Good day, everyone, and welcome to First Solar First Quarter 2009 Earnings Conference Call. (Operator Instructions). I would now like to turn the call over to Mr. Larry Polizzotto, Vice President of Investor Relations for First Solar Incorporated. Mr. Polizzotto, you may begin.

Today after the market closed, the company issued a press release announcing its fiscal first quarter 2009 financial results. If you did not receive a copy of the press release, you can obtain one from the Investor Section of First Solar's website, at firstsolar.com. In addition, First Solar has posted the first quarter presentation for this call, it's under a supplemental information, as well as key quarter statistics and historical data on the financial and operating performance for the quarter. We will be discussing the first quarter presentation during this call, and it is being webcast as well. In addition, an audio replay of the conference call will also be available approximately two hours after the conclusion of this call. The audio replay will remain available until Friday, May 1, 2009, 8:59 PM Mountain Standard Time or 11:59 Eastern Daylight Time, and can be accessed by dialing 888-286-8010 if you are calling from within the United States or 617-801-6888 if you are calling from outside the United States, and entering ID number 93319217. A replay of the webcast will be available for 90 days approximately two hours after the conclusion of this call. If you are a subscriber of FactSet you can obtain a written transcript within two hours. With me today are Mike Ahearn, CEO; Jens Meyerhoff, CFO; and Bruce Sohn, President of First Solar. Mike will begin with an overview of the company's first quarter 2009 achievements followed by a market and business update. Jens will provide you with the first quarter 2009 financial results and provide you an update for guidance for 2009. We will then open up the call for questions. All financial numbers reported and discussed in today's call are based on US Generally Accepted Accounting Principles. The company has allocated approximately one hour for…

I'm going to walk through some slides in the presentation starting with slide five. If you can follow along, I'll speak mainly to these slides. The company, obviously, continue to execute at a very high level over the first quarter. If you look at the financial metrics on slide five that's listed here briefly, revenue at $418.2 million, that's down slightly over Q4. Jens will explain it, but it primarily results from the planned annual price reductions we have at January 1 under our long-term contracts. That revenue drove net income of $164.6 million for earnings per share of $1.99. From an operational perspective, the operating metrics that drove the financial results included production at 219.5 megawatts. That's up 26% quarter-over-quarter. Annual capacity per line was up to 49.4 megawatts, up 4% quarter-over-quarter, primarily driven by higher conversion efficiencies and aligned throughput. Conversion efficiency averaged 10.9 % for the quarter. That's up 0.1% quarter-over-quarter. We operated KLM 1 and 2 at full capacity for the entire quarter. We also began shipping and ramping KLM 3. KLM 4 will begin shipping in Q2, and that will bring all four factories in KLM into production and full ramp ahead of schedule, so an excellent job at executing a major factory expansion for us. Manufacturing cost declined to $0.93 per watt, 5% reduction quarter-over-quarter and 18% year-over-year, driven primarily by lower Malaysia costs as we averaged in higher volumes into our consolidated results and improved throughput and efficiency as I alluded to earlier. From a market perspective, we were particularly pleased. We were able to sign up 479 megawatts of new volumes in Q1, particularly under the conditions that the industry has been dealing with. Those included 361 megawatts in Europe in increased contract module sales with existing customers, 23 megawatts contracted in…

On slide 15, you see our net sales for the first quarter were $418.2 million, a decrease of 3.6% over the fourth quarter of 2008. The decrease was primarily driven by price declines, customer mix as well as by sequential decline in the euro exchange rate from a blended $1.41 per euro in the fourth quarter to $1.39 per euro in the first quarter of 2009. These decreases were partially offset by higher shipping volumes from the ramp of plant 2 and 3 in Malaysia and higher line throughput. Moving to slide 16, our cost per watt produced for the first quarter was $0.93, down 5.1% sequentially as we continue to realize the benefit from increased production and low cost locations, higher line throughput and lower material cost. Cost per watt included $0.02 of Malaysian land cost and long set of stock-based compensation expense. Cost per watt is expected to continue to decline with a ramp of plant 3 and 4 in Malaysia and continued throughput improvements. Gross margin on slide 17 for the first quarter was 56.3%, up 2.4 percentage points over the prior quarter, primarily due to lower manufacturing costs and customer mix, partially offset by lower ASPs and the decline in the blend of euro exchange rate underlying our net sales. Please note that our gross margin continued to benefit from foreign exchange hedges executed in the first half of 2008, which are phasing out as the year progresses. In addition, first quarter margins do not yet reflect the full impact of revised product pricing implemented during the first quarter. On slide 18, our operating expenses declined $5.4 million quarter-over-quarter, due to a reduction in variable compensation expenses and a decrease in plan startup costs of $2.6 million, sequentially to $6.2 million, as Plant 2 and 3…

(Operator Instructions). Your first question comes from the line of Steve Milunovich from Merrill Lynch. Please proceed.

