Good afternoon, everyone, and welcome to First Solar's Second Quarter 2020 Earnings Call. This call is being webcast live on the Investors section of First Solar's Web site at investor. 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 Mitch Ennis from First Solar Investor Relations. Mr. Ennis, you may begin.
Thank you. Good afternoon, everyone, and thanks for joining us. Today, the company issued a press release announcing its Q2 2020 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 Alex Bradley, Chief Financial Officer. Mark will begin by providing a business technology update. Alex will then discuss our financial results for the quarter as well as our outlook for 2020. Following the remarks, we will open the call 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, including among other risks and uncertainties, the severity and duration of the effects of the COVID-nineteen pandemic.
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?
Thank you, Mitch. Good afternoon and thank you for joining us today.
We continue to hope each of
you are managing well as the pandemic continues. As we emphasized during our May earnings call, our COVID-nineteen response centers on balancing our top priority of safety with meeting our commitments to our customers. This approach, together with our associates' dedication and the strength of our differentiated business model, enabled us to deliver solid financial results for
the 2nd quarter and year
to date with earnings of $0.35 per share and $1.20 per share, respectively. Alex will discuss our results in greater detail. Starting on Slide 3 with our module business. We remain pleased with our operational performance with strong metrics across the board. Year to date, we have produced 3.5 gigawatts, including 3.3 gigawatts of Series 6 modules.
Fleet wide capacity utilization has remained over 100% for the month of May, June, July. The fleet wide capacity utilization is led by our international factories in Vietnam and Malaysia, which are progressing towards their previously demonstrated capacity utilization peak of 120% of initial design nameplate. Domestically, our Ohio 1 and 2 factories experienced 2.5 days of idle production in June, but still achieved respective utilization rates of over 100% 94% during June. The unplanned downtime was caused by railroad logistics constraints, which resulted in a delivery delay of certain bill of materials supply. As a result, we accelerated previously planned factory upgrades from the Q3 to minimize any impact to our full year production plan.
On a fleet wide basis in July, megawatts produced per day was 15.9 megawatts, manufacturing yield was 96.4 percent, average watts per module was 4.35 watts and the arc from 4 30 to 4 40 modules was 98%. Vietnam had a particularly strong start to the quarter with capacity utilization of 114% and manufacturing yield 100 basis points above the fleet average. We are encouraged by the operational start to the quarter and the momentum it provides to further improve our cost per watt. Regarding our capacity roadmap, we remain on track to commence commercial production at our 2nd Series 6 factory in Malaysia in the Q1 of 2021. However, 3rd party equipment installers as well as our U.
S.-based associates are subject to international travel restrictions as a result of COVID-nineteen. While we continue to work with relevant agencies to support this essential travel in a safe manner, incremental delays resulting from these restrictions may impact the timing of initial production. Since the previous earnings call, we have not experienced any significant operational disruption from our suppliers' inability to maintain manufacturing operations. Much of our ability to mitigate this impact to date stems from our supply chain strategy, which emphasizes corporate and geographic diversity of supply. In certain situations where we source critical raw materials from a single vendor, we ensure the product can be manufactured in multiple geographies.
From a shipping and logistics perspective, the most significant impact to date is the consolidation of shipping routes, which has resulted in constrained capacity. We have factored this into our logistics strategy and are working to mitigate these impacts. Separately, foreign congestion has recently improved in Europe and the United States, although we continue to monitor this risk. Turning to our systems business on Slide 4. Our EPS results were favorably impacted by the successful sale of our 123 Megawatt American Kings project.
We are pleased with this result, capturing competitive market value for this project despite capital market dislocation. From an EPC perspective, in July, we declared substantial completion on the last remaining project being constructed by First Solar EPC. This project has experienced the combination of unforeseen weather and COVID-nineteen related delays and incurred significant additional costs during the quarter, which unfortunately weighed on our Q2 results. Alex will later discuss the P and L impact as well as provide an update on the capital markets for system projects. With regards to our U.
S. Project development business, as discussed on our Q1 earnings call, COVID-nineteen had affected the timing of our evaluation of of that the market is now in a better position to evaluate potential partnerships, sales or other transactions. Accordingly, in June, we formally launched this process. We do not intend to discuss further developments except to the extent the process is concluded or is otherwise deemed appropriate. With regards to our O and M business, during the Q3 of 2019 earnings call, we indicated that we are evaluating the long term structure, competitiveness and risk adjusted returns of the business.
In addition, during our Q4 2019 earnings call in February 2020, we discussed that we were continuing to evaluate our O and M strategy to ensure that this business is able to achieve its full enterprise value potential and continued market leadership. Our original interest into and continued presence in the O and M market was a natural extension of our utility scale solar development and EPC capabilities. It helped create a vertically integrated systems platform, which allowed us to capture an additional profit pool. However, with our transition to a third party EPC execution model, increase in maturity of the U. S.
Solar O and M market and our evaluation of strategic opportunities for our U. S. Project development business, the strategic thesis behind our O and M business has changed. From a financial perspective, as we indicated during our December 2017 Analyst Day, our contracted O and M gross margin at the time was above 30%, largely as a function of legacy contracts. We also indicated that as we expected gross margin for new O and M business to decline to a range of 10% to 30% depending on the risk profile and the contract tenure.
