the future of pv-first solar’s...

© Copyright 2012, First Solar, Inc.

January 18, 2012

The Future of PV-First Solar’s Perspective

Alex Panchula, Performance Analysis

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Forward-Looking Statements

During the course of this presentation the company will make projections and other

statements that are forward-looking statements within the meaning of the federal

securities laws. The forward-looking statements in this presentation are based on

current information and expectations, are subject to uncertainties and changes in

circumstances, and do not constitute guarantees of future performance. Those

statements involve a number of factors that could cause actual results to differ

materially from those statements, including the risks as described in the company’s

most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and other

filings with the Securities and Exchange Commission. First Solar assumes no

obligation to update any forward-looking information contained in this presentation

or with respect to the announcements described herein.

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• Utility scale PV solutions in sustainable markets

• Beyond the module

This Presentation

• State of the PV Market

• Strategy

• Value proposition for emerging sustainable markets

The Future of PV

State of the Market

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2.9 5.4

9.7 13.6

26.1

36.3

1.7 3.1

6.0 8.1

20.7

24.2

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011E 2012E

Available Module Capacity Module Production

1.Entry barriers for c-Si production eliminated 2.Feedstock constraints eliminated

In a supply chain without entry barriers: • Production increases as long as capital available • Pricing and margins will decline to equilibrium • Any supply-demand equilibrium will be temporary

Global Production Capacity Effectively Tripled from 2009 -2011

Sources: Based on equity analysts & FSLR analysis.

?

Mo

du

les

(GW

)

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Core Markets Historically Represented ~ 80% of Installations

0

5

10

15

20

25

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010 2011E

Tota

l Glo

bal

PV

Inst

alla

tio

ns

(GW

)

Co

re M

arke

ts a

s a

Pro

po

rtio

n o

f To

tal (

%)

Core Markets as % of Total Total global Installations

Sources: EPIA, IREC, IMS Research, equity analysts & FSLR analysis.

Core Markets: “Markets existing prior to 2011 that have been transparent and open to exports”

Germany, France, Spain, Italy, California, and Czech Republic

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Sources: EPIA, IMS Research, equity analysts & FSLR analysis.

Spain PV Installation Capacity (GW), 2006-2012

0.1

0.5

2.7

0.1 0.4

0.5 0.5

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

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Source: IOU RPS Projects Status List, November 2011. Note: 2011 Solicitation still in progress. *Projects classified according to CPUC filings based on solicitation year, RPS Procurement Plan referenced in a bilateral agreement, or a bilateral agreement date.

CA RPS Solar PPAs (By Year of Solicitation*) (GW), 2007-2011

1.3

4.6

1.8

0.6 0.6

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

Includes CSP

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Source: CPUC, CSI , IOU websites. Incorporates CSI program, RAM program, Utility PV program.

CA DG PV PPAs (GW), 2007-2011

0.1 0.1

0.1

0.4

0.2

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

?

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Czech Republic PV Installation Capacity (GW), 2006-2011

0 0 0.1

0.4

1.5

0.1

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

?

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German PV Installation Capacity (GW), 2006-2011

0.8 1.3

1.8

3.8

7.4

5.4

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

?

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Note: 2010 demand shown here includes plants constructed under the Salva Alcoa decree. Sources: EPIA, IMS Research, equity analysts & FSLR analysis.

Italy PV Installation Capacity (GW), 2006-2011

0 0.1 0.3

0.7

5.6 5.5

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

?

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France PV Installation Capacity (GW), 2006-2012

0 0 0

0.2

0.7

1.5

0.8

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

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Sources: EPIA, IREC, IMS Research, equity analysts & FSLR analysis.

Core Market Installation Capacity (GW), 2006-2011

1 2

5.2 5.5

15.8

13.6

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011E 2012E

Pe

rce

nta

ge o

f H

isto

rica

l Max

(%

)

Germany, France, Spain, Italy, California, & Czech Republic

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What Explains the Pattern?

Market initially slow to take off while legislation is translated into an effective program and bureacracy is streamlined

Once market begins to function effectively, the incentive programs caused an over-supplied industry to quickly descend to develop project backlogs.

The unexpected size and velocity of market expansion combined with high import volumes alarm politicians, who worry about high cost and economic impact

Politicians react by sharply reducing the size of the program and in some cases making it less transparent

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Will New Subsidized Markets Turn Out Differently?

?

0

2

4

6

8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GW/yr

ROE (ex Czech) India Australia ROAPAC USA

RO Americas Saudi Arabia Morocco Sub-Saharan Africa Thailand

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In Summary, the Solar Industry is Structurally Imbalanced

Production Capacity

Installation Capacity

Uncapped and Growing

• No entry barriers; expansion capital

available

• Manufacturers producing beyond demand

levels

• Margins and returns on capital reduced

• Industry prone to over-capacity conditions

even after current imbalance abates

Limited by Subsidy Levels and Declining

• Open, transparent subsidized markets

cannot be sustained in an over-supplied

industry

• Open, transparent subsidized markets

unlikely to be created in significant volumes

in the future

• Countries with high energy needs cannot

afford large subsidies

First Solar Confidential & Proprietary | © Copyright 2011 18

Strategy

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Where Does First Solar Go From Here?

Our low-cost technology and captive U.S. project pipeline will help us remain profitable in a shrinking, structurally imbalanced industry.

In order to thrive, First Solar must grow massively in this environment (to grow volume at a 20% CAGR, First Solar must deploy roughly 65GW over the next 10 years.)