You commented that we haven't seen the full impact of the price declines that you implemented in the first quarter. Do you think those will be significantly noticeable going forward or could be offset by other factors?

Obviously, these impacts are incorporated into the guidance that we gave today to the full extent. Obviously as the full effect becomes eminent, we're also reducing our costs further. So you have some offsetting trends all of lower cost reduction efforts.

Your next question comes from the line of Steve O'Rourke with Deutsche Bank. Please proceed.

How should we be thinking about your manufacturing cost basis in Malaysia compared to the US or Germany?

I think we always gave an indication that over time we would expect roughly $0.20 benefit out of Malaysia compared to the US plant, which was the baseline. So I think we're seeing that trend come through. Having said that, however, as you gain more efficiency and throughput advances, the overall compensation element in the manufacturing cost declines as a percentage. So today we're seeing a good mix of the overall throughput improvements. We're seeing efficiency improvements and we're seeing the lower cost structure all benefiting the aggregate manufacturing costs.

The material cost in COGS, is that demonstrably lower also in Malaysia?

In Malaysia?

Yes, when you think about material inputs?

No. Generally, I don't think there's a material impact. As a matter of fact, I think in the beginning as we ramp some of these plans, we utilized traditional sources for materials in the transitional stage. Some of that could have been slightly higher due to transportation costs. So we're scaling into that.

Your next question comes from the line of Satya Kumar with Credit Suisse. Please proceed.

I was just wondering if you could give us a sense as to what price of polysilicon you'd be competitive as you exit the year. Looking at the run rate for your guidance, you are assuming pricing is coming down fairly significantly through the year.

If you look at the slides that Mike walked through, which are essentially slides 10 and 11 in the deck we gave some sensitivity with respect to different type of poly price assumptions. You see the slides and I leave it to your judgment to take a point with respect to where and when we will be at certain poly prices. We believe based on the pricing behavior that we see that our current price is highly competitive and drives sell-through. You can draw a scenario, obviously, on the slide here. If you draw $0.93 current manufacturing costs, you freeze it and you bring down poly costs to $25. That could theoretically create some near term pressures. The purpose of the slide is actually to show that those pressures will be temporary and that our cost reduction roadmap is more than adequate to allow us to compete overtime very successfully, even with very; very low polycrystalline feed stock prices.

My understanding is that the Cottbus project was refinanced at extremely attractive [referral] rates. By my math, this project is cash flow positive for you, just looking at the percentage funded and your cost. I'm assuming that you could generate very high returns on equity.

The underlying economics of the Lieberose project are quite compelling, especially financing, essentially provided additional upside to the minimum 20% IRR that we described. Obviously, those 20% IRRs are billed based on our manufacturing cost item. The question really would be at what point would be the project clearing. We believe there are enough economics in this project for it to be very attractive for certain equity investors that we would target together with our customer.

Your next question comes from the line of Nic Allen with Morgan Stanley. Please proceed.

Can you talk about the breakdown for the quarter and for your yearly guidance between module sales and then system sales?

I think so far we have not broken this down. What we have said in the past was roughly that we expected about 10% of our volumes to essentially be placed in the US market. Some of that is obviously subject to the exact timing of some of these projects. I think Mike alluded to that permitting times and so on, our critical aspect of project realizations. We realize that our investor community is very eager to understand the differences in the business model between the modular sales that we are having the European feed-in tariff versus a more integrated model in the US. Essentially our Analyst Day in June will explain this in a lot of details. So, that's going to be our core focus there to layout how we think about both aspects of our business.

Is there a general volume that we could think about where that system business becomes operating breakeven?

That would imply that it was losing money which I don't think we've generally disclosed that we were feeling or thinking about it this way. I think, generally, we will give you an overview of the economics, which obviously would include the degrees of profitability that we you would find in that business.

Your next question comes from the line of Vishal Shah with Barclays Capital. Please proceed.

First of all, what percentage of PR shipments in Q1 were to the German market and specifically to the ground-mounted market in Germany? And were you able to attract new customers by lowering prices in Q1? And if so, what's the total number of customers do you have as of today?

I'd say generally, we remained in the first quarter very euro-focused around our revenues. That's essentially our core markets still while the US is developing. I think I just laid it out for the year, Vishal, with respect to the percent of US business. The volumes we signed off were primarily signed off with our existing customers, as Mike mentioned. Obviously, part of our sales and marketing efforts is to broaden the customer base out further.

So were you able to successfully sign any additional customers?

I think the volumes we placed under these contracts were with our existing customers. As you know, our existing customers essentially represent the very large share of market in the European markets.