Relative to this expectation, with increased competitive pressure and declining PPA prices, we have seen new contracts trend towards the lower end of this range. While we have been able to partially offset the impact of this gross margin percentage decline by increasing the scale of our O and M portfolio In order to further optimize the business and maintain our market leading position, we would need to continue increasing the business scale as well as enhancing the range of O and M product and service offerings. To justify incremental capital investment in O and M, the financial returns would need to exceed those available from further investment in our module business. Earlier this year, we received a compelling unsolicited offer to acquire our North American O and M business from Nova Source Power Services, a portfolio company of Clarabas Group, a strategic investor who is scaling a market leading solar O and M platform following their recent acquisition of SunPower's utility scale O and M business. We believe their strategy for scaling and growing the business will enable the O and M Enterprise to reach its full potential.
Accordingly, this week, we signed an agreement to sell our North American O and M business. We believe this transaction captures compelling value, will maintain our history of high quality customer service and with additional scale and capital will further enhance the capabilities of the business. Upon closing of this transaction, which is expected by year end, approximately 220 First Solar O&M Associates are expected to join NovaSource Solar O and M platform. Turning to Slide 5, I would like to highlight our bookings and shipment activity for the quarter. In this challenging economic environment, demand for Series 6 product remains strong.
Since the prior earnings call, our net bookings are 0.8 gigawatts. These new bookings include approximately 0.3 gigawatts of 3rd party module sales and 0.5 gigawatts of systems bookings. In addition, 0.4 gigawatts of these bookings are for delivery in 2022. Despite our success in booking these additional volumes in the U. S, we believe the current uncertainty of tax equity availability for projects scheduled for completion in 2021 and beyond as well as the uncertain status of the legislative solution, such as the ability to receive direct cash payments in place of direct investment tax credits to alleviate this tax equity availability constraint is a headwind impacting our ability to book certain opportunities in late stage negotiations.
We currently have approximately 0.9 gigawatts of opportunities in late stage negotiation with terms, pricing and conditions near final agreement. We believe the current uncertain tax equity environment has contributed to the delays in finalizing these negotiations and accordingly has delayed our ability to book these volumes. Note, although not booked, these volumes are reflected in our late stage opportunity pipeline. Strong Series 6 demand coupled with First Solar's strength as a trusted partner underlines our current bookings and late stage opportunities, which when combined total 1.7 gigawatts. During the Q2, we shipped 1.2 gigawatts, which was approximately 3 9awatts below our expectations.
Delays in shipments were due to a combination of previously mentioned port congestion, project site labor constraints and interconnection and financing delays. After accounting for 2nd quarter shipments, our contracted backlog remains strong with future expected shipments of 11.9 gigawatts. Our ability to forward contract module supply creates a position of strength, which enables pricing discipline and helps to mitigate the financial impact of variable spot pricing for solar modules. We remain effectively sold out through 2020 with only 2 gigawatts left to sell at our expected 2021 supply with a 'twenty one mid to late stage pipeline of 3.8 gigawatts, which includes the previously mentioned 0.9 gigawatts in late stage negotiations, We have a path to fully contract our 2021 supply plan over the next few quarters. With regards to our systems booking in July, we were awarded 2 PPAs for projects located in Ohio and North Carolina that support the clean energy needs of a Fortune 500 company starting in 2023.
Separately, building out the recent PPA we signed with Dow prior to the Q1 earnings call, we continue to see strong demand from corporate customers who are becoming increasingly proactive in reducing their carbon footprints. As American Solar Company, we're proud to support the renewable energy objectives of corporations with our Series 6 technology, which has the lowest carbon and water footprints available in the market today. As a reflection of this sustainability leadership, we are pleased to announce earlier today our commitment to the RA-one hundred initiative joining the likes of Apple, Facebook, Kellogg and Microsoft, all customers of clean energy generated by First Solar Technology. In joining this initiative, we are targeting powering all of our U. S.
Operations with 100 percent renewable energy by 2026 and our global operations by 2028. As shown on Slide 6, our mid to late stage pipeline of opportunities remains robust and has increased by 0.3 gigawatts despite bookings of 0.88 gigawatts since the prior earnings call. In terms of segment mix, this opportunity pipeline of 7.8 gigawatts includes approximately 7.3 gigawatts of potential module sales, with the remaining represent potential systems business opportunities. In terms of geographical breakdown, North America remains the region with the largest number of opportunities at 5.9 gigawatts. Europe represents 1.7 gigawatts and the remainder in Asia Pacific.
As a reminder, a mid to late stage pipeline reflects those opportunities we see sales can book within the next 12 months and is a subset of a much larger pipeline of opportunities, which total 15 gigawatts of opportunities in 2022 and beyond. Turning to Slide 7, I would like to provide an updated manufacturing cost and technology outlook. Overall, I'm very pleased with our manufacturing execution, especially in light of the current environment. Much of our ability to thus far mitigate the operational impact of COVID-nineteen from our proprietary manufacturing technology, which enables us to produce a cattail module within a single factory in a matter of hours. Our fully integrated manufacturing process is a competitive advantage relative to crystalline silicon technology, which is manufactured over the course of several days across multiple sites.
While we have largely mitigated supply chain disruptions to date, the impact of pandemic experienced in other industries underscores the importance of supply chain diversity. As the only U. S.-based company and only alternative to crystalline silicon technology among the 10 largest solar module manufacturers globally, First Solar provides a domestic supply security and enables the United States and global markets to ensure to reduce their over reliance on imported and government subsidized panels from China. As we look to the future, we believe a differentiated technology and advantaged cost structure and a balanced perspective on growth will enable us to continue succeeding in the global marketplace. By the end of 2021, we expect to have 8 gigawatts of Series 6 nameplate capacity across factories in the United States, Malaysia and Vietnam.
