Good afternoon, everyone, and welcome to First Solar's second quarter 2018 earnings call. This call is being webcast live on the Investors section of firstsolar.com. At this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded. I would now like to turn the call over to Stephen Haymore from First Solar Investor Relations. Mr. Haymore, you may begin.
Thank you, Abby. Good afternoon, everyone, thank you for joining us. Today, the company issued a press release announcing its second quarter financial results. A copy of the press release and associated presentation are available on First Solar's website at investor.firstsolar.com. With me today are Mark Widmar, Chief Executive Officer, and Alexander Bradley, Chief Financial Officer. Mark will begin by providing a business and technology update. Alex will discuss our financial results for the quarter and provide updated guidance for 2018. Following their remarks, we'll have time for questions. Please note this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in today's press release and presentation for a more complete description. It is now my pleasure to introduce Mark Widmar, Chief Executive Officer.
Mark?
Thanks, Steve. Good afternoon, thank you for joining us today. I would like to start by discussing the global PV market. As you are aware, since our last earnings call, there has been significant developments in the global market, primarily stemming from policy decisions in China. The near-term impact has been an almost immediate collapse in pricing across the crystalline silicon supply chain. While we have seen planned maintenance pull forward or other actions taken to better align near-term supply with demand, there is still an oversupply across the value chain, which is driving declining module ASPs in both China and certain international markets.
While it's still too early to fully assess the long-term effect these decisions will have on the industry as a whole, the end result most likely will be more competitive PV power prices, which will lead to demand elasticity both in China specifically and the global market in general. Additionally, we will likely see industry consolidation as uncompetitive technologies and financially unstable companies struggle to compete. While we will continue to carefully monitor these recent developments, we remain focused on leveraging our competitive advantages and executing our differentiation strategy. First and foremost, our CdTe technology, and specifically our Series 6 product, is a competitive advantage. In an industry that suffers from a lack of differentiation, Series 6 has the potential to achieve a distinctive combination of low cost and high efficiency.
While there is still a great deal of work ahead to realize its full potential, our unique technology is a key competitive advantage. In addition, as we look over the horizon of an oversupplied market, our nearly 11-gigawatt pipeline of future contracted shipments is a position of strength. While I will talk more about this in a moment, nearly 80% of our available supply from now until the end of 2020 is booked. This is a substantial pipeline of contracted volume that provides good visibility to future demand at an uncertain time in the market. Finally, another competitive advantage unmatched in the industry is our balance sheet, which enables us to invest in our business and be opportunistic at a time when greater stress is likely to be placed on competitors who are already highly levered.
Our net cash at the end of Q2 was a record $2.7 billion, even after significant year-to-date investments in Series 6 capacity and project development activities. While this is an industry that has experienced periods of overcapacity and difficult market conditions in the past, the long-term potential for solar energy still shines brightly. Furthermore, as a company, we have never been better positioned to deal with the current near-term challenges given our Series 6 product, contracted bookings, and balance sheet strength. Before providing an update on our progress related to Series 6, there are some important points to keep in mind pertaining to our financial results for Q2. First is that when we began our transition to Series 6 a year and a half ago, we anticipated that 2018, and in particular the first half, would be the trough in our earnings power.
With Series 6 production largely slated for the second half of the year, we knew we would be at the low point of our module availability and a period with elevated levels of ramp and startup costs. Additionally, the second quarter was significantly impacted by the timing of closing of certain project assets. As we've seen in the past, there's a great deal of uncertainty associated with project sale timing, and the effects on a single quarter can be pronounced. Given this quarterly variability, we provide financial guidance on an annual basis as we believe this is the most meaningful way to evaluate our performance. Lastly, certain initial Series 6 production issues that we have experienced during Q2 impacted our results. Lower-than-targeted throughput and yields resulted in fewer modules available at project sites and a higher module cost per watt.
While we see these ramps-related impacts primarily as near-term issues rather than as long-term structural challenges, they nonetheless caused a delay in some project revenue recognition and resulted in a decrease in our full-year margin outlook. Alex will provide discussion around the financial results in more detail later and provide an update to guidance. Now, turning to slide four. I'll provide some more context related to our Series 6 ramp and the manufacturing issues mentioned. Overall, we are very pleased with the progress we have made thus far and remain confident in the long-term capability of the Series 6 product from a cost and an efficiency perspective. To give you a sense of the progress we are making, at the time of our last update in April, we had only recently started production and initial commercial shipments from our Ohio factory.
Since that time, we have commenced production at our second Series 6 factory in Malaysia, with our third Series 6 factory in Vietnam not far behind. In Vietnam, we are completing factory acceptance tests of the equipment, we expect the first module production in late Q3, with commercial shipments to follow in early Q4. Construction of our second Series 6 factory in Vietnam is also progressing according to schedule, with tool installations beginning later this quarter, followed by first production in 2019. In the U.S., we are progressing with our second Series 6 factory that we announced on our previous earnings call. We held the groundbreaking event for the new factory in early June, and the 1.2-gigawatt nameplate factory is anticipated to commence production in late 2019.
