First Solar Shares Rise ... Just Because

Shares of First Solar Inc. (NASDAQ: FSLR) are up about 8% in the early afternoon on the company’s announcement that it has now installed another 100 megawatts of solar panels at its Agua Caliente solar project. That brings the project to a total of output capacity of 200 out of a total of 290 megawatts. Agua Caliente is already the largest operating photovoltaic power plant in the world.

The plant is owned by MidAmerican solar, a subsidiary of Berkshire Hathaway Inc. (NYSE: BRK-A), (NYSE: BRK-B) and NRG Energy Inc. (NYSE: NRG). First Solar is building the plant and will be the operator once construction is completed in 2014. The US Department of Energy supplied a loan guarantee of $967 million for construction of the plant. Pacific Gas & Electric Co., a subsidiary of PG&E Corp. (NYSE: PCG), has a long-term power purchase agreement for all the project’s power generation capacity.

Today’s share price rise at First Solar is nice in a not-very-encouraging way. Think about it. The construction of the Agua Caliente plant should already have been baked into the company’s share price. If it wasn’t then analysts probably didn’t figure the company could get the plant built. If Agua Caliente is already in the share price, then what does today’s jump represent? Animal spirits? Relief?

Booking more projects is what this company needs to be doing. Recent approval of First Solar’s 230-megawatt Antelope Valley project was good news. Also good news came from an announced delay in the construction of a competing thin-film solar plant by General Electric Co. (NYSE: GE) in Colorado. The company needs more — a lot more — of that kind of news and less news from Chinese makers that have pushed crystalline solar prices down to at least par with thin-film.

First Solar has been saved from near-oblivion by its installation and construction operation. Now the design, construction, and operations capabilities of the company are likely to drive its panel production and, to some degree, R&D into new technologies.

In the near term, First Solar’s shares are probably worth less than the $24.04 consensus target price. Whether the company’s construction pipeline can drive the price beyond that is really questionable.

Shares are trading up 7.8% at $15.28 in a 52-week range of $11.41-$126.14.

Paul Ausick