17 April 2012
First Solar to close German manufacturing facility and idle four lines in Malaysia
First Solar Inc of Tempe, AZ, USA - which manufactures thin-film photovoltaic modules based on cadmium telluride (CdTe) as well as providing engineering, procurement and construction (EPC) services – is restructuring its operations in response to deteriorating market conditions in Europe and to reduce costs and align its organization with sustainable market opportunities.
As part of this program, in fourth-quarter 2012 First Solar will close its manufacturing operations in Frankfurt (Oder), Germany. Also, from 1 May it will indefinitely idle four production lines at its manufacturing center in Kulim, Malaysia. These actions, combined with other personnel reductions in Europe and the USA, will reduce the global workforce by about 2000 positions (about 30% of the total).
The restructuring initiatives are expected to reduce First Solar’s costs by $30-60m this year and $100-120m annually going forward. In addition, the firm’s average manufacturing cost is expected to improve to $0.70-0.72 per watt in 2012 (under prior expectations of $0.74 per watt). In 2013 the firm estimates that average module manufacturing costs will be $0.60-0.64 per watt.
To achieve these cost savings, the firm will record restructuring and other related charges of $245-370m (of which $80-120m are cash expenditures), consisting of:
- $150-250m in asset impairment, primarily related to the Frankfurt (Oder) plants;
- $50-70m in severance;
- $30m for repayment of a government grant related to the Frankfurt (Oder) operations; and
- $15-20m for other charges representing valuation allowances for deferred tax assets in Europe and costs associated with the repayment of the German debt.
First Solar expects to incur these charges primarily during first-quarter 2012 and the rest over the course of this year. It has also voluntarily paid down about $145m of debt ahead of schedule in 2012, representing repayment in full for outstanding amounts under the firm’s German loan agreement.
“After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders,” says chairman & interim CEO Mike Ahearn. “Decisions like this are not easy, especially given how important the European markets and our associates in Europe have been to the development of our company and the solar industry as a whole. We are committed to treating all affected associates fairly, and to building our relationships with European business partners that are aligned with our strategy of pursuing utility-scale solar opportunities in sustainable markets around the world,” he adds.
“The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage,” continues Ahearn. “After a period of robust growth, First Solar is scaled to operate at higher volumes than currently exist following the reduction of subsidies in key legacy markets. As a result, it is essential that we reduce production and decrease expenses to reflect the smaller volume of high-probability demand we forecast,” he adds. “These actions will enable us to focus our resources on developing the markets where we expect to generate significant growth in coming years."