Overall, there has been significant progress made in the past three months, the organization is intently focused on building out our Series 6 capacity. As it pertains to the manufacturing ramp of our Ohio and Malaysia factories, we have made substantial progress over the past 90 days. Production at the Ohio factory is now running at approximately 60% of nameplate capacity, our Malaysia factory has ramped very rapidly to over 40% of nameplate. Even with this progress, the planned Q2 production was below our expectations. Our biggest challenge remains the throughput on the back end of the line, bussing through final pack-out. The layout of the back end of the line was built according to the tool set availability specification, which resulted in few required buffers.
As we started to ramp the back end of the line with the tool set availability not yet at a mature state, we realized there were multiple single points of failure in the line that could shut down production. Effectively, the line was not adequately buffered given the current performance of the tool set. We are in the process of installing inventory accumulators to properly buffer the back end of the line. Once completed in our Ohio factory, we will use our Copy Smart approach to roll out to Malaysia and Vietnam. Over time, as the tool set availability improves, while the inventory accumulators will remain in place, the need for inventory buffers will decline.
The impact of reevaluating the back end, identifying the required buffers, and installing the inventory accumulators across our manufacturing facilities, in addition to adversely impacting Q2, has resulted in a reduction of approximately 200 MW to the full-year Series 6 production plan. It is important to note that despite the 2018 volume reduction, with the actions we are taking, we anticipate to exit the year at the originally anticipated throughput levels and enter 2019 on track to our previously announced Series 6 production volume. Keep in mind that the issues we are working through do not impact our long-term outlook for Series 6. Relative to our long-term expectations, I wanted to make a comment on the tool set, which incorporates approximately 200 tools across the front end and the back end.
Through our initial production, we have validated the cycle time and performance of each tool. The capabilities meet or exceed our plan requirements. This validation helps to critically inform our views on long-term expectations. Module wattage continued to improve steadily and is currently averaging 415 watts per module, as compared to a production entitlement that yielded most modules near 400 watts at the end of our last call. Our top bins are currently at 420 watts per module and are approaching 425 watts. With a robust pipeline of advancement to come, we have line of sight to continued improvements in the fleet average efficiency. Overall, our efficiency and watts per module are on track relative to our expectations for the year. Series 6 product readiness has taken a significant step forward since last quarter with the completion of both UL and IEC certifications.
We indicated previously that our achieving these certifications was primarily a matter of time. Completing both certification is an important milestone. We have not yet scored this metric green as a matter of due course, given the relatively recent introduction of the Series 6 product. As we gain more experience throughout this year, we expect to advance this metric to green. Continuing on slide five, I'll highlight our bookings activity for the past quarter. Since our last call, bookings have continued to be solid as we have contracted nearly 900 megawatts of new business. This brings our year-to-date net bookings to 4.1 gigawatts and our total future expected shipments to 10.9 gigawatts. To put our future expected shipments into context, almost the entire 10.9 gigawatts is expected to ship between now and the end of 2020.
Given this same time period, our anticipated supply of both Series 4 and Series 6 modules is 13.8 gigawatts, which implies approximately 2.9 gigawatts of remaining bookings to fully contract through the end of 2020. Factoring in the over 750 megawatts of contracts signed but not yet counted as bookings, the remaining bookings number to the end of 2020 drops to less than 2.2 gigawatts. While we still have considerable work ahead to fully contract the remaining 2.9 gigawatts of supply, we currently have 5.1 gigawatts of mid to late-stage opportunities with shipment requirements before the end of 2020. An important element to highlight relative to our year-to-date bookings is both the stability of our Series 6 pricing and the pricing advantage of Series 6 versus Series 4.
For example, the average ASP of Series 6 modules booked this year is essentially consistent with the 2017 Series 6 bookings average module ASP. Note, this is especially noteworthy given the current year bookings are for shipments through the end of 2020. When compared to 2018, Series 6 and Series 4 bookings, Series 6 average ASP is 6% higher than Series 4. We also continue to make progress in building our systems pipeline, as we highlighted by two new PPAs we booked in the U.S. One PPA for 75 megawatts AC was awarded by a utility in California and has an expected completion date in 2021. A second PPA for 73 megawatts AC was obtained through a recent pipeline acquisition and will be our first project in South Carolina. The PPA is with South Carolina Electric & Gas, and the project has an expected completion date of 2020.
We are excited by this entry into a new part of the Southeast U.S. in a region that has an excellent solar resource. While this was the only project acquired with assigned PPA, the pipeline acquired also includes a number of mid to late-stage opportunity development projects, which in aggregate total approximately 600 MW. As I mentioned earlier, our balance sheet strength allows us to be opportunistic, and we will continue to evaluate other project or pipeline acquisition opportunities so long as they meet our return thresholds. While not yet counted as bookings, we have also signed an approximately 60 MW AC PPA with the utility in Western U.S. for a project that will provide power to a corporate customer.