Note this capacity is over 120% higher than the original nameplate envisioned when we launched Series 6. We evaluate the potential for future capacity expansions, we may seek to further diversify our manufacturing presence, although we have made no decisions at this time. Several factors in this evaluation include, firstly, geographic proximity to solar demand where First Solar has an energy or competitive advantage and which could mitigate freight related costs. Secondly, the ability to export costs competitively to other markets. Thirdly, cost competitive labor, low energy cost and low real estate cost and finally, a cost competitive supply chain of raw materials and components.
From a cost perspective, we previously indicated during our December 2017 Analyst Day that we expect to reduce our 2020 lead line cost per watt by 40% relative to the Series 4 2016 cost per watt. We have achieved this target at our Vietnam manufacturing sites and on track to do so in Malaysia by the end of the year. Our Series 6 factory in Vietnam, which to date have been largely unaffected by the COVID-nineteen pandemic, are a strong leading indicator for the full potential of the entire manufacturing fleets. Secondly, we indicated that despite an increase in the proportion of module volume coming from our higher cost Ohio factories relative to where we ended up 2019, we expect our fleet wide cost per watt to decline approximately 10% over the year. Despite the unforeseen challenges posed by the pandemic, we remain on track to achieve this objective.
We continue to believe there is significant headroom and further enhance our competitiveness in our Series 6 technology, and we relentlessly challenged ourselves on commercializing the next generation of disruptive ThinSim technology. Simply put, we continually strive to accelerate our pace of innovation in pursuit of our near and mid term technology objectives. In the near term, we are focused on successfully implementing our copper replacement program in our lead line during the second half of twenty twenty one and fleet wide during 2022. This implementation is expected to further increase the Series 6 energy advantage due to increased wattage, significantly reduced long term degradation and improved temperature coefficient. Each of these improvements is expected to create value for our customers, which will facilitate Series 6 bookings in 20222023 with the module bins increasing from 4 60 watts to 4 80 watts over this period.
Of note, in July, we produced the 1st copper replaced Series 6 modules, which will be utilized for initial preliminary testing and validation. While we remain largely on track for our implementation, COVID-nineteen and technical challenges remain as a risk to the project completion timeline. In the midterm, we remain focused on achieving our goal of a 500 watt module, which is at a standard test condition glass area efficiency of 20.8%. This technology enhancement will further increase the customer value proposition and cost competitiveness of Series 6. It is important to note, unlike recently announced increases in crystalline silicon wattage made possible through module size increases, the planned Series 6 wattage increase is expected to be driven by a 15% increase in energy density without changing our model form factor.
In other words, we do not see increasing our customers' balance of system or design costs in order to achieve the 500
watt goal.
Additionally, the benefits of improved temperature coefficient and significantly reduced long term degradation, coupled with our continued spectral response advantage, will amplify the benefits of increased energy density and are expected to increase lifecycle energy beyond 15% without adding cost to the module device. As shown on Slide 8, in support of our near, mid and long term goals, we have recently announced a series of changes in our technology and manufacturing team and leadership. Firstly, Marcus Gluckler has been appointed Co Chief Technology Officer alongside Rafi Garabedian, our CTO since 2012 and will join First Solar's executive leadership team. Marcus will drive our Series 6 platform, device and efficiency improvement roadmap. This will enable Rafi to focus on advanced research and development to create the next disruptive cad tel technology beyond Series 6.
A particular focus will be to evaluate moving beyond a single junction device and leverage the high band gap advantage of CATL into a multi junction device. The objective would be to create a market leading high efficiency technology that remains energy advantage. Secondly, as recently announced, Taimin De Jong, our Chief Operating Officer, has decided to retire effective April of 2021. Taiman has played an essential role in establishing the company's international Series 6 module manufacturing footprint with 5 announced factories currently in production and a 6 on track to commence production during the Q1 of 2021. I'm appreciative of Timon's invaluable leadership and his many significant contributions to First Solar over the years.
Tyler will continue to serve as COO during his 8 month transition period overseeing certain priority projects. In addition, during this transition, Taiman will transfer the majority of his responsibilities to Mike Korylowski, Chief Manufacturing Officer Kuntal Kumar Varma, Chief Manufacturing Engineering Officer and Pat Buehler, Chief Quality and Reliability Officer, each of whom will join First Solar's executive leadership team. We believe the addition of Marcus, Mike, and Pat to the executive leadership team will enhance our manufacturing, technical and commercial capabilities and set the company up for continued growth. I'll now turn the call over to Alex, who will discuss our Q2 financial results and outlook for 2020.
Thanks, Mark. Starting on Slide 9, I'll cover the income statement highlights for the Q2. Net sales in Q2 were $642,000,000 an increase of $110,000,000 compared to the prior quarter. The increase was primarily driven by the sale of the American Kings project, partially offset by lower module sale volumes. On a segment basis, as a percentage of total quarterly net sales, our module segment revenue in Q2 was 58% compared to 74% in Q1.
Total gross margin was 21% in Q2 compared to 17% in Q1. The Systems segment gross margin was 21% in Q2 compared to 11% in Q1, and the increase was primarily driven by increased U. S. Project sales and higher seasonal production from our power generating assets. This was partially offset by $22,000,000 of cost increases stemming from unforeseen weather issues, COVID-nineteen related delays and other matters related to our final EPC project mentioned by Mark earlier.
We intend to pursue recover of these costs by insurance and other forms of relief. The module segment gross margin was 22% in Q2 compared to 19% in Q1. This increase was driven by a lower cost per watt sold despite a higher mix of volume from our higher factories and a slight increase in ASPs compared to Q1. While our total module segment gross margin for the quarter was adversely impacted by $13,000,000 of Series 4 related charges, primarily due to severance, decommissioning and costs associated with reduced manufacturing volumes. Our Series 6 gross margin was approximately 25% in Q2.
