First Solar, Inc. Thinks These Are 3 of Its Biggest Risks

1. Disappearing Subsidies

1. Disappearing Subsidies

First Solar, Inc. relies on solar subsidies and other pro-solar policy to boost sales and keep costs competitive.

With 90% of its 2014 sales in the United States, First Solar is especially worried about the drop in America’s investment tax credit from 30% to 10% at the end of

2016.

1. Disappearing Subsidies

With an upcoming presidential election, pro-solar policies like President Obama’s Clean Power Plan could hit hard

times if the newly elected Commander in Chief isn’t a fan.

But if subsidies disappear for First Solar, they also disappear for its competitors. Solar subsidies don’t decide solar company winners and losers. They decide whether

the solar industry wins or loses.

2. Increased Competition

2. Increased Competition

The solar industry is heating up. First Solar, Inc. is growing fast, but so are its competitors.

“Competition at the systems level can be intense, thereby exerting downward pressure on systems level profit margins industry-wide, which could reduce our net sales, profitability, and adversely affect our results

of operations” – SEC 2014 10-K filing

2. Increased Competition

It enjoys more sales than SunEdison, Inc. (NYSE: SUNE) and SunPower Corp. (Nasdaq: SPWR), but its 25% growth over the past 5 years isn’t as impressive as SunPower’s 45%.

3. International Operations

3. International Operations

International opportunities can be useful: corporations diversify their risk and expand their

customer base.

First Solar, Inc.’s operations covers six continents, and including countries as diverse as Australia, Chile, India,

and the United Kingdom.

3. International Operations

Every country has its own energy policies, regulation, infrastructure, and political issues.

For First Solar, Inc., its international expansion is often based on national renewable energy plans. India has

its “National Solar Mission,” Chile has a “National Energy Strategy,” etc.

3. International Operations

But plans and strategies can hit hiccups and roadblocks.

First Solar, Inc. isn’t happy with India’s requirement that half its new solar comes from domestic manufacturers. Nor is it thrilled about working in places like China and

the Middle East where “significant government contact” could put First Solar, Inc. in an awkward spot with foreign

anti-bribery laws.

Risky business?

First Solar, Inc. is full of risks—but so are other solar companies.

Smart investors should take time to understand everything that can go wrong with a company before

investing in what they hope will go right.

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