We'll provide more details in the future, but this project is a prime example of our capabilities to address the renewable energy goals of corporations in partnership with utilities by leveraging efficient and reliable large-scale offsite generation. Previously, we were able to bring these same capabilities to bear when we partnered with NV Energy to power data centers for Switch with clean, affordable electricity. In addition to the signed PPA, we are in advanced discussions with utilities for two additional projects that would supply over 100 MW AC of power to corporate customers. All three of these opportunities highlight this important growth opportunity as many companies increasingly commit to 100% clean energy. Outside the U.S., we also continue to see growth in our systems portfolio this past quarter with approximately 30 MW AC of additional systems bookings in Australia.
In addition to new development project bookings, we also recently converted an additional 65 MW DC of previously contracted module volume to an EPC sale. When we add EPC scope to previously booked module sales, we do not count these agreements as new bookings. However, they do provide incremental future revenue and margin. This is the fourth project that we will construct for Tampa Electric with an expected completion date of this project in 2019. Year to date, our total net system bookings are now 1.3 GW, which comprises of over 750 MW of development project bookings and more than 500 MW of EPC contracts, which we converted from module sales. In addition to the system projects discussed, the remaining bookings for the quarter were module sales primarily to customers in the U.S. Other module agreements were also signed with customers in India, the Middle East, and Europe.
Continuing on to slide six. I'll next discuss our mid to late-stage bookings opportunities, which on a net basis is unchanged at 8.3 GW DC. When factoring in the bookings for the quarter, a number of which were included as opportunities in the prior quarter, our mid to late stage pipeline actually grew. On a geographical basis, North America increased with a roughly corresponding decrease in opportunities in Asia Pacific. North America increased primarily as a result of acquiring the project development portfolio in the Southeast U.S. mentioned previously. Keep in mind, in addition to the more advanced project opportunities, which are included in the 8.3 GW, there is a robust portfolio of early-stage projects not reflected here. Similar to last quarter, the total potential opportunities include deals that are signed but not yet counted as bookings until financing or other CPs are closed.
As mentioned, there are over 750 megawatts of such projects, including the PPA with the Western utility already discussed. With respect to the expected shipments, timing of the mid to late-stage opportunities, we have 5.1 gigawatts of opportunities in 2019 and 2020 against the remaining supply in this time period of 2.9 gigawatts. Early-stage projects not included in this number provide additional opportunities to sell the remaining volume. Next, I'll provide an update in progress we are making on our systems project pipeline. As we discussed at our Analyst Day last December, the systems business remains a core part of our strategy, and on average, we are targeting around one gigawatt per year of development business in the next few years.
As it pertains to development, we remain focused on key markets such as the United States, Japan, and Australia, where we can pursue a differentiated strategy that can lead to capturing value and compelling returns. Select EPC opportunities in the U.S. will also remain a priority as these agreements enable greater customer engagement and we believe enhance our value proposition for utilities wanting to own their own generation. As highlighted on slide seven, we are making good progress towards achieving our annual development target. Note that the timing of revenue recognition on systems project will vary from the shipment timing shown on this slide. However, it is a good indication of the current status. As illustrated, we have nearly reached the one gigawatt target in 2019 with contracted development projects, and we have the potential to exceed that mark if we're able to close the mid to late-stage opportunities shown.
Both EPC projects plus potential EPC conversion opportunities take that total even higher. In 2020, we are more than halfway to our target, with the potential to significantly exceed that mark. Keep in mind that there are always contracting risks associated with mid to late-stage projects, and we do not expect that we'll ultimately book all of this mid to late-stage opportunities shown. However, this does highlight our progress on building our systems business over the next few years. I'll now turn the call over to Alex, who will provide more detail on our second quarter financial results and discuss updated guidance.
Thanks, Mark. Before discussing the quarter in detail, there are some key points to note as it relates to the first half of the year. From the outset of the Series 6 transition, we anticipated that this timeframe would be the lowest point of our earnings power due to lower module production levels and elevated startup expenses and ramp costs. In Q2, these expected elements combined with a quarter of unusually low sales. This was due to both the aforementioned Series 6 throughput and yield issues, which impacted module costs and availability for projects already sold, as well as to a delay in closing certain new project sales. Despite these challenges, we've been able to maintain our revenue and earnings per share guidance for the year while implementing plans that fully address these early-stage manufacturing ramp challenges.
It's also worth noting that in our February earnings call, we guided to an expectation of approximately 25% of our full-year earnings being recognized in the first half of the year. With year-to-date EPS of $0.32, we are tracking slightly behind our expected earnings distribution across the year, but remain on track to achieve our full-year earnings per share guidance. Turning to slide nine, I'll start by discussing selected income statement items for the quarter. Q2 net sales were $309 million, a decrease of $258 million compared to the previous quarter. Systems revenue as a percentage of total quarterly net sales decreased slightly to 66% in Q2 versus 72% in Q1. As indicated, the lower net sales in Q2 resulted from certain project sales pushing out of the quarter, lower revenue recognition on projects already sold, and a decrease in third-party module sales due to shipment timing.