This included $3,000,000 of COVID-nineteen related costs, which reduced our Series 6 gross margin by approximately 1%. SG and A and R and D expenses totaled $74,000,000 in the 2nd quarter, a decrease of approximately $10,000,000 compared to the prior quarter. Of note, the 2nd quarter total includes $3,000,000 of severance costs, dollars 3,000,000 of impairment charges related to development projects and $1,000,000 of retention compensation. Start up expense was $6,000,000 in Q2 compared to $4,000,000 in Q1. In relation to litigation matters, as initially slowed on June 3, we entered into an agreement in principle to settle the claims and the opt out action for $19,000,000 resulting in a $6,000,000 litigation loss during the Q2.
We've since entered into a definitive settlement agreement. And while we were confident in the fact of the merits of our position, we believe it was in our best interest to conclude this lengthy litigation process and continue our focus on driving the business forward. Separately, the previously disclosed class action settlement agreement received final approval from and was dismissed as prejudiced by the court at the end of the Q2. By entering into the definitive settlement agreement for the opt out and the class action settlement is dismissed with prejudice, the final securities litigation is behind us. During start up and litigation losses, total operating expenses were $87,000,000 in the second quarter, a reduction of approximately $2,000,000 compared to the Q1.
Interest income was $4,000,000 in the 2nd quarter compared to $9,000,000 in Q1. This was primarily driven by a decline in interest rates, which led to a reduction in the yield on our cash and time deposits. We recorded tax expense of $10,000,000 in the 2nd quarter compared to tax benefit of $89,000,000 in the 1st quarter. The increase in tax expense for Q2 is attributable to the discrete tax benefit recognized in Q1 as a result of the CARES Act and higher pretax earnings in Q2. The aforementioned combination of items led to a second quarter earnings per share of $0.35 compared to earnings per share of $0.85 during the Q1.
Next, turning to Slide 10, I'll discuss select balance sheet items and summary cash flow information. Our cash and marketable securities and restricted cash balance ended the quarter at $1,600,000,000 an increase of approximately $44,000,000 compared to the prior quarter. Total debt at the end of the second quarter was $465,000,000 a decrease from $472,000,000 at the end of Q1. And as a reminder, all of our outstanding debt continues to be project related and will come off our balance sheet when the corresponding project is sold. Our net cash position, which includes cash, restricted cash and marketable securities less debt, increased by approximately $51,000,000 to $1,200,000,000 The increase in our net cash balance is primarily related to cash collections on systems projects in the U.
S. And operating cash flows from our module segment. This is partially offset by capital expenditures and other working capital changes during the second quarter. Net working capital in Q2, which includes non current project assets and excludes cash from marketable securities, decreased by $76,000,000 compared to the prior quarter. This decrease was primarily due to the sale of project assets, a decrease in accounts receivable related to our last remaining in house EPC project and an increase in current liabilities, which includes accrued litigation losses.
Net cash provided by operating activities was $148,000,000 in the 2nd quarter compared to net cash used in operating activities of $505,000,000 in the prior quarter. Finally, capital expenses were $108,000,000 in the second quarter, which brings our year to date total to $221,000,000 as we continue our Series 6 capacity expansion. Turning to Slide 11, I'll next provide an updated perspective on 2020 guidance. As discussed during the May earnings call, we withdrew our full year 2020 guidance that's been provided in February due to the significant uncertainties resulting from the COVID-nineteen pandemic. With a follow-up to that decision, I'd like to discuss how each of those uncertainties has evolved.
Firstly, the number, intensity and trajectory of COVID-nineteen cases has differed across the globe. For example, Vietnam has been relatively fortunate in experiencing national confirmed cases below 1,000. In contrast, the state of Arizona, where First Solar has now reached over 180,000 confirmed cases. The outlook for the spread of individual exposure to the pandemic and the related impact on businesses and the economy in general remains very uncertain. Secondly, since the previous earnings call, local, state and national governments have begun easing certain COVID-nineteen related restrictions.
While we've been committed to operate Series 6 manufacturing in Ohio, Malaysia and Vietnam throughout the pandemic, increases in COVID-nineteen cases have caused some authorities to reimpose certain restrictions, and they may continue to do so or even significantly expand those restrictions. Thirdly, to date, we have not experienced any significant operational impacts from our manufacturing supply chain, although we continue to monitor this risk. From a logistics perspective, port congestion has recently improved in Europe and the United States. However, the most significant impact to date remains the consolidation of shipping routes, which has resulted in constrained capacity. We've incorporated this into our logistics strategy, but to the extent ports are severely congested or are temporarily shut down, our ability to ship modules and receive inbound raw materials may be adversely impacted.
Fourthly, tax equity and debt markets appear intact for high quality 2020 projects as demonstrated by our ability to complete the sale of our American Kings project during the quarter. However, tax equity commitments of projects set to achieve a commercial operation in 2021 appear uncertain. COVID-nineteen has caused a number of prominent financial institutions to book record allowances for credit losses during the Q2, citing a significant uncertainty around the path of recovery. This reduction in profitability may reduce the availability of 2021 tax equity capacity or negatively impact its pricing and terms. Our Sunstream's 2 project, which has not been sold, has an expected completion date in 2021 and will require a tax equity investment during the time frame to be efficiently monetized.
