First Solar has joined forces with 33 other clean power companies including rivals like SunPower and Nanosolar to appeal against the Republican proposal to axe the funding for the Department of Energy's loan-guarantee program. The proposal was included in a budget bill passed in early February and was a shock to many in the renewables community as it could potentially derail the high growth in solar and wind energy adoption.
First Solar is engaged in the manufacturing and sale of solar modules with an advanced thin film semiconductor technology and competes with other international solar industry players like Suntech Power and Yingli Green Energy. We have a price estimate of $155 for First Solar's stock, which is just slightly above the stock's current market price.
Understanding the Proposal and its Impact on the Industry
The increasing focus of U.S. government to develop alternatives for clean sources of energy is clear from the fact that President Obama set a goal of 80% clean energy for the country by 2035. This sort of announcement should only point to an increase in activity in the renewable energy sector for the future.
Over the last few years, the Department of Energy has worked on making large scale solar and wind energy projects feasible for companies by providing them with loan guarantees. Essentially, the loan guarantees allow companies to raise large debt for individual projects, something that was difficult after the economic downturn as private debt sources had little experience or limited appetite for financing such projects.
If the government decides to cut the funding to the DoE, this would directly affect the $41 billion in loan guarantees for renewable energy projects, a move that companies in the renewables sector say could "kill all clean energy projects."
What This Means for First Solar
First Solar has benefited from the DoE's loan guarantees in the past, and currently has a $967 million conditional loan guarantee for its 290-megawatt project in Arizona.
Our analysis shows that sales in the U.S. contribute to almost 20% of First Solar's value, which can be severely affected if the loan guarantees stop. We believe that without loan guarantees the company's ability to undertake large projects will be limited while the financing costs for projects that do take off would also be higher than they were in the past.
If the company's sale of photovoltaic modules in the U.S. falls to about 1.1 billion at the end of our forecast period from our current estimate of 1.5 billion, this would represent a 10% downside to the company's price estimate bringing it to around $140.
See our full analysis of First Solar here
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Reader Comments (Page 1 of 1)
4-10-2011 @ 12:57PM
MyKisa said...
if the products work, you won`t need taxpayer`s money....sell the product
4-10-2011 @ 6:20PM
william lindblad said...
The government is lilke a serpent - forked tongue.
I think Mr Pickens has been on the natural gas bandwagon for years and has spent a great deal of his own money. I anyone has a point - he does, but I don't see any response from our government. The only thing happening is a move to get flex fuel pumps installed across the country - and that AIN'T the government.
The government has been flat on it's ass since the oil embargo. Talk, talk & more talk, but there proactive stance has been limited to token movement. So, if past performance is any indication -solar and wind are going right back to where they were ca. 1980, aka, the backseat.
What is amazing about this is - take a look at Europe and the UK. Both are taking a very strong proactive approach and it's not entirely based on moving from coal and oil, but on looking to future needs and the ability to be more self reliant at less cost.
Does make one wonder why we even bother with elections.
4-11-2011 @ 1:08PM
Marilyn said...
I can't believe there are only two comments regarding this...one pro and one con. Those dates should be over. We desperately need to look to alternate forms of energy that are clean and readily available. Everybody should have solar panels on the roof and electric cars to plug into it to get entirely off the grid. Yes, it could actually be done. There are plenty of homes in Florida selling back extra electricity to the utility companies because solar panels generate enough energy to run the house and then some. Add an electric car and you are basically off the grid. And you don't have to live in Florida for solar efficiency. But our government subsidies oil, coal, and corn and screws over the solar and wind power start ups because the lobbyists pay them to shut the door on new energy sources. A sad state of affairs. I came to Florida during the embargo in 1974 because I was afraid of freezing to death or not being able to operate my vehicle, and I've been waiting since then for a sound energy plan. When will us Americans get the message that we can't steal oil and go to war for it. We have to earn our energy independence the old fashion way through development which will also provide the jobs every one needs in our country. WAKE UP!!!
4-12-2011 @ 10:52PM
Louie said...
MyKisa...taxpayer money already goes to subsidize the oil industry and nuclear energy. Billions of dollars go to them (not including the $5 per gallon we are about to pay at the pump). Nuclear energy would not survive in the free market without taxpayer subsidies, it is too costly. Also, nuclear power plants cannot even get any insurance company to insure them against disasters because insurance companies do not like losing money. If solar energy got a fraction of the taxpayer money that goes to Big Oil and Nuclear, we would be independent of foreign oil in no time and clean up our environment in the process. I don't know about you, but I do not want to be eating mutant cancer causing seafood from all the pollution and radiation caused by oil spills and nuclear reactor meltdowns.
4-13-2011 @ 1:40PM
william lindblad said...
Nice to hear from all.
The real problem is getting a replacement for vehicle fuel and the only viable alternative if natual gas. Electric has potential, but it's still a long way off for use other than local.
Electric generation in the U.S. is mostly coal, followed by natural gas, water and with oil in last place. We could easily increase natural gas, re-open many closed hydro operations and continue with wind and solar. The combined would make electric abundant for at least another fifty years. I don't like nukes for two reasons - they cost too much and we still don't know what to do with the waste. Besides that, another commentator mentioned insurance. Adding to that I wouild like to mention that these facilities have a "terminal" life span and unlike coal and gas, you cannot simply do a modernization and keep the facility operating.
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