Your next question comes from the line of Timothy Arcuri with Citi. Please proceed.

First of all, Jens, can you tell us the megawatt shipment number and how many of those megawatts went into the systems business?

I think Mike reported the megawatts produced. We do not generally report any longer the megawatt ship number due to sensitivity around pricing, but the production was 219.5 megawatt.

Okay. Then, I guess, secondly, if you kind of normalize for some of the balance of system costs, right now you have kind of $0.60 to $0.70 advantage versus branded crystalline. So I am wondering how you think longer term as to what the cushion that you want to maintain for your pricing relative to branded crystalline once you normalize for the balance of system. So are you willing to come down to $0.25? Is that where you want to keep the cushion? How do you think about that?

Maybe Mike wants to chime in here. I don't think there is such a magic formula where you just lock this in. You gauged the end market. You gauged the sell-through. As you know, we're going to use our cost reduction roadmap. We are firm believers in passing these cost reductions to some degree through and to the market for multiple reasons. Number one, it helps us to grow our business and to drive overall sell-through. It strengthens the overall channel and our channel partners. We are a firm believer in demonstrating, especially to the government that have enabled feed-in tariffs that PV can scale. There is a logical and plausible task towards parity for this industry.

Your next question comes from the line of Al Kaschalk with Wed Morgan.

I just wanted a follow-up on the sold out position that you have in terms of production and the next expansion project that we see from a capacity standpoint. The follow-up would be, could you comment a little bit further on the change in customer mix that you experienced in Q1?

Yes. This is Mike Ahearn. We didn't mean to imply that we were sold out in 2009. We are nearly sold out. I think our estimate is we have 90% of our volumes under contract at this point. So, we are about where we want to be in terms of having some flexibility to see some new relationships. The factory expansion, we are thinking about that I guess the way we always have. When we can identify visible demand that we'll consume the output of incremental production over a time period that's sufficient to repay the investment. Then we'll make an expansion decision to go ahead and commit the expansion. One of the advantages we have in the US from these long project timelines is that we think we can commence and build a factory faster than we can get through the utility scale project timeline right now, which means we have the advantage of preserving some optionality here in terms of when and where we commit to factory expansion. So, we're looking at a number of sites. We are talking to a lot of people around the world about factory expansion. We're basically deferring decision on that and allowing demand to continue to crystallize and kind of look at our timelines in terms of when we must commit to serve demand that's been secured. So, we don't have anything new to report today. Obviously, what we want to do is build more factories and expand, and we're eager to do it. So, we're working to put all those pieces together.

Yes, there was, I think, a question about customer mix. So obviously, I think as we mentioned, with respect to some of our revised pricing, the customers that committed to higher volumes that benefit from different terms compared to customers that essentially maintain certain volumes. There is also differentiation with respect to markets served between feed-in-tariff based markets and markets that have less incentives. So, the US utility market would be one example, but also other emerging markets that are much closer towards grid parity requirements.

Mike, a follow-up on the production and specifically on policy for the US. Can you give us a little update on tax incentives that the US government may be providing? I realized there is probably nothing specific, but maybe you could just comment on that. Thank you.

I think in general, at the federal government level, there is a real interest in trying to stimulate more solar manufacturing and technology development in the US. I think that the key issue there is to create a market opportunity in the US that will consume incremental manufacturing production, because absent a strong US market, I believe that manufacturing will continue to go where the markets exist. There are a number of other countries around the world that are working on market programs that try to stimulate manufacturing. So, the first thrust I think in the US, at least what we've urged is, you ought to get the policies and programs to help stimulate a robust solar market. You can't leave this all to the States. Otherwise, it's going to be fragmented and under-funded. It's just a fact of life. And so, there is a number of things, I think, to be done there. There is in the stimulus program an enhanced tax incentive for manufacturing, and it's something that I think will be useful. I don't believe it's been ruled out yet. I think they're working on the procedures and the logistics around it. That will be a useful sweetener, but I don't think it would substitute for creating a robust market in terms of really attracting manufacturing, you know certainly from First Solar's perspective.

Your next question comes from the line of [Collin Rush] with ThinkEquity.

Thanks. Mike can you talk a little bit more about the policy changes that you'd like to see mentioned a radical change? Can you just describe what would you like to see? How long do you think it's going to take and what sort of cooperative efforts across the industry do you see as necessary?

