First Solar Inc. (FSLR) announced that billionaire investor Warren Buffett's MidAmerican Energy Holdings Company has entered into a definitive agreement to acquire its Topaz Solar Farm.
The transaction is a win-win situation for both the parties since with the Topaz deal First Solar is able to clear its house with all the big four U.S. based utility solar projects under sale. The other three big ticket projects include the 660-megawatt Desert Sunlight project in California vended to NextEra Energy Resources (NEE) and General Electric (GE); the 348-megawatt Agua Caliente project in Arizona sold to NRG Energy Inc. (NRG); and the 280-megawatt Antelope Valley project in Nebraska sold to Exelon Generation (EXC).
On the other hand the buyer of the Topaz project would be able to qualify for the U.S. Treasury grant rebate program. For solar installations, the grant is equal to 30% of the system’s cost and the owner will get this amount regardless of their earnings and tax bill. The move to acquire the Topaz project by MidAmerican Energy Holdings is a smart move as the 30% grant would be locked in before its expiry by the end of fiscal 2011.
The 550-megawatt Topaz project, under construction in San Luis Obispo County, California, will have the capacity to generate enough renewable energy to power about 160,000 average Californian homes. The companies did not disclose the financial details of the deal.
The project, in June 2011, was the fore runner in receiving a $1.9 billion loan from the U.S. Department of Energy to cover part of the financing. Though it announced in September that it was unable to qualify for the loan, it was still keen upon pursuing the project.
The Topaz project worth more than $2 billion is one of the largest PhotoVoltaic endeavors in the world. Construction began in November 2011 and is expected to be complete by early 2015. The project will create about 400 construction jobs and 15 ongoing operations and maintenance jobs. Pacific Gas and Electric Company (PCG) will purchase the electricity from Topaz under a 25-year power purchase agreement.
First Solar, the largest stand-alone solar module manufacturer in terms of market capitalization, will benefit greatly from the steady economic recovery as well as favorable legislations supporting PV installations. The company’s project pipeline currently stands at an impressive 3.2 GW.
First Solar manufactures solar modules with an advanced semiconductor technology and is a premier provider of comprehensive PV system solutions. The company is delivering an economically and environmentally viable alternative to fossil fuel.
From raw material sourcing through end-of-life collection and recycling, First Solar is focused on creating value-driven renewable energy solutions that protect and enhance the environment.
Moreover, by virtue of its diversified revenue exposure, technological enhancements and cost minimization, the company has a distinct edge over its competitors. Through cadmium telluride-based solar modules, the company offers a differentiated technology versus its silicon-based peers.
However, First Solar’s short-term growth may be partially hampered by the volatile euro, apprehension over reduction in German subsidies, falling crystalline silicon prices and the modules’ glut in the market. The company presently retains a short-term Zacks #5 Rank (Strong Sell). Over the longer run we however maintain our long-term Neutral recommendation on the stock.
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