As it pertains to the timing of systems sales, we indicated on the Q1 call there was the potential for a significant impact on Q2 earnings if the closing of certain project sales moved out of the quarter. While we saw delays in the sale of two projects, in both cases, this is only a timing impact, and in neither case do we anticipate any impact to overall project economics as a result of this change in timing. With regards to revenue recognition on projects already sold, various issues with the California Flats project were the main reason for lower than expected revenue in Q2. Firstly, Series 6 module availability constraints, due to both throughput constraints and delays in the release of module shipments pending final product certifications, limited the amount of work that could be completed on the project.
Secondly, there was a small decrease in the project size due to lower than planned module bin classes. While we'll still be installing the same number of modules as initially planned, the lower wattage per module results in a lower total DC capacity. Thirdly, the cost plan for the project was increased due to both higher module costs and acceleration costs resulting from the timing of module shipments. The combination of these factors served to decrease total expected project revenue and increase total expected costs, which reduced both the project percentage of completion from work performed in Q2, as well as leading to a Q2 adjustment of the project to date for revenue recognized. Second quarter gross margin was negative 3%. The module segment was impacted negatively by low sales volume and ramp-related costs.
Bear in mind that the module segment sales is composed entirely of Series 4 volume, as early Series 6 volume is entirely allocated to our systems business. However, the module segment COGS is comprised of both Series 4 COGS and Series 6 ramp-related costs, as these are allocated to the module segment. In Q2, the module segment was burdened by over $20 million of ramp costs, as well as several million of scrap charges related to initial Series 6 production. Note that for the full year, we still expect ramp costs to be approximately $60 million, and during the period where we're ramping our new technology, we expect to see continued noise between our two reporting segments.
The systems segment gross margin was affected by the change in estimates for California Flats revenue and cost plan mentioned earlier, as well as the higher mix of revenue from EPC projects versus development assets. Q2 operating expenses were $96 million, a decrease of $3 million compared to last quarter. Plant startup expenses decreased by $13 million as a result of lower Series 6 pre-production activities in Ohio, partially offset by increases from the Malaysia and Vietnam factories. The decrease in startup expense was partially offset by higher SG&A. Our Q2 operating loss was $104 million, compared to an operating profit of $74 million in the first quarter. The Q2 loss was primarily a result of the unusually low sales, impacts to gross margin for over $20 million of ramp costs, and more than $24 million of plant startup expense.
There was an income tax benefit of $6 million in Q2 as compared to a tax expense of $12 million in Q1. As it relates to U.S. tax reform enacted last December, we did not record any adjustments in Q2 related to our original estimates. However, as a reminder, we continue to evaluate our provisional estimates until we file our 2017 federal tax return later this year. The sale of our ownership interest in 8point3 closed in the second quarter, and we recorded a gain on the sale that resulted in Q2 equity and earnings, net of tax of $40 million. The combination of the aforementioned items resulted in a net loss for the second quarter of $0.46 per share, compared to earnings per share of $0.78 in Q1. Moving to slide 10, I'll next discuss select balance sheet items and summary cash flow information.
Our cash and marketable securities balance ended the quarter at $3.1 billion, an increase of $256 million from the prior quarter. We had a record net cash position of $2.7 billion at the end of Q2, a sequential increase of $238 million. The higher cash balance was primarily due to proceeds from the sale of our interest in 8point3, partially offset by capital expenditures to support our ongoing Series 6 capacity expansion. Pertaining to the sale of 8point3, we received net proceeds of $240 million after the payment of fees and other amounts. We collected the remaining outstanding balance of $48 million associated with a promissory note that was issued when interest in the Desert Stateline project was sold to 8point3. Second quarter net working capital, which includes the change in non-current project assets and excludes cash and marketable securities, decreased by approximately $230 million.
The change was primarily due to the collection of accounts receivables and an increase in deferred revenue from module prepayments, partially offset by an increase in inventories. Total debt at the end of the second quarter was $456 million, a net increase of $18 million from the prior quarter. The increase was primarily associated with issuing project-level debt in Australia. As a reminder, essentially all of our outstanding debt is project-related and will come off our balance sheet when the projects are sold. Cash flows from operations were $129 million due to the collection of accounts receivable and the receipt of module sale prepayments. Cash received for the sale of our interest in 8point3 and the repayment of the Stateline promissory note were classified as investing cash flows. Capital expenditures were $195 million in the second quarter, compared to $178 million in the prior quarter.
The cumulative spend on Series 6 capacity is now approximately $800 million out of a total expected spend of around $1.8 billion for 6.6 gigawatts of capacity. Lastly, depreciation and amortization expense was $30 million in Q2 versus $24 million last quarter. Continuing on to slide 11, I will next discuss our updated 2018 guidance. Before discussing the specific updates, there are some key points and assumptions to highlight. Firstly, we have narrowed our sales guidance range to reflect the impact of some systems revenue recognition moving into 2019. As mentioned previously, this timing of new project sales has no expected impact on the overall economics of these projects. We are lowering our expected gross margin range to reflect 2018 cost impacts, including Series 6 cost per watt increases, mostly associated with aluminum costs for the module frame, as well as increased BoS costs.
