First Solar to Build New Mexico Solar Plant (FSLR)

First Solar, Inc. (NASDAQ:FSLR) will build a 30 megawatt solar PV plant in northeastern New Mexico to supply power to a wholesaler that serves nearly 1.5 million customers in four Western states. The contract is said to be the largest ever granted by a US electric cooperative to a PV maker.

The plant is expected to be completed by the end of 2010. First Solar says that it “expects that, upon completion of the PV power plant, it will have transferred all or substantially all of its equity interest in the project.” What’s that about?

From First Solar’s 10-K filing in February 2009:

• In October 2008, we made an equity investment acquiring preferred stock in a company based in the United States that supplies solar power plants to commercial and residential customers at a total cost of $25.0 million. This investment represents an ownership of approximately 12% of the voting interest in this company and is our only equity interest in that entity. Since our ownership interest in this company is less than 20% and we do not exercise significant influence over it, we account for this investment using the cost method of accounting.    In the fourth quarter of 2008, we have also entered into a long-term supply contract with this related party that in the aggregate allows for approximately $0.2 billion in sales from 2009 to 2013. During 2008 we did not have any material revenue transactions with this related party.

First Solar makes no other reference in its 10-K filing to an equity investment in any other company. So, one might conclude that the $25 million equity investment was made in the company that is building this PV plant in New Mexico. Back in October 2008, before the contract to build the plant was awarded.

First Solar shares were up about 2% in early trading this morning, but they have come back close to flat right around $131.00.

Paul Ausick
March 24, 2009