First Solar is spending $400 million to scoop up the solar energy projects being developed by OptiSolar, which has had trouble raising money to carry out the projects and recently fired half of its staff.
The deal is a coup for First Solar because it comes with projects in more advanced stages of development, including a 550-megawatt plan that recently won the approval of the California Public Utilities Commission, said Mike Ahearn, First Solar's CEO, in a conference call Monday afternoon. To develop those projects from scratch now would take many years, he added.
Although First Solar's primary business is to develop and produce thin-film solar panels, most of which are sold in Germany, Spain and France, it also has been pursuing opportunities to become a developer of large-scale power projects in the United States. The company bought Turner Renewable Energy in 2007 as an initial move into the project development business. First Solar expects this strategy to create more demand for its solar panels while lowering the overall costs of building a solar power plant.
"What we would like to do is to handle engineering and procurement, because that gives us additional chance to drive costs down," Ahearn said. "If we are going to vie for the utility market ... we need to be more vertically integrated."
OptiSolar decided to sell its project portfolio because it couldn't raise enough money to carry them out, especially when the company had committed to meet certain deadlines to complete those projects (see OptiSolar Lays Off 300, Half of the Staff). The company, which also makes thin-film panels, suspended the operation of a new factory in Sacramento last November.
But OptiSolar isn't going out of business. The Hayward, Calif.-based company plans to focus on developing and making solar panels using amorphous silicon as the key material for converting sunlight into electricity, said Alan Bernheimer, a spokesman at OptiSolar. The company, founded in 2005, has applied for a $300 million loan guarantee from the U.S. Department of Energy to restart its Sacramento factory.
OptiSolar follows other solar companies that recently announced changes in their business plans. Ausra said it would focus on selling equipment for building solar-thermal power plants, though it also would pursue only small-scale projects to build and operate solar power plants. eSolar sold the development rights to 500 megawatts worth of power plant projects in the United States to NRG Energy and wants to license its technology to developers outside of the country (see eSolar's Transformation Continues with Indian Deal).
The crown jewel of OptiSolar's project portfolio is the 550-megawatt project that OptiSolar was going to build in a deal to sell the electricity to the Pacific Gas and Electric, a utility serving Northern California (see PG&E to Buy 800MW From OptiSolar, SunPower). It's one of the largest solar power purchase agreements by PG&E, which is under pressure to meet a state mandate to get 20 percent of its electricity supply from renewable sources by 2010.
First Solar, based in Tempe, Ariz., hasn't had a chance to discuss its acquisition with PG&E, Ahearn said. One key change to the project will be the solar technology: First Solar makes thin-film panels using cadmium tellurium as the key materials to convert sunlight into electricity, while OptiSolar had planned to use its own amorphous-silicon panels for the project.
Under the deal with PG&E, OptiSolar had committed to start delivering power from the project in 2011, but the power plant won't be completed until 2013 at the latest. First Solar plans to start constructing the power plant in 2010.
Another key change might be the ownership of the power plant. OptiSolar's previous business model called for it to own and operate the 550-megawatt project. First Solar is willing to develop projects under different models, from building power plants for a public utility or independent power producer to selling power to a utility from a power plant built and maintained by First Solar. Ahearn said the company would hire subcontractors to do the installation.
PG&E intends to honor the power purchase agreement, said Jane Oliveira, a PG&E spokeswoman. She declined to comment on the prospect of buying the power plant from First Solar. PG&E recently announced its intention to own and operate solar power plants, though it also will continue to buy power from independent power plant developers and owners (see PG&E to Own and Build Solar Power Plants).
The all-stock purchase of OptiSolar's assets will give First Solar an additional 1.3 gigawatts worth of projects under negotiations with utilities in the western United States. It also gives First Solar the rights to develop solar power plants on about 136,000 acres, which are enough to set up 19 gigawatts worth of projects, First Solar said.
The deal also includes a 30-person project development team from OptiSolar, Ahearn said. OptiSolar's bank representative told First Solar that there were other bids for the projects, but didn't provide more details, Ahearn said.
The acquisition is likely to produce $70 million in revenue for First Solar in 2009 while costing the company 35 cents to 40 cents per share in earnings.
First Solar has gained some experience as a power plant developer. It oversaw the 10-megawatt project in Nevada for Sempra Generation, which is selling the power from the project to PG&E (see PG&E to Get Solar Power for the First Time).
First Solar expects the OptiSolar deal to close during the second quarter of 2009.
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