Solar PV maker First Solar Inc. (NASDAQ: FSLR) failed to meet a deadline in its application for a federal loan guarantee amounting to $1.9 billion for its Topaz solar farm project. The project was one of three that had received conditional loan commitments from the US Department of Energy, but the company’s press release noted, “there was insufficient time to process all requirements before the Sept. 30, 2011 deadline.” Who’s to blame here — First Solar or those nasty federal regulations?

Or maybe Solyndra, the solar PV firm that recently filed for bankruptcy protection after taking a $535 million loan from US taxpayers. Solyndra’s bankruptcy has generated calls from some federal legislators and solar industry critics to end federal guarantees and loans to alternative energy projects. The fallout hits not only First Solar, but SunPower Corp. (NASDAQ: SPWRA), Trina Solar Ltd. (NYSE: TSL), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), LDK Solar Co. Inc. (NYSE: LDK), and other solar industry companies competing for solar farm projects in the US.

First Solar says it is in “advanced talks regarding the sale and financing of the project with potential buyers utilizing a different transaction structure that does not require a DOE loan guarantee.” The leading candidate to buy Topaz is rumored to be Enbridge Inc. (NYSE: ENB). Enbridge’s access to low cost capital could in fact make such a sale possible.

According to a report from TheStreet.com, First Solar estimated earlier this year that it could lose as much as $0.625/watt in a sale of the Topaz project if the federal loan guarantee was lost.  That would hit EPS to the tune of $4-$4.50 over the next two years. But a buyer like Enbridge, with a low cost of capital, would likely only cost First Solar a few cents of loss per watt and an essentially insignificant amount of lost earnings.

But, wait, there’s more. The story at the TheStreet.com details contacts between First Solar and various brokerage firms that might have violated the SEC’s Regulation FD that prohibits officers or directors of a company from selectively disclosing information that may be material to the company’s business. If the company did selectively release material information, that could jeopardize the other two solar farm projects for which First Solar still expects to receive loan guarantees, Antelope Valley Solar Ranch and Desert Sunlight.

Losing or significantly delaying those guarantees would be substantially reduce First Solar’s earnings outlook for the next couple of years. Unless the company can find a buyer like Enbridge, with access to low-cost capital, it would have to try to borrow the necessary funds itself at a much higher cost. That in turn would reduce the amount the company would realize in an eventual sale of either of the two projects for which it still hopes to get federal guarantees.

The overall softness in the solar PV market has crushed solar industry stocks since late April. First Solar shares are down nearly -50% since then and SunPower shares are down more than -25%, even after getting a huge boost from the purchase of a controlling stake in the company by Total SA (NYSE: TOT). Trina, JA Solar, and LDK are all down more than -70% since April, both due to oversupply of solar panels and accounting concerns that have hit Chinese companies hard.

Today doesn’t look like a recovery day for First Solar either. The stock is trading down another -1%, at $66.07, below the new 52-week low set yesterday of $66.19. The stock’s 52-week high is $175.45.

Paul Ausick

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