We expect visibility into the 2021 tax equity market to continue to improve. However, to the extent the tax equity market dislocated, we remain strongly supportive of a direct pay legislative solution in place of investment tax credits to alleviate the structural market constraint. Importantly, a legislative solution such as the aforementioned direct cash payment could help mitigate the adverse impact of financing delays resulting from reduced tax equity availability for our 3rd party module customers. Internationally, as it relates to our Japan assets, while we made progress as it relates to the sale proceeds, completing financing, construction and executing asset sales is challenging in this environment. We're continuing to work with relevant counterparties to facilitate the timely success of these project sales.
Given the significant uncertainties that remain associated with the pandemic and its effect, we feel it's prudent to continue providing the guidance metrics that we believe are largely within our control or within reasonable line of sight at this time. With these factors in mind, our 2020 guidance is as follows. Our full year 2020 production guidance of 5.7 gigawatts of Series 6 and 0.2 gigawatts of Series 4 remains unchanged. We have already achieved our Series 4 production target, and year to date, we have produced approximately 3.3 gigawatts of Series 6. No, we do not anticipate any further ramp costs in 2020 above the $4,000,000 recorded during the Q1.
Our operating expenses forecast, which includes production start up expense, has increased by $5,000,000 to a revised range $345,000,000 to $365,000,000 While our production start up expense guidance has decreased by $5,000,000 to a revised range of 40 $5,000,000 to $55,000,000 This benefit was offset by the previously mentioned $6,000,000 litigation losses and $3,000,000 impairment charges related to development Additionally, depending on the timing of previously expected IT cost savings during the year, we may track to the higher end of our operating expense guidance range. Finally, our 2020 Series 6 manufacturing CapEx forecast of $450,000,000 to $550,000,000 remains unchanged. As it relates to our module segment, we anticipate sequential improvement in gross margin percentage during the 3rd 4th quarters. The factors driving this improvement are firstly, a decline in cost per watt as we've largely ramped manufacturing at our second Ohio factory. Secondly, limited revenue recognition from Series 4 during the second half of the year.
And finally, limited incremental severance costs expected during the second half of the year. We achieved a 25% Series 6 gross margin in the 2nd quarter, we expect a relatively flat Series 6 gross margin in the 3rd quarter to have a modest decline in ASPs offset by a reduction in cost per watt. While we expect a flat Series 6 gross margin in 3rd quarter, we anticipate an increase in overall module segment gross margin percentage due to declining Series 4 volumes. The Q4, we expect Series 6 gross margin expansion of approximately 300 basis points due to a lower cost per watt, increased volume sold and a more favorable plant mix. As we do not anticipate recognizing any Series 4 revenue in the 4th quarter, we expect our Series 6 gross margin will represent overall module segment gross margin.
Note, with shipments of approximately 2.5 gigawatts during the first half of the year, our expected shipments profile is incrementally back weighted to the 3rd and 4th quarters. As we continue to work with our module customers to mitigate impacts from the current pandemic, there remains potential for the timing of module shipments to move across quarters all over year end with a corresponding impact to revenue and gross margins. Our $1,300,000 net cash position increased by $51,000,000 in the previous quarter. This liquidity position remains a strategic differentiator, which enables us to make proactive and strategic investments in technology, cost and product leadership during the current market disruption and in the long term. We intend to maintain this strong liquidity position throughout the COVID-nineteen pandemic, and at this time, we do not expect to draw on our revolving credit facility.
Turning to Slide 12, I'll summarize the key messages from today's call. Firstly, we had Q2 earnings per share of $0.35 and increased our quarter end net cash position. Secondly, we achieved fleet wide capacity utilization over 100% during May, June July and have achieved our mid term cost for what target of 40% reduction below our 2016 Series 4 costs at our Vietnam factories. Thirdly, demand for our Series 6 technology remains strong, and we have continued success adding to our contracted pipeline with net bookings of 0.8 gigawatts since the prior earnings call and 2.6 gigawatts year to date. With a contracted backlog of 11.9 gigawatts, we remain effectively sold out for 2020 and have 2 gigawatts remaining to sell on our expected 2021 supply.
Despite challenges related to the COVID-nineteen pandemic, we're pleased with our operational and financial performance, achieving results in line with our pre COVID expectations. And finally, while the significant uncertainty posed by the current pandemic remains, we are updating the guidance provided in our May earnings call, which includes full year 2020 production guidance of approximately 5.9 gigawatts full year 2020 capital expenditure guidance of $450,000,000 to $550,000,000 and full year 2020 operating expense guidance of $345,000,000 to $365,000,000 which includes $45,000,000 to $55,000,000 of start up expenses. With that, we conclude our prepared remarks and open the call for questions. Operator?
Our first question comes from Philip Shen with Roth Capital Partners. Your line is open.
Hey, everyone. Thanks for taking the questions. For the bookings you've secured since last earnings call, can you share how much is for delivery in 'twenty one versus 'twenty two and 'twenty three? And what are the ASPs for the bookings? I think last quarter you mentioned pricing for 'twenty two and 'twenty three was still good in the 30s.
And I think you mentioned in the deck that it's still attractive. So I was wondering if you're seeing some pressure perhaps in the outer years or if you're still able to maintain? And then also, as you think about the bookings in 2022 and 2003 and your cost roadmap, what are your expectations for margins? It's a ways I know, but wanted to just get a sense for if you expect margins to remain stable in that timeframe or perhaps potentially step down with the Section 201 expiring or potentially even see some upside in margins?
