Monday, 9 September 2019

First Solar - New Addition

First Solar (FSLR) is a leading global provider of PV solar energy solutions. They offer a cheaper alternative to conventional fossil-fuel power production such as coal or natural gas. It has a market cap. of $6.5bn, the largest in the renewable energy sector. Head office is based in Arizona and the company was first listed on the NASDAQ exchange in 2006.

The company has over 17 GW of capacity installed worldwide. Their technology is unique - rather than the conventional panels made of silicon, First Solar make use of ultra-thin panels using cadmium telluride. This PV technology displaces up to 98% of greenhouse gas emissions compared to fossil fuel generation. The modules have approximately half the carbon footprint of traditional silicon PV panels.

Furthermore, the company's focus is on utility-scale solar projects which do not rely upon state subsidies. It is involved in every stage of the process - manufacture, finance, maintenance and will recycle materials when they come to the end of their natural life.

First Solar v Nasdaq Index
(click to enlarge)

The Global Transition to Renewables

The world is rapidly transitioning toward a future powered by renewable energy. In the last five years alone, around $1.5 trillion has been invested in building renewable power generation facilities to help power the global economy. This new capacity has added 1 million megawatts (MW) to the worldwide power supply.

According to the latest Vox report, most of the world's new renewable capacity is solar photovoltaic (PV) panels. Of all the new capacity installed in 2018, 55% was solar (100GW), wind 28% and hydro 11%.

However, despite that massive spending, solar and wind still only account for less than 10% of the world's total energy use. Heating and cooling accounts for 50% of global energy usage and this is mainly natural gas and oil. Transport accounts for a third of global energy use and this is mainly petrol/diesel. Clearly if we are to meet our climate targets, transition to net zero emissions and halt global warming, this need to change quickly.

So, there is still much room for growth of solar and wind. I expect this to increase from the current 10% to 30% minimum by 2030 given the concerns about global warming and climate. Because of that, there's a big opportunity ahead to continue building more renewable power capacity, with one estimates at more than $10 trillion, to replace the current carbon-based power systems in the world's largest markets. The opportunity is even larger when factoring in population growth and the electrification of transportation.

Therefore companies such as First Solar have the potential for much further growth over the coming years. However, there will be increasing competition particularly from the fast-growing economies like China and also government interference like the recent imposition of tariffs by Trump and new regulation so the investment case is not without risks.

The company has recently introduced a new range of Series 6 panel which should boost demand and earnings for the next few years. Although the share price has had a good run over the past few months - up 40% year to date - I am hoping there will be more to come with the rise of ESG funds and the global expansion of renewables. 

With sterling having dropped to $1.23, it's probably not the ideal timing but I have decided to dip a toe in the water with my first US-listed holding at the price of $62. The shares are held in my SIPP.

As ever, this article is merely a record of my personal investment decision and should not be regarded as a recommendation - always DYOR!


  1. Given it is a us share - does it pay a decent dividend and do you.lose out on the exchange rate when the and cents are turned into pounds and pence?

    1. I think this is more of a growth share and afaik it has not yet paid any dividends, but may do so in the future. As to losing out, it all depends upon the exchange rate GBP v USD. With my global investments, this has worked in my favour over the past 3 years due to the weakness of sterling post Brexit referendum. Longer term, I guess these things will even out.