First Solar Falls Most Ever After Chief Gillette Departs, Ahearn Named CEO
Rob Gillette has left First Solar Inc. (FSLR) after almost doubling production capacity during the two years he ran the world’s biggest maker of thin-film solar panels.
“Effective immediately, Rob Gillette is no longer serving as chief executive officer,” the Tempe, Arizona-based company said today in a statement that didn’t give a reason. Chairman and founder Mike Ahearn, 54, was named interim CEO.
With demand and prices for solar panels falling, expanding First Solar’s production may have been the wrong decision, said Paul Leming, an analyst at Ticonderoga Securities LLC in New York. Declining prices also make it unlikely that the company will be seen as a buyout target.
“Rob Gillette made one overwhelmingly bad decision,” Leming said today in an interview. “He made the decision early in his tenure to put the company on an aggressive capacity expansion.”
First Solar’s annual production capacity was 1,228 megawatts at the end of 2009, shortly after Gillette was named CEO in October. The company expects to have 2,236 megawatts of capacity at the end of this year, according to a second-quarter company overview.
Gillette, 50, expected demand for solar panels to continue to grow, and expanded factory capacity, Leming said. That view is “blowing up in his and the board’s face right now.”
Biggest Decline Ever
First Solar fell 25 percent to $43.27 in New York, the biggest decline since the company’s initial public offering in November 2006.
Gillette’s departure came as a surprise to analysts. “This abrupt move might be related to differing views on the long-term strategic direction for the company, in light of rapidly changing industry dynamics driven by slower-than-anticipated demand” and excess capacity, Sanjay Shrestha, an analyst at Lazard Capital Markets in New York, said in today in a research note.
First Solar’s thin-film panels compete against products made from polysilicon, which is rapidly falling in price. The spot price fell 9.1 percent to $37.40 a kilogram in the week ended Oct. 24, and has dropped 19 percent since the start of the month, according to data compiled by Bloomberg New Energy Finance. That decline is also driving down the price of solar panels made with polysilicon cells.
The falling price of silicon makes First Solar an unlikely takeover target, said Theodore O’Neill, an analyst at Wunderlich Securities Inc. in New York. The company’s technology “is barely competitive with silicon solar cells,” he said today in an e-mail. “They make super cheap, very inefficient solar panels. Everyone else makes cheap, very efficient solar panels.”
Thin-film panels typically convert less of the energy in sunlight into electricity than polysilicon ones. First Solar’s average conversion efficiency was 11.7 percent in the second quarter. SunPower Corp.’s polysilicon panels are the world’s most efficient in commercial production, with a conversion rate of about 22 percent.
Gillette “may just be stepping down because he sees the writing on the wall in the solar industry and thinks that First Solar will be unable to compete with crystalline silicon,” Gordon Johnson, an analyst at Axiom Capital Management Inc. in New York, said today in an interview.
Johnson has had a “sell” recommendation on the stock since August 2010 and a $35 price target since Sept. 16.
The company’s shares have dropped 71 percent in the past year.
Gillette is the third high-level First Solar executive to leave this year. The company’s president of operations Bruce Sohn stepped down in April and wasn’t replaced. And last month Jens Meyerhoff, president of its utility systems unit, departed.
The company’s pipeline of projects under development will be a “strong earnings buffer,” Shrestha said.
“The industry sees First Solar’s project development as one of the most successful,” said Jenny Chase, solar analyst at Bloomberg New Energy Finance.
First Solar is developing three projects that use its panels. It sold all of them after they received $3.1 billion in backing under the same U.S. Energy Department loan guarantee program that supported the failed solar panel maker Solyndra LLC.
Its 290-megawatt Agua Caliente project in Arizona, which it sold to NRG Energy Inc., received a $967 million guarantee in August.
The company received two other guarantees Sept. 30, the day the program ended, for projects in California. Its 230-megawatt Antelope Valley Solar Ranch 1 project in Los Angeles County received a $646 million guarantee and was sold to Exelon Corp. NextEra Inc. and General Electric Co. bought the 550-megawatt Desert Sunlight project in Riverside County after it received a $1.46 billion guarantee.
First Solar said Sept. 22 that its 550-megawatt Topaz Solar Farm in California wouldn’t get a $1.9 billion guarantee that had been conditionally approved because it couldn’t meet certain conditions by the Sept. 30 deadline. The company is seeking a buyer for Topaz.
“It can’t be a very easy business to run in this environment with the core business losing money and the challenges it faces in trying to finance these more-than-a- billion dollar projects without Energy Department guarantees,” Aaron Chew, an analyst at Maxim Group in New York, said today in an interview. He has had a “hold” recommendation on the stock since Sept. 12.
First Solar reported net income of $61.1 million, or 70 cents a share, in the second quarter, compared with $159 million, or $1.84 a share, a year earlier.
Ted Meyer, a First Solar spokesman, would not comment on Gillette’s departure today, and said the company would discuss it Nov. 3 when it reports its third-quarter earnings.
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