Yes, I'll take the bookings ASP and I'll let Alex handle the margin question. So in terms of the bookings between earnings call, which is basically 0.8 gigawatts, 400 or so of that was with our systems business, which would be for shipments in 2022 and then the rest effectively is 2021. But what I would expand beyond that, Phil, and we try to highlight in the call, we have about 900 Megawatts that sits in effectively final stage negotiations, in some cases ready to sign a PO, in some cases subject to some CP, in some cases a letter of intent with exclusivity, locking in the module volume and the module pricing. So against that 900, we've had to bring pricing on all that. It's just, again, there's with the uncertainty and these are all 21 shipments, with the uncertainty of the availability of tax equity, with the uncertainty with any type of legislative fix, direct pay type of structure, people are being a little concerned around locking in firm contracts and leaving certain some amount of CPs open to allow them enough time to assure financings in place and alike associated with the project.
These are projects that are committed. These are projects that have PPAs. They're sites. They're ready to go. They're just finalizing some of the financing components to ensure they have everything locked and loaded around the project.
If you include those projects, those projects also have pre annual ASPs. So if you look at the volume that we have for module only, it's about 300 or so 400 or so for 2021 plus that additional 900, they all are still very solid ASPs. We are in a vantage situation from the standpoint, as we said, we only have about 2 gigawatts left to book. Our customers know that. There are biases and preferences to do business with First Solar and certainty of supply and ability to deliver.
And so we have customers engaging with us proactively so we can lock up that supply. So if I lock up that 900, right now, it may state negotiations, I only have about a gigawatt left for 2021 and our customers want to ensure that security and get that in place for that supply. So my ASPs are still holding reasonably firm. We're happy with the ASPs. Behind those, there's 2 more follow-up orders that almost get to a gigawatt that are associated with that 900 veteran late stage negotiations with 2 separate customers.
They have follow on commitments they would like to make in 2022. So I can give you a feel of where that pricing is right now. It's in line with what we said in the last call. We had a large order, which had carried volumes into 2022. It did have a 2 handle within the high 2s.
It also had adjusters for bins, it had adjusters for module degradation if we do better than we had guided to. So I look at what we have for last quarter that was booked plus what we currently are engaged in the market with around pricing in 2022. We're still pretty happy with how that's shaping up. A lot of things can move and change. Clearly, there's got to be some solution to tax equity and capacity because that's going to constrain the market, could have adverse implication around projects.
But at least from the bookings and relative ASPs, we're pretty happy given the challenges in the current environment, pretty happy with what we're seeing.
Yes. Phil, on the cost side, on the margin side, the long way out, as you said, to be giving you guidance around gross margin. But if you try and think around the cost piece, at the beginning of the year, we said we were looking at a 10% reduction in cost over 2019 to 2020 year end to year end, and we said we're on track to do that. We also said that we expected by year end to achieve the Series 4 minuteus 40 percent cost reduction target we initially stated back in 2017 at our high volume manufacturing. We've actually already achieved that By mid year at our Vietnam factory, we're tracking well to do that in Malaysia as well.
And remember, that number includes freight and warranty as well when you're doing a comparison around those numbers. So cost reduction going pretty well so far. And then if you go back to the slide we showed in our guidance call back in February, we gave you a chart that showed a lot of levers around cost reduction. A key one is our CURE program, which is going to be increasing wattage. And in Mark's prepared remarks, he talked about bringing it up from 460 to 480 in that 20 2, 20 23 timeframe.
And we're doing that with a module that's the same size. You're actually getting increased energy density versus some of what you're seeing in our competitors today who are announcing very large nameplate watt numbers, but actually on an efficiency basis seeing almost no improvement. It's just a significantly larger module. So our CURE is really important to getting us there. CURE is important from nameplate losses, so improves degradation overall energy profile.
So when we look through that, we think that helps us bring cost down, but also negate some of the bifacial threat that we've seen. But that's only a couple of the levers. And if you look through that chart I mentioned, we talk about yield throughput, efficiency, bill of material, sales rate. And if you do the math on the chart there we gave, it's still directionally accurate, you get to a point where we can bring costs down significantly over the next few years. So I can't guide you to your gross margin percent at this point.
But given what Mark said around where we're seeing ASPs and we're comfortable with those, we're tracking towards the cost reductions that we discussed earlier in the year. I'm comfortable with where we have seen gross margins coming out on those longer days of bookings.
Our next question comes from Brian Lee with Goldman Sachs. Your line is open.
Hey, guys. Thanks for taking the questions. I guess first one on the gross margins. The sequential improvement for Series 6, not to get to sort of nickel and diming here, but is the baseline 25 percent that you reported this quarter, which includes the $3,000,000 of COVID related costs, are you assuming those costs come off in the back half and so it's a 300 basis point expansion in Q4 over a clean 26% baseline? And then I guess related to that, are there any more ramp costs embedded in COGS in Q3 and Q4 that further go away in 'twenty one?
So as of now, there's no ramp costs in Q3, Q4. The only ramp that we saw is $4,000,000 in Q1, and that's the full expected ramp for the year. In terms of the expansion, it's still unknown. I mean the number we're giving you here assumes we may still have some COVID related costs impacting us in Q3 and Q4. So I think you can look at it really as a $300,000,000 improvement from the $25,000,000 as a starting point.
Our next question comes from Michael Weinstein with Credit Suisse. Your line is open.
Hi, guys. Hey, can you hear me all right?
Sure.
Okay, great. You mentioned that Raffi is going to be working on advanced research and development to create the next disruptive technologies beyond Series 6. Is there some preview of that you could talk about at this time? And are there limits, to the levels of efficiency that you can get out of the technology?
