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First Solar Signs Plant Delivery Agreement with PJB Services (FSLR)

The manufacturer of comprehensive photovoltaic solar systems, First Solar (NASDAQ: FSLR), signed a memorandum of understanding (MOU) with PT. Pembangkitan Jawa Bali Services (PJB Services) to collaborate on the delivery of utility-scale solar power plants capable of producing 100 megawatts of energy in Indonesia.

The Arizona-based manufacturer of solar modules offers integrated power plant solutions that deliver an economically attractive alternative to fossil fuel electricity generation. First Solar’s renewable energy system uses a thin-film semiconductor technology. After dipping from a high of $50.00 per share in the first half of 2011 to $30.00 in mid-December 2011 due to virtually zero subsidies, slowing growth and plunging demand, the shares of First Solar started to recover amid reports of a possible consolidation in the industry.

The continuation of strong demand from Germany, the largest consumer market of solar power, and a report suggesting the possibility of an explosive demand from China took the share price back to around $50.00 in the second week of February 2012. After reporting a fourth-quarter adjusted earnings per share of $1.26, which was well below analysts’ estimate of $1.53 per share, and a cut in fiscal 2012 annual guidance, the shares of First Solar slid to $25.80 in the first week of March. The stock was also downgraded by DNB Markets to “sell” from a “hold” recommendation.

First Solar recovered to $28.67 in the second week of March 2012 on the news of a contract to build a 26-megawatt solar facility for NRG Energy and a 20-megawatt power plant in Maryland. However, a doubt on the company’s claims of sustained annual returns of 15% and an ability to innovate resulted in a further fall in the share price to $20.00. A stock downgrade from “hold” to “sell” on April 23, 2012, by Maxim Group pushed the stock price lower to $11.77 on the first of June. A Seeking Alpha report on June 6 stated that solar power is expected to cater roughly 22% of the world’s electricity needs by 2050. A few days later, First Solar won two Australian power projects that require 159 megawatts of solar panels. These positive developments triggered a turnaround in the share price of First Solar.

A better-than-expected fiscal 2012 second-quarter performance and an improved annual guidance reported on August 1 initiated a rally at the counters of First Solar, resulting in a share price of $25.70 on August 28. The share price of First Solar corrected by 16% after Bloomberg reported a halt in deliveries to the company’s Agua Caliente project. However, the news of a 25-megawatt solar panel contract from India’s Green Infra Ltd. restored the share price back to around $25.00 in the second week of September.

Today’s agreement is the first of its kind for First Solar in Indonesia. Similarly, for PJB services, it marks the first foray into the development of utility-scale solar photovoltaic power plants. The parent company of PJB Services is PJB, which itself is a subsidiary of Perusahaan Listrik Negara (PLN). First Solar also said that it expects its project with General Electric (NYSE: GE) to stimulate the industry’s expansion.

First Solar ended the day at $24.09 per share, up $1.84 or 8.3% on a volume of 8.32 million shares.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.