First Solar rises again

  @FortuneMagazine January 16, 2014: 7:12 AM ET
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First Solar's 3,800-acre Desert Sunlight solar farm in Mojave Desert, Calif., is slated for completion next year.


Jim Hughes is about the last person you'd expect to find running a solar-power company. For starters, the 51-year-old Texan is a lawyer, not a physicist or a materials scientist. Then there's the matter of the decade-plus he spent in senior jobs at Enron, followed by several years operating energy assets cleaved from its carcass. And lest there be any confusion, Hughes makes no effort to hide his contempt for the save-the-world, policy-driven mentality embraced by the "renewable" energy sector since its inception. "We need to quit talking about policy," he says. "We need to focus on the fact that we can participate alongside traditional energy players on the basis of the existing economics. And we need to quit turning everything into a debate over climate change." Markets may one day reward solar-panel makers for the benefits of lower carbon emissions, he says. "But the fact is, they don't today. We can succeed without fighting that war."

Peace has definitely broken out in the solar sector, stoked by the success of retail rooftop-installation companies like SolarCity (backed by Elon Musk) and manufacturers like First Solar, which survived a wave of bankruptcies among competitors. To get to this point, First Solar and others have endured the solar industry's roller coaster of investor exuberance and massive government subsidies followed by manufacturing gluts, trade wars with China, plunging prices, and more recently a modest financial recovery. The company's stock price trades for more than $50 a share, having bottomed out near $10 in mid-2012, around the time Hughes became CEO. (It exceeded $300 in 2008, during a period of maximum solar mania.) With 2013 earnings estimated to be just shy of $450 million on sales of $3.5 billion, First Solar is a stalwart -- the biggest by revenues and profits -- in an industry known for catastrophe.

First Solar is more than a survivor. It's also a case study in the virtues of marrying wide-eyed technological optimism with patient capital that is willing to see a company through good times and bad. As one of the oldest surviving large-scale makers of what's known as photovoltaic panels -- sheets of glass covered with semiconductors that convert sunlight into electricity -- the company has been a pioneer at several turns in its history. It championed a different type of panel technology from most of the rest of the industry, the same kind generally pursued by Solyndra, the infamously bankrupt startup that lost half a billion taxpayer dollars.

Yet First Solar is no Solyndra. Indeed, the latter might have fared better if it had been backed by a son of Sam Walton rather than by Uncle Sam. John Walton, one of the Wal-Mart founder's four children, bought a controlling stake in First Solar 15 years ago, and his family continues to hold about 27% of the company's stock today, a stake worth about $1.4 billion. (For comparison, the clan's roughly 50% share of Wal-Mart today has a value of about $125 billion.)

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