First Solar cuts 2013 outlook, buys GE solar technology

LOS ANGELES Tue Aug 6, 2013 6:52pm EDT

LOS ANGELES (Reuters) - First Solar Inc (FSLR.O) on Tuesday reported quarterly earnings and revenue well short of expectations and slashed its outlook for the year due to construction delays for a large project and a decision to sell two projects only after they are finished.

The company's shares slid 9 percent in extended trade.

First Solar also said it is acquiring the intellectual property of General Electric Co's (GE.N) cadmium telluride solar technology and entering into a partnership with the company that will raise operating costs this year. It will issue 1.75 million shares to GE as part of the deal, making GE one of First Solar's 10 biggest shareholders.

Finally, the company said it would acquire a 1.5 gigawatt pipeline of projects in the United States and Mexico from developer Element Power. Terms were not disclosed.

The company said net income fell 70 percent to $33.6 million, or 37 cents per share, in the second quarter, from $111 million, or $1.27 per share, a year ago.

Excluding items, the company earned 39 cents a share, below analysts' average estimate of 52 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 46 percent to $520 million. Analysts were expecting $721.08 million in revenue.

"CHOPPY" REVENUE

First Solar has been building a string of major utility-scale solar projects in the western United States. The 230-megawatt Antelope Valley Solar Ranch One project in California is expected to be completed in the fourth quarter, but the company said on Tuesday that it had run into delays in the county approval process for materials used in construction.

In addition, it said it would hold off on selling two other projects until they are completed, a move that will improve the projects' economics but delay revenue recognition.

"Revenue recognition can be choppy for a project-centric company such as this, so the quarterly miss is not all that shocking," Raymond James analyst Pavel Molchanov said in an email. "But the guidance cut - less than four months after giving the guidance at the April analyst day - is highly damaging to market sentiment."

First Solar and fellow panel manufacturers were Wall Street darlings before a surge in Chinese production and a reduction in generous government incentive programs in Europe created a global glut of solar panels that over the last two years sent prices into a tailspin and erased profits in the fast-growing industry.

First Solar has cut costs and focused its growth efforts on overseas markets where solar power does not need incentives to compete with power from the grid. That strategy, and more stable pricing for solar panels, has paid off this year for investors. As of Tuesday's close, First Solar shares had gained more than 50 percent this year.

During the quarter, First Solar raised $427.7 million from a secondary offering of 9.75 million shares of its common stock.

The Tempe, Arizona company lowered its 2013 sales outlook to between $3.6 billion and $3.8 billion. It had previously expected sales of $3.8 billion to $4 billion.

Its earnings per share forecast, excluding the equity offering and issuance of shares to GE, was lowered to between $3.75 and $4.25. It had previously expected earnings of $4 to $4.50 a share.

Including the share sale and issuance, First Solar expects to earn between $3.50 and $4.00 a share for the year.

First Solar shares fell to $42.55 after closing at $46.75 on the Nasdaq.

(Additional reporting by Bijoy Koyitty in Bangalore; Editing by Maju Samuel and Steve Orlofsky)

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