Two Choices:

(1) Continue to play the “whack-a-mole” game in subsidized markets

(2) Find a different game to play

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Goal • Derive substantially all of our new sales from sustainable markets by end of 2014

Strategy • Focus on providing utility scale PV generation to geographic markets with immediate need

for mass scale PV electricity

• Offer integrated module and system solutions to open markets and create sustainable

competitive advantage

Plan • Localize in the key geographic markets

• Remove the obstacles to mass scale solar electricity generation

• Profitably transition out of subsidized markets

Alignment • Achieve cost model needed to price in non-subsidized markets

• Enhance organizational capabilities needed to execute strategy

• Reallocate resources from past to future direction

Execution • Immediate execution in light of long lead times

• 3 Year Plan with interim milestones/metrics

• Alignment of financial incentives with achievement of Goal

Strategy

First Solar Confidential & Proprietary | © Copyright 2011 21

Value Proposition for Emerging Sustainable Markets

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Moving to Sustainable Markets for Utility Scale PV Generation

Photo is of Agua Caliente from fourth quarter 2011.

Photo of a large PV project in California

First Solar Leadership in Providing Utility Scale PV Generation Solutions

• Over 2GW constructed or under construction

• Dramatic reductions in cost and acceleration of construction cycles

• Reliability and up time validated to high utility standards

• Environmentally sustainable life cycle

• Validation from some of the most respected companies in the industry

Photo of a large PV project in California

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$0

$50

$100

$150

$200

$250

$300

$350

Diesel Crude Oil Gas Peaking Coal IGCC GasCombined

Cycle

Nuclear

Leve

lized

Co

st o

f El

ectr

icit

y ($

/MW

h)

Conventional generation (ex diesel and crude oil) based on Lazard LCOE Analysis v 5.0; June 2011. Assumes coal price of $2.50/MMBtu and natural gas price of $5.50/MMBtu.

High end of coal and IGCC costs incorporates 90% carbon capture. Fuel sensitivity assumes +/- 25% fuel cost. Nuclear does not reflect decommissioning costs.

Diesel and crude oil based on FS analysis. Assumes diesel price of $20.81/MMBtu ($120/bbl) and crude oil price of $17.24/MMBtu ($100/bbl).

Crossing Over to Sustainable Markets

Price parity with conventional generation drives inflection in price elastic demand

Conventional, Base Cost

Conventional, Fuel Sensitized Cost

PV Cost Roadmap

Global PV demand

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Requires Leadership Across the Value Chain

• Low Module Cost

• Aggressive Cost Reduction Roadmap

• Scale

Turnkey Solution Pricing too High

Module

First Solar INJECTIONS

INDUSTRY CONSTRAINTS (which increase LCOE)

VALUE CHAIN

EPC Development O&M

• Turner (2007)

• EPC Velocity

• BoS Cost Optimization

• RayTracker (2011)

High Balance of System Costs

• OptiSolar (2009)

• EME (2010)

• NextLight (2010)

• Strategic Partnerships

Long Development

Lead Times

• Data Monitoring

• O&M Program

Module Lifecycle & Performance

Financing

• Balance Sheet

• Capital Structure

• Track Record

• Partnerships

High Cost of Capital

The Most Cost Effective Module and BOS Technology

$0.40

$0.60

$0.80

$1.00

$1.20

2007 2008 2009 2010 2011 2012 2013 2014 2015

$/W

att

Module Cost

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

2008 2009 2010 2011 2012 2013 2014 2015

$/w

att Standard BOS

10%

11%

12%

13%

14%

15%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Module Efficiency

Metric Old (’14) New (’15)

Module costs ($/W)

$0.52-$0.63 $0.50-$0.54

Efficiency 13.5%-14.5% 14.5%-15%

Standard BOS ($/W)

$0.91-$0.98 $0.70-$0.75

2012 per full utilization

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Proven process already demonstrates panel-scale integration of the record process

Cells constructed using 60x120cm processes with commercial materials that can be scaled economically

We are continuing to expand the “limits” of CdTe performance

Record 17.3% Cell Efficiency Provides Confidence in Our Roadmap

9.0 9.5

10.4 10.7

11.0 11.3

11.7

14.5

7

8

9

10

11

12

13

14

15

2005 2006 2007 2008 2009 2010 2011 YTD

2014 Goal

Module Conversion Efficiency %

Record 17.3% CdTe thin-film cell confirmed by NREL

Record 14.4%

Full Area Module!

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Key Innovations Enabling BoS Cost Reduction

• CCRR in 2008 $ 1.48 • CCRR in 2015 $0.69

Overall Mission Objectives

• LCOE

• Yield & Availability

• Cost

• Construction Velocity

$/watt Yield LCOE

Inverter Power Conversion Technology Controls &

Forecasting

Yield & Availability O&M Cost

Automated Construction

$/watt LCOE

DC Structures

$/watt Velocity LCOE

First Solar Tracker System

Yield O&M Cost

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Solar Power Plants Completed

Blythe (NRG) 21MW 2009

Cimarron (Southern) 30MW 2010 Sarnia (Enbridge) 80MW 2010

Copper Mtn (Sempra) 48MW 2010

Tilbury (Enbridge) 5MW 2010

El Dorado (Sempra) 10MW 2008

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Solar Power Plants Completed

Santa Teresa (NRG) 20MW 2011

Hondale (PNM) 6MW 2011 Los Morros (PNM) 5MW 2011

Amherstburg 2 (Enbridge) 15MW 2011

Reeves (PNM) 2MW 2011

Paloma (APS) 18MW 2011

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Goal: Create and Develop new markets

• Develop customer focused compelling solutions

• Establish right price without subsidies to clear existing markets and create new ones

• Drive cost roadmaps to grid parity

• Reallocate spending to fund sales, market development and R&D

• Focus on long-term economic value generation

Beyond the module

the future of pv-first solar’s...

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