We see offsetting non-operating impacts result in maintaining full-year EPS guidance. Secondly, it is important to reiterate certain risks we highlighted in our last earnings call with regards to our Ishikawa project in Japan. Our full-year guidance continues to assume the project is sold in 2018. As mentioned on our previous earnings call, the project experienced weather-related construction delays earlier this year, from which it has not fully recovered. We continue to work through a mitigation plan and to see progress in construction. There remains substantial risk as to whether the sale will be completed this year. Given the size of this project and the expectation that the sale, and therefore initial revenue recognition, will occur near to or at COD of the project, we believe it is prudent to highlight the risk.
If the project sale does move into 2019, we continue to expect there would not be any change in the anticipated project economics. However, this change in timing to a 2019 sale would likely result in 2018 revenue and earnings near the low end of our guidance ranges. Thirdly, as it relates to the distribution of earnings between the third and fourth quarters, we expect Q4 to be the strongest quarter of the year from a revenue and earnings standpoint. We expect the remaining earnings for the year to be split approximately one third, two thirds across Q3 and Q4. Having discussed some of the key assumptions underlying our guidance, I will now cover the specific updates to the ranges.
Starting with net sales, we are narrowing the range to a revised forecast of $2.5 billion-$2.6 billion in order to reflect the revised timing of revenue recognition on certain systems projects. Note, this is not an overall reduction to expected systems revenue, but rather a shift in timing between 2018 and 2019. Our expected gross margin has been lowered by 100 basis points to a revised range of 20.5%-21.5%. Reduction accounts for the increase in module cost per watt and changes to the California Flats revenue and cost plan discussed. The operating expense forecast, which includes plant start-up, has been lowered by $10 million to a revised range of $390 million-$400 million. Plant start-up expense is unchanged at $120 million, the reduction is a reflection of our ongoing management of core operating expenses.
Our outlook for operating income has been revised down by $15 million at the midpoint to a new range of $120 million-$160 million, as a result of the lower revenue and gross margin, partially offset by the reduction in operating expenses. Below operating income, we've increased our forecast for net interest income, as well as increasing our forecast full-year tax expense to approximately $35 million, a result of jurisdictional mix of income. Our guidance also assumes minimal additional equity and earnings for the balance of the year. Putting these revisions together, our earnings per share guidance remains unchanged at $1.50-$1.90. The operating cash flow range has been increased by $100 million as a result of the revised timing of project development spending and expected improvements in module accounts receivable collection.
As a reminder, both the structure of project sales and the timing of a sale can have a meaningful impact on our operating cash flow guidance. As we discussed last quarter, if we sell a project later in 2018 than anticipated, the project continues to draw down debt financing in intervening periods, operating cash flow proceeds will be lower, assuming the debt is assumed by the buyer of the project. With Ishikawa and other international project sales expected in the second half of this year, we could have some revisions to our operating cash flow expectations, even when the economic substance of transactions are unchanged. Capital expenditures have been reduced by $50 million to a revised range of $800 million-$900 million, primarily due to timing of Series 6 spend and reductions in non-Series 6 CapEx.
As a result of the higher operating cash flow and lower capital expenditures, we're raising our net cash guidance by $200 million to a range of $2.2 billion-$2.4 billion. Our shipment guidance range has been lowered by 100 megawatts to a revised range of 2.8 gigawatts-2.9 gigawatts to reflect the 200-megawatt reduction in Series 6 shipments, partially offset by an increase in Series 4. Finally, turning to slide 12, I'll summarize the key messages from our call today. Firstly, while there have been immediate impacts to module pricing in international markets from the recent policy decisions in China, we remain focused on executing our strategy. Our differentiated technology in Series 6 products, our strong contracted bookings, and our unique financial strength allows us to thrive even in market conditions that may prove challenging for competitors.
Secondly, whilst our second quarter results were impacted by Series 6 ramp-related issues of module availability, factory throughput, and higher cost per watt, we've maintained our earnings guidance for 2018 and do not foresee these issues having longer-term impacts to Series 6 cost, efficiency, or capacity. With module wattage that is currently at 420 watts on our top bins, improving throughput levels at a third factory that is expected to start production later this quarter, we're encouraged by the positive Series 6 momentum. Lastly, we continue to make solid progress in booking new business, as evidenced by the approximately 900 megawatts of new volume contracted since our prior earnings call, and total future contracted shipments of 10.9 gigawatts.
In particular, with recent PPA awards, we continue to make good headway in building a systems portfolio that we expect to average approximately one gigawatt per year over the next few years. With that, we conclude our prepared remarks and open the call for questions. Operator?
