First Solar Becomes Predator (FSLR)

It may seem a very gutsy call considering the economy, even in the Obama-favorite of the solar sector.  But First Solar, Inc. (Nasdaq: FSLR) has just announced that it is going to do a deal.  The company plans to significantly expand its penetration within the U.S. utility solar power market, and it is doing this through th e acquisition of OptiSolar’s solar project pipeline.

This purchase include a 550-megawatt (MW) AC solar development project under a power purchase agreement with PG&E, a project pipeline of additional 1,300MW AC which are in negotiation with Western utilities for solar development projects, strategic land rights of approximately 136,000 acres with the potential to deploy up to 19 GW of utility-scale solar power projects.  It is also acquiring the development team.

First Solar apparently expects to construct solar power plants developed under the acquired solar power project pipeline over the next several years, and it will then sell them to regulated utilities, diversified energy companies, and independent power producers.

Project development is planned to begin as early as 2010, and it believes this will create 400 green-jobs in California.  First Solar acquired Turner Renewable Energy in November 2007 and has since has expanded its capabilities by constructing a 10MW AC plant in El Dorado, Nevada. Late last year it entered into an agreement with Edison Mission Energy to develop and construct utility-scale solar generation in California.  This also follows last week’s announced that it had broken the $1 per watt price barrier and it will reach 1,100 MW manufacturing capacity in 200.

First Solar will pay approximately $400 million to acquire all of OptiSolar’s project development business.  The exact terms are not disclosed yet, but the transaction appears to be all stock and should close in the second quarter.  The company has a market cap of about $8.5 billion, so the company can easily spend and absorb this.

Shares closed down 1.6% at $103.97 today, and shares are actually up about 2% in after-hours trading.

Jon C. Ogg
March 2, 2009