There are only going to be so many survivors coming out of the solar industry's current doldrums. If the market's reaction is any indication, First Solar (NAS: FSLR) isn't one of them. The stock has been pounded over the last year and is now so low that I think the company needs to begin thinking about ways to unlock value. It has two very distinct businesses, manufacturing and project development, and it may be time to split them into two.

Would it be a wise move? Let's put some numbers together to figure it out.

Thin film isn't dead... yet
The biggest question facing First Solar right now is the future of thin-film modules. First Solar's modules cost less than crystalline silicon (for now) but they're far less efficient. But there are advantages for thin film in low-light conditions, making the modules appealing for some applications.

Even if manufacturers like JA Solar (NAS: JASO) , Trina Solar (NYS: TSL) , and Suntech Power (NYS: STP) are able to catch First Solar on a cost-per-watt basis the company's thin film modules will have some value in certain applications. And with a 15.4% gross margin in the first quarter, the company is making more money per panel than any of its rivals.

So how much might the module business be worth on its own? After closing its Germany plant, First Solar now has about 1.7 GW in capacity. If we guesstimate that long-term the company may be able to squeeze $0.05 to $0.08 per watt in profit from manufacturing (around a 10% margin), the company could make $85 million to $136 million per year in profit. An enterprise multiple of 8x would mean a value of $680 million to $1.1 billion.

A few years ago, the thin-film manufacturing business was worth around $20 billion, so there must be some value there, right?

FSLR Market Cap Chart

FSLR Market Cap data by YCharts.

The exact value the market would place on the manufacturing business is up in the air, but the range I've outlined above seems reasonable.

Projects have value in today's market
First Solar has a 2.7 GW pipeline of projects, largest in the industry. This pipeline has value if it was a separate company, and based on what I heard at the GTM Solar Summit last week, there are people who would like to see more downstream companies on the public market because they're less risky than manufacturers. The business even has a couple of strategy options available.

A strictly project development company would be able to use modules from any company, creating projects with the lowest levelized cost of energy, which is what matters for utility scale project. The project company could build utility scale developments and sell this to investors, much the way First Solar and SunPower have done in recent years. In this strategy, the company would roll projects over into new projects regularly.

In another strategy, the company could build projects, own them, and pay a dividend or roll the money into new projects. The second strategy would be similar to what NRG Energy (NYS: NRG) is doing in the space, except it would capture profit from building and owning the project, so it would be higher-margin than NRG's solar business.

So, what would such a company be worth? In 2010, SunPower paid $277 million for a 1,200 MW pipeline in its acquisition of SunRay. That was $0.23 per watt of projects in the pipeline at the time. That may be the top end of what we could expect First Solar's project unit to be worth, but it is a starting point for valuing the company as a separate unit.

Price Per Watt

Value of First Solar's 2.7 GW Pipeline

$0.13 $351 million
$0.18 $486 million
$0.23 $621 million

I think $351 million to $621 million for this business would be a conservative estimate, especially as the company adds project pipeline in new markets.

Splitting a strong balance sheet
First Solar isn't sitting too badly on the balance sheet, either. The company has $307 million of net debt when you subtract cash and marketable securities from long-term debt. There is also $705 million in inventory and balance of system parts sitting on the balance sheet, so there is value to unlock there.

Foolish bottom line
With a market cap of $1.44 billion and net debt of $307 million, I think First Solar might be worth more as two separate companies, but it isn't a slam dunk yet. I've outlined how I think the company could be worth as much as $1.7 billion after being split up, even before considering value that could be unlocked from the balance sheet. This is about what First Solar's enterprise value is right now, so if the stock falls further, it's a strategy the company should consider.

We could also look at a book value of $3.2 billion for the equity alone. The company's market cap is about half of that now, so it should be thinking about how to unlock that value sooner rather than later.

For another energy stock that has a lot of shareholder value, check out what our analysts call the only energy stock you'll ever need. The report is free -- just click here for access.

At the time this article was published Fool contributor Travis Hoium owns shares of SunPower in both a personal and a managed account. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of First Solar. The Motley Fool has a disclosure policy.
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yOU ARE BASING YOUR ANALYSIS ON First solar's pipeline of only 2.7 gigawatts over the couple years or so.. Waht if we decide to expand the pipeline ten times over and this can mean 25-30 gigawatts inthe pipeline.. Come to think of this which is not imnpossible to conceive of.. This is what we are supposed to do to ensure that Big Oil is not up to no good like before.. It should not matter even if oil prices eventually crashes to $50 a barrel soon, we should seize this huge savings to start salting away a few hundreds of billon dollars toward expanding the solar pipeline over the next decade when we will have 100 gigawatts or more already in place. This will serve a crucial bulwark against future oil prices . This could mean a different oil price down the road like possibly 20% or more lower oil prices onver the stretch than otherwisely. We are willing to invest in energy conservation efforts costing us hundreds of billons already but why do we stop here?? We can and should do more to keep oil prices at bay .. We invest too much capital in oil industries with both good returns as well as bad returns in terms of health costs, economic upheavels, wars, loss of life, poor quality of life and enviorment, the long list goes on.. We dont care about them but just numbers.. We just cannot continue to contribute ever more carbon dioxide into the atmopshere, can we/? Why are we dumping solar stocks for?? Toiletheads!!