As a reminder, it is star one to ask a question. We will take our first question from Paul Coster with JPMorgan. Please go ahead.
Good afternoon. Thanks for taking our questions. This is Mark Strouse on for Paul. I'd like to start with, so you disclosed you booked a little less than one gig since the last earnings call. Are you able to say what the bookings have been since the Chinese policy announcement change? Maybe if you can't give details on that, just anything high level you can say regarding customers potentially holding off on projects, just waiting to see what the floor and pricing ultimately will be.
Yeah. If you look at what we highlighted in the earnings presentation deck, just from the end of the quarter, since June, so we're 26 days into it, we've booked 400 megawatts of volume. The 900, 400 was booked in the month of July. The 500 before that, a high percentage of it also was booked in the month of June. There was only about a month between our last earnings call and when the policy decision was made, which effectively was May 31st. We have been continuing to see good momentum. I actually was dealing with our head of sales, chief commercial officer today, and he's got customers in and given us a list of opportunities which they need modules for, and we're actively engaging in that conversation for hundreds of megawatts with this particular customer.
I haven't seen, at least at this point in time yet, a meaningful slowdown. You can also see it in our mid to late-stage opportunities. As we've highlighted, we still have over 8 gigawatts of opportunities sitting there. That hasn't come down. We're seeing a lot of opportunity on the PPA side. We're bidding actively. We're seeing a number of PPAs, particularly here in the U.S., relatively successful on what we've seen so far. Obviously, it's a very competitive environment for PPAs on the development side, you're not going to have a very high hit rate, but relatively pleased with that activity. We are putting some points on the board, as we highlighted on the call, of 750 megawatts or so far on the development side.
We've got a number that we've been shortlisted on, we're in active negotiations with customers to finalize some PPAs that we'll hopefully be able to report on the next earnings call. Generally, it's still been pretty good. Now, that's the U.S. market. As you get outside the U.S. market, I would say there's probably more of a pause of wait and see maybe a little bit. Clearly, after the announcement was made, we saw ASPs drop very quickly. We started to see them stabilize a little bit. Clearly, there are some customers now that probably will wait and sort of see what plays out over the next couple of quarters and kind of see where PPA prices go. The nice thing about us, we don't necessarily have to engage.
If we have an opportunity with a module in an environment that we're very well-positioned because of energy advantage with our temperature and spectral response advantages, we'll engage opportunistically and selectively, we'll make sure we get the right ASPs. We're in a good position right now relative to the uncertainty of the market.
Our next question will come from Philip Shen with ROTH Capital Partners.
Mark, Alex. Thanks for the questions. In your prepared remarks, you guys had talked about some issues with throughput and yield. Wanted to see if you could provide a little bit more color on each. As it relates to the throughput, you talked about Ohio, I think, being at 60% and Malaysia being at 40%, and I know you plan to be at 100% by year-end, or at least that's what it sounded like based on what you had been saying. Could Ohio or Malaysia be at 100% earlier? Could we see that perhaps in Q3? It sounds like it's a framing back-end issue there. As it relates to yield-
It is
sorry, Mark. You had mentioned that the fleet average is 415 watts now. Do you expect the fleet average what do you expect it to be in Q3 and in Q4? How do you expect your efficiencies to progress? We had been, in some of our checks, seeing that you're actually perhaps improving faster than expected, but wanted to get a feel for if there's a step function change that we could see ahead, or should we expect a more kind of continuous kind of gradual improvement here?
Yeah. I'll take the throughput question first. Again, the issue that we're having is really around, it's the back end, and it relates to the availability of the tool set. When you look at the tool set, and if you say, what are the most critical components to ensure full entitlement of the nameplate capacity that we need to achieve, there's really three components. When I look at it from the standpoint of in order of importance, the first two and most important is really gonna be cycle time on the tool and performance on the tool. Those are critical.
If we aren't hitting cycle time, if we aren't getting the performance out of the tool, there isn't a lot that we can do to try to help enable that other than redesign the tools or other issues that we have to think about to sort of address both of those. Cycle time and performance around the tool set from the front end all the way through the back end is at or better than our expectation. That's extremely important. The third component that we look to for the tool set is the overall availability. The overall availability at mature state, well, specified capability around the tool, we believe the overall availability will still enable us to get to where we need to, but we're not at a mature state yet with the tool set.
The way we manage through that is we're putting buffers into the back end of the manufacturing process. Think about it as we have a single point of failure on the production line today. If that tool goes down, everything upstream is shutting down, and we're starving the downstream processing. That tool is critical because it's a single point of failure. We have to have the availability, we've identified where those points are, what we're going to do is we'll buffer it with inventory. If a particular tool goes down, we aren't starving the balance of the production line. We can continue to run the production as an example.
When I look at the tool capability, if I look at Perrysburg as an example, we've had a number of times where we are running at effectively 90%-100% of nameplate capacity at that particular time, and we measure it in hour increments. We'll look at hour increments of production, and we'll say, what is the output that we achieved during that particular hour? We can have multiple hours, two, three, even four hours, where we're running effectively at nameplate capacity, something goes down. As soon as that single point of failure occurs, you'll see the production go from almost 100% of capacity down to 20% of capacity.
