First Solar’s 4 DOE loan projects: Updates on status

First Solar (FSLR) has 3 pending and 1 confirmed project using the US Department of Energy’s Recovery Act funding. Based on the Agua Caliente 290MW confirmed project, analysts are projecting AV Solar Ranch One, Topaz, and Desert Sunlight’s chances of receiving the requested dollar figures from the government. Last week, FSLR received notice from the DOE that its projects are still under consideration.

May 16, 2011 — On May 10, 2011, the Department of Energy (DOE) Loan Programs Office provided an update regarding the projects it will continue to evaluate through the final steps required to complete a loan guarantee. First Solar (FSLR) received notification letters from the DOE confirming that AV Solar Ranch One, Topaz, and Desert Sunlight, will continue to be evaluated by the DOE Loan Programs Office.

These projects are in addition to the Agua Caliente project, which received a conditional commitment for a loan guarantee of up to $967 million in January and accordingly did not receive a similar notification letter.

First Solar’s Topaz and Desert Sunlight projects will each have 550MW of capacity. Its Solar Ranch project will have 230MW. Agua Caliente, built for NRG Energy Inc., will hit 290MW.

As stated in First Solar’s Q1 2011 earnings call on May 3, 2011, First Solar expects the Agua Caliente DOE loan guarantee and sale to NRG to close in late Q2 or early Q3, and it expects to begin revenue recognition for the Agua Caliente project in the third quarter.

The Energy Department has approved, with conditions, 19 loan guarantees for renewable energy projects, accounting for almost two-thirds of the $2.4 billion in funding that was approved as part of the Recovery Act. The agency must distribute all the funds before the loan guarantee program expires at the end of September, notes Christopher Martin, Bloomberg.

Gordon Johnson with Axiom Capital and Timothy Arcuri with Citigroup both believe the letters to First Solar from the DoE mean less than would appear, and that First Solar’s projects are still at risk of not getting funded, said Tiernan Ray, Barrons, noting that Mark Bachmann with Auriga Securities, saw the letters as a positive sign.

Due to impending deadlines and lack of sufficient funds, not every project submited to the DOE for Recovery Act financing can be backed, said Jonathan Silver, director of the Energy Department’s loan program. DOE support will go to the best projects. Ray says bearish investors don’t see enough money left in the DOE’s Recovery Act coffers to fund the FSLR plants. Gordon Johnson estimates that funding is being apportioned on a dollar basis at about three times the total wattage of the project, based on Agua Caliente’s MW-to-dollars funding breakdown. He thinks AV Solar Ranch alone demands funding of $800 million, Ray notes. Companies are not required to make public the funding they seek from the DOE.

Topaz and Desert Sunlight would need to clear their environmental impact assessment (EIS) by June 16, when paperwork is due to the DoE. While Johnson says this is impossible, Auriga’s Bachman believes the sites are in the middle of their EIS and could be done in time. “Desert Sunlight expects to receive a Record of Decision from the BLM [Bureau of Land Management] in early June. Topaz expects a decision on its Conditional Use Permit from San Luis Obispo County, perhaps as soon as today. We expect both projects will accommodate deadlines required by DOE,” said FSLR representatives in a statement to Ray.

Bachman states that the DOE would not have sent letters to 9 applicants, First Solar and others, if there were not sufficient funds remaining.

There are still several steps remaining in the DOE loan approval process, and other factors such as private funding, and other government programs, could play a role.

Sources for these updates:

First Solar (FSLR): www.firstsolar.com

US Department of Energy: www.energy.gov

 

Barrons, Tiernan Ray: http://topics.barrons.com/person/R/tiernan-ray/6293

 

Bloomberg: www.bloomberg.com

 

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