional energy sources. Life Cycle r u t To sustain attractive growth rates over — Generates electricity with no air c a f emissions or waste production; u time and achieve its full promise, the C P n o r a l o solar industry will need to open new — Consumes no water or fuel; and le d M c uc ti t on markets—markets that are not dependent — Provides collection and recycling of uct Prod on high subsidy levels. the solar modules at the end of their Use useful life with a pre-funded program First Solar has created $973.01 substantial economic growth in the process of scaling its business $473.2 Cumulative Capital Investment ($M) Jobs (FTEs) $195.7 3,4001 $82.7 $34.8 1,462 227 252 723 (1) Based on Company Guidance. 2004 2005 2006 2007 2008E First Solar has used this window of opportunity to develop a By taking thoughtful and prompt action to create these business platform capable of leading the industry’s expansion sustainable regulatory market structures, the U.S., which into these new markets, and we intend to focus on this lagged behind other parts of the world in subsidizing the expansion in 2008 and beyond. For example, photovoltaic development of solar technologies, has the opportunity solutions traditionally have been considered too expensive to lead the world in the mass adoption of affordable to serve the U.S. utility market as compared to conventional solar electricity. This requires two things: and even other renewable energy alternatives. In 2008, First 1. Adopting a coherent national renewable energy policy Solar intends to begin offering affordable solar solutions — at that, among other things, recognizes the external benefits price points well below those previously achieved in the solar provided by renewable energy solutions in reducing industry — to load-serving entities in selected U.S. markets greenhouse gas emissions, enhancing national security that must satisfy renewable energy requirements under state and creating new jobs; and renewable portfolio standards. 2. Updating state energy policies to recognize the full Demonstrating lower prices for solar electricity not only economic value provided by photovoltaics. expands solar markets but also provides First Solar with For example, photovoltaic generation systems operate with an opportunity to re-frame policy discussions around the virtually no variable operating costs, and as a result solar integration of solar power solutions into our national and electricity costs are fixed for 25 years with no exposure global electricity infrastructures. In the past, these discussions to fuel prices or other major inflationary forces. In addition, have centered on the appropriate types of subsidy structures photovoltaic systems can be installed cost effectively in small to bridge the development of fledgling solar technologies sizes and with short lead times, enabling them to be deployed to mainstream markets. However, by demonstrating reliable, around existing grids with limited need for transmission low-cost solar electricity and gigawatt levels of system capacity expansion. Although existing state regulatory structures deployment and production volumes, First Solar is shifting traditionally have not recognized these types of economic the policy discussions from temporary subsidies to the benefits, this is beginning to change, led by innovative creation of sustainable regulatory market structures that will governors, legislatures and regulators in progressive states. enable solar electricity to coexist with traditional, centrally generated electricity sources. We believe the U.S., and indeed the industrialized world, sits today at a crossroad in defining the renewable energy policies that will govern the 21st century and beyond. First Solar, as the industry’s cost leader and one of its largest manufacturers, is eager and well prepared to contribute to this critical task. First Solar Priorities In the coming year, First Solar will continue to execute with Our expansion into new markets will likely necessitate lower a sense of urgency and focus on the key drivers that reduce module prices than those we could obtain in markets driven manufacturing