May 10 2012 at 2:38 PM Report abuse rate up rate down Reply

We are actually paying higher health premums for still thinking that oil prices is still cheaper than solar energy.. Why dont we sue Big OIl for health related costs??? we can , of course! it is not only for oil spills but also CANCER EVERYWHERE IN OUR BODIES...

May 10 2012 at 2:27 PM Report abuse rate up rate down Reply

Expsure to gasline at the pump do causes cancer for so many people but Big Oil cannot be sued for that.. we can sue tobacco companies for cancer from smoking cigaretts.. I am sure that equal numbers of people die from cancer from oil or tobacco.. about the same... Big Oil is getting away scotfree... Why cannot we sue Big OIl?? We can , of course!! People ar fooling ourselves for still thining that gasoline is just harmless to handle, not! it is toxic!! Yet, we worry about toxicity in thin film solar panels.. We are not able to get our heads togehter at all.. We are all scatterbrains!!

May 10 2012 at 2:25 PM Report abuse rate up rate down Reply

Sure, dont cry for me... !!!

May 10 2012 at 2:21 PM Report abuse rate up rate down Reply

In any case, if you stil dont get it.. If you are a First Solar shareholder, you are now feeling like someone is actually shoving your head in the toilet right now.. it is a bullying act and noone cares..

May 10 2012 at 2:20 PM Report abuse rate up rate down Reply

First Solar is scheduling higher efficency thin film products to 14.2% in 2015 from 12% now. It was 11% a couple years ago.. It was also said that First Solar thin film start generating electricity much earlier in the day and continiue to much later into the dusk consistently.. This is what low light conditons mean.. that is dawn and dusk light .. This means more hours in availability no matter how low efficiency it is.. This is what the utilties want as opposed to silicon variety that requires high light conditons and quit when it is low light during dawn and dusk hours.. The uitlities want more time availabilty for access to solar energy . It is not all about efficiency but time availabilty .. There is another solar company that uses mirrors to heat molten salt in a tower and save it for overnight storage and generation.. It suspends its IPO offering last month for no reason or due to persistent competiveness from photovoltaics.. That company is called Brightsource that uses heliostats.. instead of photovoltaics. The true value of First Solar is actually higher than what we are still willing to bid for if you include the effects on our oil prices ... You cannot show it on balance sheets but it is there in the ether world of common sense.. It is real out there for our pluckings but we continue to ignore it.. we will go deeper in debt because of that.

May 10 2012 at 2:16 PM Report abuse rate up rate down Reply

Big Oil is currently lowring oil prices as well as natural gas prices as long as our solar companies is still up and around.. Once they go under, watch out!! Big OIl will do a maginficent U-turn and screw you like in 2008 !! we will be gouged with our eyes popping out and hanging ..

May 10 2012 at 2:06 PM Report abuse rate up rate down Reply

Solar companies is actually giving away the store.. Customers no longer need paid in tariffs or government guaranteed loans to be able to afford solar energy, anymore. With the ever constant threat of ever higher oil prices over the time. Everyone knows that nobody can just slap a gigafarm overnight... It takes years from stratch to completion of a gigafarm.. If you ask me where oil prices will be in 5 years, It can be down or up, but it will be down if we just get off our behinds and start planning ahead .. This will send a strong message to oil producers that we are already fed up with rising oil prices that already cost us an extra trillon dollar in past ten years.. Now, why are we fretting over paying too much for solar energy today that may get cheaper later on, sure! We will pay many times more in higher oil prices the longer we dally on completing gigafarms as we are supposed to.. Germany already had 20 gigawatts or more in place and running with Italy not far behind..Spain , France and other nations already do more than America here.. Look at them, they are messed up financially ,thanks to $8 gasoline .. We will be in the same rut when it happens here because we thought oil prices is still cheaper than solar energy.. Lets learn a few lessons from them over there and lets get busy with solar energy .. America ought to have 100 gigawatts of solar energy already in place by now and counting.. With enough gigafarms going up here in America, Big Oil will stand with virtually no chance of jacking up oil prices to the delgiht of shareholders .. You have to choose either solar or hydrocarbons in your energy portfolio.. You cannot have both unless you want higher oil prices to pull solar energy along ... .. This is clearly retarded economics... becasue this will mean more borrowings we dont have... unless you intend to steal from Social Security, keep minimum wages down, etcetra... or keeping real estate values depressed.. What we need to do is to get 100 gigafarms in place which can cost only $300 billon or so that can potentially save us hundreds of billon dollars each year from lower oil prices . If we go ahead and putting gigafarms right away, there is chances that Big Oil will take over those solar companies, maybe not.. this is the least of our concerns right now. Actually, nobody is immune from higher oil prices becasue all you have to look is what is happening to Europe. Again, look at Germany and Italy goverments decdiing to lower paid in tarfiis becasue they can no longer afford to . despite falling prices for solar watts with more to come.. Europe is in a really desperate time now while America is still pretending that it cannot happen here.. No, no,, it iwll happen here if we dont act now on solar energy. Your nitipicking analysis here is based on the worst case right now.. Wait until Americans realize what it takes to keep Big Oil at bay... we will continue to sit on hands and watch our solar companies heading into bankruptcy

May 10 2012 at 2:01 PM Report abuse rate up rate down Reply