There's lots of headroom still to go on the efficiency side and the title that's around our cad tel device. Ravi, for those of you who may not remember or are aware of, Ravi joined the company a decade or so ago. He really joined us as part of our advanced research team and he at that time was leading our efforts to evaluate alternative thin film materials such as SIGS. His core competencies around understanding really all of the semiconductor devices and PD in particular, whether it's crystalline silicon, whether it's perovskites, whether it's CATL, whether it's CIG, all different devices, Rafi has got a deep knowledge and understanding on. So when we look beyond the current device in Series 6, one of the things that we are looking to is one of the inherent advantages that we have with CATL is that from very high band gap, which means that it captures a significant amount of the sun spectrum, the light, the sun spectrum light.
And there's a lot of evolution that could happen with device or technology and there's some that's being done in aerospace where you create a single junction or to a multi junction type of technology, whether it could be a combination of different types of technology, 2 different types of thin films, maybe even could be thin films with crystalline silicon as an alternative. So one of the things that Rafi is going to be looking at is not only existing materials, there could be organic PV that he would be looking at as well, different solutions that are evolving, perovskites, could be looking beyond just a single junction into a multi junction type of device. So it's really just evaluating the world and the spectrum of what they are to the possible and then how do we leverage what we currently have and evolve that beyond what our current capabilities are around the technology. So that's primarily what Rafi is going to be focused on.
Our next question comes from Ben Kallo with Baird. Your line is open.
Hey, guys. Following on a previous question from an analyst, just about costs, ramp costs, anything associated with Series 4 ramp down? And then number 2, how do you sell your O and M business, but then your development business, how do you sell that first before the development business just in the market? And then number 3, just looking at your exit rate for saying that you have 2 gigawatts to sell in 2021, what does that assume for your total production? Because I think it's higher than your nameplate.
Thank you.
So the first, I'll take the O and M question and then the in terms of the 2 gigawatts or 21 relative to what the assumption is for the supply plan. And then Alex can talk about kind of ramp costs in general and then also decommissioning costs related to Series 4. Ben, look, on the O and M business, especially now that we no longer have the EPC capability, we've moved to a 3rd party, We've kind of separated the development business from the O and M business. And the reason I say that is that a lot of the EPC providers that we engage with also want to provide O and M. So now we created kind of a competitive tension around captive development with maintaining the O and M even though we're using a 3rd party to do EPC.
The EPC wants to somewhat they have guarantees and other warranties that they provide post COD and they also a number of them would prefer to do O and M for that horizon. And some want to do it strategically longer term. So for us, because of the separation of EPC from the development business has created this natural separation between development and O and M. So it's not as unnatural as it may appear. It may be unnatural from how we first evolved.
As we said, there's the capabilities and cycles of innovation that's evolved in the O and M space today is much different than when the journey first started off and few had those full capabilities. So it's kind of separated through that for that reason. And as we look at strategic options for the systems business, even if we end up partnering or doing something different, retaining the interest in the development business, it's not as critical to have the O and M capability as it was years ago. And to some extent, what we prefer to even do today is just do development, get a cycle site, excuse me, to notice to proceed, staple that with a module agreement and then step out of the equation. I really don't want to deal with the 3rd party EPC.
I just want to where we can trade the greatest amount of value, turn the keys over to the 3rd party EPC and sell down into a long term owner. So that's the best process around O and M and how we can separate it. The 2 gigawatts of 'twenty one, we'll have nameplate capacity in 2021 of 8 gigawatts. Our supply plan right now is about 7.5 gig. I think we indicated in prior communication that it would be between 7.3 and 7.7.
So the midpoint 7.5, that's kind of what we're tracking to right now. So 2 gigawatts less to go out of 7.5, so we got 5.5 booked. I got almost half of that 2 gigawatts in late stage negotiations with negotiated pricing, finalizing terms and conditions. So we have pretty good line of sight to make sure we can sell through that 20 watt supply plan.
Yes. And on the ramp side, on ramp up, as I mentioned before, dollars 4,000,000 of ramp up costs for the year, fully taken in Q1 than we expected. In terms of ramp down costs, the majority of those ramp down costs have hit in Q1 and Q2. We'll see a few single digit million still come through in terms of truly decommissioning cost and a little bit of ongoing severance and retention. But the vast majority of that cost has been taken in the first half of the year.
Our next question comes from Eric Lee with Bank of America. Your line is open.
It's Julien here. Good afternoon everyone. Appreciate it. Just wanted to follow-up here on, first off, if you could talk about some of the backdrop here for systems business. You guys talked about pressure on that probably turning towards the lower end.
Can you elaborate on what's driving that? If I'm hearing you right, you're specifically alluding to tax equity. But I just want to understand what's driving that today and what your expectations are with respect to that evolving over time? And then secondly, if you can come back to your bookings trajectory near term, but more importantly longer term, how do you think about signing into 2022 and 2023 given the potential for further tax credit extensions, etcetera. Just want to understand, is there still pressure to sign into those last couple of years of 30% HCC the way it's structured now?
Julian, just to clarify on your first question, you said lower end of systems. Can you just clarify what you mean by that?
It's just margin pressure on
the systems business, maybe more broadly as you described in your opening comments.
Yes. Well, first off, and you can take maybe a little bit on that
one too. But I think what
we said just so we're maybe clear is we did reference the O and M business that we gave a range of gross margin expectations that we previously had established for O and M. And the now the range was 10% to 30% based on our Analyst Day in 2017. We indicated that what we've seen in the market is that the actual gross margins on the O and M business have trended towards the lower end. And it's a combination of 2 things, increased competition plus lower PPA prices. So PPA prices have continued to come down.
And really, in order to drive to a lower LCOE, everything, whether it's the module, the inverter, the O and M, operating expenses, whatever it is, all have been kind of under pressure. And so that was the comment I think we referenced towards the lower end of the range around O and M, and we are seeing it come down partly in pressure because of lower PPA prices. Look, I think the tax equity and the implications that it has, availability is going to be a challenge. So it's going to be mainly available for high quality projects. Plus, because it's a constraint, I would expect pricing to actually increase, which actually works against the PPA prices and potentially would require higher PPA prices in order to create market clearing prices.