That's what we're working through, we've redesigned, we've put some buffers in the back end of the line that will help address that and will enable us when we do have an event occur, as we continue to ramp up the tool set availability to its full entitlement, that we won't have the adverse impact that we're seeing right now as it relates to throughput. We're working through that right now. We won't have all of the buffers and the inventory in place until probably end of Q3, more or less the beginning of Q4. We will continue to see a little bit of headwind, that's why we've reflected that in the reduction to the production plan. Once we do Perrysburg, we'll replicate all that as we roll out into Kulim and Vietnam. That's the story around throughput.
We will get to where we need to be at the end of the year. It is just a matter of addressing the issues that I highlighted. As it relates to efficiency, we are starting to touch a 425 W bin, which is really important. We will continue to see from the average right now of 415, we will see that step up and then to 420, and then ultimately up to 425 to get closer to the average. I will say one thing, though, that the impact of the throughput, we have not prioritized. We refer to them as ETAs, so engineering tests that we do. We have prioritized throughput to ETAs, and ETAs will also be helpful as we optimize and drive efficiency up.
We have not got the full foot on the gas pedal yet on all the activities that we need to do to drive the efficiency side of the equation because, again, we are prioritizing the throughput over running some ETAs that will help us on the efficiency side. Again, steady progression, really happy with 415, progressing towards 420 as we get into the next quarter. Love the fact we are starting to touch 425, that is how we ought to think about as we move through the balance of the year.
Our next question will come from Brian Lee with Goldman Sachs. Please go ahead.
Hey, guys. Thanks for taking the questions. Maybe the first one is just on the manufacturing. Given the pricing collapse you referred to, Mark, and the fact that Series 6 is pricing higher than Series 4, just wondering if it makes sense or if you are contemplating any shifts, specifically to Malaysia 1, the one facility you have not committed to a timeframe for shifting from Series 4 to Series 6. Does that potentially get accelerated and come offline sooner given the cyclical dynamic we have here? Then just a follow-up would be around just cost competitiveness here. Again, on that same topic, we are seeing global module ASPs trending toward the mid $0.20 per W range.
I think there's a general assumption in the marketplace that your targeted cost per watt for Series 6 will be in the low $0.20s per watt when fully ramped in mid to late 2019. Correct me if I'm wrong on the timing, what are you thinking in terms of what your cost advantage versus peers looks like given real time pricing? Has that potentially shrunk versus your original base case assumptions?
I'll just talk through on the prioritization, how we think about Series 4 production and Kulim 1.2GW. We are continuing to reassess and evaluate, not for the horizon through 2020. Where we're looking and spending time on is how do we best position the most competitive posture that we can have as we enter into 2021. What we're thinking through is what are all the critical dependencies, knowing the uncertainty that 2021 could have. As we continue to book our volumes up through 2020, we're looking across that horizon out beyond 2020 into 2021 in particular. Ideally, we're going to want as much Series 6 production as possible. Scale's going to be important. We got to get to the efficiency and the cost entitlements where we need to be, and Series 6 is going to be a critical enabler of that.
As we think through those various levers, we'll continue to evaluate our concurrent commitment around Series 4 and the timeline at which we'll run production, in particular Kulim 1.2GW, relative to opportunity to drive more Series 6 volume into 2021. Still to be determined. We haven't made any conclusions. We're happy with what we have booked for that business right now, for that volume. We'll continue to evaluate that. Again, more from how do we best position ourself for success long term into 2021 and beyond. As it relates to cost competitiveness, what we assumed when we did our analysis, I also want to make sure that when you think about that $0.25 number that you referenced, you got to add $0.02 or so, compare that to our $0.20 or what people think the numbers are, the low $0.20s, right?
You take $0.02 off my number. I don't care how you look at it, right? If it's 25 for them, we're at 18, or if you're targeting us at 20 and their 25 becomes 27. Make sure that's into your map. A lot of times people don't always include the logistics cost and the warranty cost. That number is relatively in line, maybe $0.01 or $0.02 lower than what we had assumed when we did our business case around Series 6 and where we thought we could get in the competitive position that was great for us. The other side of that equation, you got to keep in mind, is the energy upside. We'll capture and we'll be cost advantage, and we'll have the energy upside, and we'll capture the value on that side of the ledger as well.
Yeah, we're positioning ourself for long-term success, and we're very happy with what Series 6 will enable for us.
Our next question will come from David Katter with Baird. Please go ahead.
Hi, this is Ben for David. How are you guys?
Hey, Ben.
I just wanted to make sure I heard something correctly. You said that you signed the new bookings, which were small, and maybe you can talk about why they're, I guess because they're so far out in the future, but they were at the same ASP as what you booked before Series 6. Is that what you said?