I think in the US, there are a few things I think would need to happen to create a real solar market in the US. One is that the incentive from the federal government, at least for large scale solar, needs to be higher than it is today, because with natural gas prices being at cyclical lows, these states are not in a position to fill subsidy gap. I just don't believe that's going to happen in size. So, I think the incentive or the subsidy has to be higher. Providing that subsidy through the tax code in the form of an investment tax credit is extremely inefficient. It doesn't allow for capital to form around project finance in any kind of visible way or in a low cost way. It narrowly constricts the pool of available financers on these projects. So, I think once this grant program expires in 2011, we're kind of right back where we started. So that's a problem. The transmission constrain needs to be addressed, in terms of renewable transmission. There are opportunities to do smaller volumes at solar, around exiting grids, about to get serious about this and really moves at multi gigawatt levels there, will need to be multi state transmission that is basically moving power out of the areas, where it's cheapest to make it, which is in the southwest and around the southwest and out of it. So, we have the transmission issue to be dealt with. I think basically facilitating some kind of low cost project financing to put solar projects on parity with conventional power projects is going to be needed as well, at least for a while. We don't think, I don't think the loan guarantee program that's presently structured is going to be particularly useful, because it's a subjective program. It's not available to the market in general. The rules and criteria aren't even developed let alone published and so when companies like us start thinking about how you put project finance in place to facilitate a large project, due late 2010 or beyond, we can't rely on that program. There's no visibility around it. No assurance, we will be entitled to participate. So, I think there are a number of things here. I do think at the federal level people are asking questions and trying to figure it out. I hope that we can have some dialogue and I'll kind of get to the real issues. I think we speak for a number of companies on these points and would like to deploy big volumes here. We just need a few of these pieces to be in place.

Your next question comes from the line of Chris Blansett with JPMorgan.

Question is kind for Jens here related to beneficial FX hedging, you've had. How do you expect this to roll off to the year, Jens, just to clarify?

Like I said, I mean, if you look right now how these hedges taper off. I think they are tapering towards the 130, 131 level. You may recall that the euro essentially traded up in the second half of last year from a high of about $1.61, down into the $1.20s. So, you see I think comparing us tapering off now from the $1.40 to the $1.30 level, that we essentially were quite successful in taking volatility out of the euro with respect to revenue recognition.

Your next question comes from the line of Jesse Pichel with Piper Jaffray.

Congratulations on the strong results. Of the 479 million of new volumes won in Q1, how much of that was a new win versus getting higher volumes in exchange for lower prices to your contract customers? And a follow-up to that would be; could you talk a little about glass, which I think is your largest cost. Some of the glass manufacturers indicated excess capacity, lowering prices. What type of TCO glass cost reductions are you looking at over the next year or two? Thanks.

I'll give you the breakdown Jesse on these contracts real quick. So, out of the 479 megawatts, you had 361 megawatts sold into existing customers in Europe. Then 23 megawatts is sold under contract into Ontario, Canada. That's a new market situation for us, and then 95 megawatts in the US that's new. Two projects, one with Sempra that will be installed in Copper Mountain, Nevada and other with Tri-State in New Mexico. And then on the glass, maybe Bruce can talk to it?

Jesse, this is Bruce. On the glass fronts; so we deal with a number of suppliers for glass and we've had a long-term strategy that our global supply chain team works on to drive down the costs overall. Certainly that has been a key component to our cost reduction road map and is really required for us to address our bill of materials going forward over the next two to three years, so we get down to those $0.65 per watt cost range. This has been an ongoing project that we have had, certainly the slow-up in the construction business and so forth has facilitated our access to glass, but of course we've been growing into that market over the last couple of years.

Your next question comes from the line of Mark Bachman with Pacific Crest.

Yes, gentlemen congratulations here on the solid execution and also the inclusion of the slide deck here and your thoughtful comments, I think are extremely helpful to your clients or your investors. Jens, on page 25, you highlight the 53 megawatt project here. I know that you had set aside roughly 100 megawatts for the modules for First Solar owned projects, but you say you have only identified just 53. So, I have a two-part question here. What's your appetite then for initiating projects for the remaining 47 so-called megawatts? And then two, how do we think about the revenue deferral for Q2?

Okay, I think, two questions. So again, as you see, our guidance remains unchanged around, that's right. So we're keeping the space over that allows us to do what I think. Slide 25 lays a low without why we're doing this right. So, we're not doing this to be an independent power producer, right. We're doing this to mitigate risk around financing and to drive sell-through, right. It was a goal ultimately to sell these projects and so where we identified projects, these projects should be of a certain size. You shouldn't think of doing this like for a one megawatt project. That wouldn't make sense for larger projects. I think we remain open to that and preserve some optionality within the guidance to do this where we believe it makes sense. With respect to the revenue recognition on this project, it was very specific to each project, Mark with respect to how they're structured and financed. So I think we'll give updates to this as we move through the quarter. Primarily it deals with closing financing and also with respect to final equity ownership are probably usually the triggers you want to look for.

Thank you for your participation. This concludes the presentation today. You may all disconnect. Have a great day.