But I'll let Alex talk more about tax equity and we're seeing in that regard.
Yes. Just one comment on the O and M for you on tax equity. So I think you've seen margins come down, and that's been also commensurate with a risk profile decrease. So you look at it on a risk adjusted basis, I think there's still value in that business. But overall, gross margins have come down as owners have started to keep more risk on their side of the ledger.
When it comes to tax equity, I think what we're seeing, as we mentioned before in the script, there's capacity levels for 2020 deals. And that's partly a function of banks firming up their views on capacity for the year and partly a function of them, the projects pushing out to the right, which pretty natural in any given year. I think what we're seeing in the current market though is that the major players who lead transactions, when you look at 2021, they either have already booked out of their capacity or are just very uncertain around where they stand. So a lot of those major players have taken loan loss reserves so far in 2021. Those are accounting reserves today.
I think you may start to see them crystallize into actual losses in 2021, and there's uncertainty around that. When you combine that with existing commitments that they've made, and then also this time of year, you typically tend to get a constraint in human resources as the banks focus on closing out deals that have to be done by the end of the year. What we're seeing is there isn't really committed capital available for next year. On top of that, the syndication markets become constrained. So the players who don't normally lead deals but have participation pieces and who have smaller level capacity have also got a lot of uncertainty.
So that market's dried up and put more pressure on the lead players. And what that means for us from a value perspective, if you think about Sunstreams too, like other large high quality projects from experienced developers, I think tax equity will ultimately be available for that project. But it may not be we may not be able to get committed capital until late this year, early next year, which will delay the timing of the sale if that happens. And as Mark said, you could see impact on pricing and or other terms, which can also impact value. And so I think that's one of the constraints for us.
And then from our perspective, obviously, we sell modules to customers who also rely on having tax equity to have their projects move ahead. And if we see significant dislocation in the market, that could be the difference between those projects moving ahead on schedule, being delayed or ultimately even being canceled. So those impacts to us there on the module side of business as well. And overall, that's why when we look at it, we believe the legislative solution here is the best way to deal with the constraint. Unfortunately, if you look at the current draft of the Republican proposal put out last week, it doesn't address the tax equity issue, but there's a long way to go before that bill becomes law.
And so I hope that that provision will be addressed through negotiation and bill reconciliation.
Yes. I think the other question you had, Julian, was around volumes in 2022 and 2023 and how do we think about booking that volume up relative to potential extension of the ITC as an example. Between '22 and 'twenty three, I think where we sit right now, a little bit north of 3 gigawatts or so that is booked in that gigawatts that's in late negotiations as well that's got committed pricing around it. And that's so cost 4 gigawatts that we've got a stake in the ground for during that window. That's against about 16 or so gigawatts of supply that we'll have over that period of time.
So maybe we're a quarter of that somewhat committed to or locked into either booked or with commitment around pricing. It's pretty we still have room to go and really we still will be very patient in that window. We'll look for good pricing. So knowing where our cost curve is going to go and where we can capture the best pricing play to our strengths like we always do, hot humid climates, Texas being another area that we talked before about given self cracking issues and inability of some of our competitors to get projects underwritten by insurance carriers or just the general cost insurance being significantly higher. So there's a number of things that we do in the U.
S. That play to our strengths, evolving that with our new technology with our copper replacement product. And if we can capture good value for the technology, start securing up some of that volumes in that window, clearly, we'll do that. But when I think about 4 gigawatts relative to the supply of 16, I got lots of optionality left that if there is an extension on the ITC that creates an additional king in the curve and potential of a more stable and better pricing environment, we still can take advantage of that as well.
Our final question will come from Colin Lusch with Oppenheimer.
Are you seeing the impact of lower cost capital start to creep into any of the PPA bids and into some of the project economics at this point? You've seen PPA prices come down at all? Are you seeing a little bit of give in some of the project level economics if you're talking to customers?
Yes. What I would say is that it's I guess, when you stay core and you stay true to what you do and you try to create value and where you can differentiate yourself, that's where you engage. And so if I look at the PPA price that we have for what we just cleared with a large Fortune 500 customer, The terms, conditions, structure, the price is a premium relative to what I think you're seeing in the market right now. And part of that just being is that particular counterparty wanted to do business with First Solar. They loved our sustainability approach and become kind of our full lifecycle management of our product inception to final recycling and how we engage from that standpoint, how we think about our CO2 footprint and our water usage, it's just threaded so nicely in what they want, and that's core to them as well.
And so those things put us in a position to capture better value. And it's no different than, I've got a large opportunity with a particular customer that's looking to cure over a gigawatt of volume over the next several years. And they want to do business with an American company, right? They love the fact that we have R and D and manufacturing in the U. S.
And they're not worried about the lowest possible module price in that example, right? We create value through our technology, through our capabilities, and they're willing to partner with us in that regard, and they're looking for a true partner. So we try to stay disciplined in that regard. As it relates to are they yes, on the debt side, is that somewhat being positively impacting where people could think through clearing of PPAs or underlying assumptions around that. You have that, but you still have this uncertainty in the U.
S. Around tax equity. I would argue they kind of offset themselves and spreads may be moving a little bit as well and you'll probably get back to the same position that you were in to start from. So I don't think we've seen a real inflection point yet as it relates to cost capital driving further lower PPA prices.
This ends our time for the question and answer session. This concludes today's conference call. You may now disconnect.