Under a 10-year power purchase agreement ("PPA"),
First Solar, Inc.
) will sell the electricity generated from the Lost Hills
photovoltaic power plant to the City of Roseville, Calif., once
the plant comes online. First Solar will begin the construction
of this power plant in Kern County, Calif. in early 2014. This
agreement is the first agreement for First Solar with a
municipality and will be effective from 2015.
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The plant has an electric generation capacity of 32MWAC.
According to the agreement, all the electricity generated from
the plant will be purchased by Roseville for the first four
years. However, from 2019 First Solar will begin sharing the
power with Pacific Gas and Electric, thereby splitting the output
between Roseville and Pacific Gas and Electric, a subsidiary of
). First Solar thus has an additional PPA for Lost Hills' output
with Pacific Gas and Electric.
In the first year, Lost Hills will produce clean and renewable
energy that will be sufficient to power 11,000 homes. This clean
energy will be able to offset more than 20,000 metric tons of CO2
per annum, which is equal to eliminating 4,000 cars off the road
each year. On an annual basis, it will also save 18,000 metric
tons of water consumption. During the peak construction period,
the plant is expected to create 200 jobs.
This agreement will help California in reaching its goal of
generating 33% of renewable energy by 2020, as per the state's
requirement. For the last 10 years, Roseville Electric has
purchased 325,000 MWH of renewable energy for $24 million.
However, this contract will reduce the cost of purchasing
electricity by $6.5 million from the amount spent last year on
renewable energy purchase.
First Solar has a proven ability to build big projects cost
effectively. In order to counter the weak economic scenario, the
company is focusing more on utility-scale electricity power
projects. In July this year, First Solar and AGL Energy Limited
entered into a partnership on two utility-scale photovoltaic
projects in Australia. Per the agreement, First Solar will
construct a 102 MW plant at Nyngan and a 53 MW project at Broken
Moreover, the company continues to execute its strategy by
diversifying globally with a focus on rising bookings, and
improving its costs. Despite these positives, we prefer to
remain on the sidelines due to the industry-wide oversupply of
solar products, its weak second quarter results and rising
competition in the market.
Recently, First Solar Inc. reported adjusted second quarter 2013
earnings of 39 cents per share, well below the Zacks Consensus
Estimate of 50 cents by 22% and 43.5% from the preceding quarter.
The considerable plunge in earnings reflects lower revenue
recognition from the AVSR project and lower sales volumes to
third-party module-only customers. The company presently retains
a short-term Zacks Rank #3 (Hold).
Among the stocks worth considering in the solar space are
JinkoSolar Holding Co., Ltd.
). While JinkoSolar carries a Zacks Rank #2 (Buy), SunPower Corp
holds a Zacks Rank #1 (Strong Buy).