First Solar Inc.
) has entered into a purchase power agreement with Pacific Gas and
Electric Company (PG&E), a subsidiary of
). As per the contract, the former will sell 72 megawatts AC of
solar electricity from its two power plants to the latter.
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The delivery term for the purchase power agreements is expected to
start from 2019, subject to the approval of the California Public
Utilities Commission. The company expects a decision from CPUC to
begin in the first half of 2013.
First Solar is developing two photovoltaic ("PV") power plants in
California. One is the Lost Hills project in Kern County that has
the energy generation capacity of 32- megawatt and the other one is
a 40-megawatt Cuyama project in Santa Barbara County. As soon as
the development process is complete, the company plans to begin the
construction of the project by 2013.
Both the projects are expected to create 600 jobs during the peak
construction period. The projects will further help California to
meet its goal of generating 33% of electricity from renewable
energy. The projects will produce adequate clean and renewable
energy to power approximately 24,000 homes in California that will
be sufficient to offset approximately 45,000 metric tons of CO2
annually, which is equal to taking about 8,900 cars off the road
First Solar's grid-friendly utility-scale power plants get easily
integrated into the electrical infrastructure. The company has been
in these kinds of purchase power agreements with PG&E Corp.
earlier also. In May this year, the company along with MidAmerican
Solar began the major construction process of 550 MW Topaz Solar
Farms, located in San Luis Obispo County, California. The energy
generated from the project will be sold to PG&E. Also,
the energy generated from one of its other project, the 290 MW Agua
Caliente Solar Project, will also be sold to PG&E under a
25-year agreement. This plant is owned by
NRG Energy Inc.
) and MidAmerican Energy Holdings Co.
One of the company's peers,
) had also recently entered into an agreement with PG&E to
supply 100-megawatt power from its Henrietta Solar Project.
First Solar is a leading global provider of comprehensive PV solar
systems that uses its advanced thin-film modules. Currently, the
company's integrated power plant solutions are engaged in
delivering an economically attractive alternative to fossil-fuel
Currently, the company is witnessing a steep drop in Average
Selling Prices. Also, the current macro scenario does not bode well
for the solar industry, which thrives mainly on subsidies and
grants. However, in order to counter the weak trend, the company is
focusing more on utility-scale electricity power projects. It is a
partial mitigation for its drop in margins through a major
restructuring of its operations.
The company presently retains a short-term Zacks #2 Rank (Buy). We
have a long-term Neutral recommendation on the stock.