Ben, it's really hard to hear what we said. The comments I made in my prepared remarks were the bookings that we're seeing right now on year-to-date on Series 6 is about 6% higher than what we have booked on Series 4. Think about it's adding $0.02 or so, right? If you think about where the ASPs are. The ASPs on Series 6 is about $0.02 or so higher than Series 4. Remember, Series 6 is about 40% lower cost. When you combine the two and you look at the margin entitlement, the fact we're capturing the upside on ASP, which we knew we would with the larger form factor and quality of the product, and still enable that lower cost entitlement, I think we're very happy with what we're seeing so far.
The other thing I said is that the ASPs that we're recognizing in 2018 are essentially consistent with what we recognized in 2017, the volume that we're booking this year is carrying us further out. We're booking 2018 volumes that are carrying us into 2020. We didn't book as much volume in 2017 for 2020 shipments. As you would normally expect, as you go further out in the horizon, ASPs would trend down a little bit. I'm very happy that we've got a relatively consistent ASP in 2018, similar to what we have in the 2017, and we carried that profile of shipments all the way through 2020.
Our next question will come from Jeffrey Osborne with Cowen and Company.
Yeah. Good afternoon, guys. I have two questions. One, I was wondering if you can just address the impact of the ITC extension for both your pipeline and your customers, then any comments on either debookings or contract renegotiations that your customers have with you.
Yeah. I guess on the ITC extension, look, we think it's probably a positive in the long run for the system business. I think in the longer term, it may delay some of the utility ownership of solar, as you're going to see a continued competitiveness of PPAs with ITC versus utility-owned generation and rate basing. Therefore, you're going to have a delay of a transition, which may actually delay what could be a longer, more optimal capital structure, moving away from tax equity, which is less efficient and more expensive owed to a more traditional infrastructure financing option. I think in the short term, yeah, we see it as a positive.
As it relates to the customer and the contracts, nothing new there in terms of what we said before. There are obligations between both parties. There's security associated with it. There's termination penalties associated with it. I think we looked at it again. I think over 90%-plus, 95, maybe higher than that, of our contracted pipeline of module sales, which I think is around 8 gigawatts, all has security associated with it. Again, I think the spirit at which we negotiated these contracts with our customers was, again, somewhat of a risk-sharing and an understanding of fair economics that would enable their projects to be successful. That's the way we're moving forward, and our customers are honoring those obligations as well.
Our final question will come from Colin Rusch with Oppenheimer. Please go ahead.
Thanks so much for sneaking me in. Could you talk a little bit about the competitive dynamics in the development business, particularly as it relates to integration of energy storage and what you're seeing in terms of pricing from your competitors and how difficult it is to close projects at this point?
Yeah. Development, obviously, it depends on where you are. It depends on how the RFP is structured. It depends on what bid bonds have to be posted in order to bid, what dollars are at risk. The tenor of the PPA, a 15-year versus 20 or 25. Every opportunity on the development side can differ relative to its attractiveness and relative to its competitiveness, relative to how aggressive things can be. We've got to be very selective in that regard, because you can get into certain opportunities where you've got developers, especially if it's a free option and you've got developers that are just going to make crazy assumptions around the install cost, or they're going to assume some huge hockey stick on a merchant curve.
A merchant curve may have an assumption of a carbon tax embedded in it, or it may have an assumption of storage already incorporated, even though the asset doesn't have the capability to create firm power. There's all kinds of dimensions and flavors that can happen that are out there that can really drive some really aggressive assumptions, with developers only worried about is capturing that PPA and flipping it to somebody else and then let them worry about it over the long run. They make their money, and they move on, right? It can be very competitive, and we've got to be very selective with where we play and how we play, and site selection and interconnection positions can be critical at times.
We have been selective, and that's also why I said in my comments that I don't want a very high win rate on development. If we're winning a very high percentage of development, we're probably taking on a lot of risk, and we don't want to do that. As it relates to storage, again, given what's going on and where you hear, similar to the deal that we did with APS, other deals that are happening with Xcel in Colorado and some of the views of PV plus storage and the capability of time shift and creating firm power, it's becoming more and more mainstream in most of the utility RFPs that we're doing. Whether it's a PPA or whether it's rate base or whatever else it may be, it's becoming more and more commonplace, and we would expect that to happen.
That's a good thing, because now it just further expands the market opportunity for storage. We still believe that there can be an interim step that with creating flexible storage using design reserves, capabilities that we have, that you can actually have a much higher penetration of PV before you get into serious issues and need for storage. We're giving the utilities a choice. We can demonstrate flexibility, and we've done a work recently with a consultant with one of the large utilities, and we've demonstrated to them the full capabilities of flexible PV and how it can obviously drive down operating costs. I think that was an insightful study that was done. We're hopeful we can actually make that a public announcement here near term.
I think other utilities will open up their perspectives around PV and whether they go straight to storage or go more to a flexible storage platform with design reserve, the options will be there.
Ladies and gentlemen, this does conclude today's conference. Thank you all for your participation. You may now disconnect.