Federal Funds Start Flowing In For First Solar’s Antelope Project

Funds from the Department of Energy (DoE) for First Solar‘s 230 Megawatt Antelope project have started to flow in, easing concerns that the deal between First Solar and the purchaser Exelon Corp may fall apart. ((Exelon Taps Federal Loan for Solar-Power Deal, WSJ))

The project had earlier run into trouble as the DoE refused to lend to the project because of issues in obtaining local permits. First Solar issued a warning that it could be forced to repurchase the project fromExelon if it failed to receive federal loan guarantees for the undertaking. (See: First Solar’s Solar Farm Deal Hits Regulatory Hurdle) The deal, valued around $1.36 billion, is expected to boost First Solar’s revenues from the 2nd quarter of this year. First Solar is concentrating on its systems business to drive revenues as its panels manufacturing business is facing severe competition from Chinese players such as Trina Solar

We are looking to revise our $52.55 price estimate for First Solar, which is more than double its current market price.

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Loan guarantees

First Solar had entered into a deal with Exelon Corp to build and operate the Antelope project for $1.36 billion. Exelon Corp reserved the right to walk away from the project in case the project failed to receive funds from Department of Energy by the 23rd of February. The DoE had approved $646 million in loans for the project, but had delayed processing the funds because of issues encountered in obtaining local permits. ^[1] The issues were resolved in mid-February, ending the uncertainty related to the sale of the project.

First Solar’s stock fell by almost 10% in February after it announced that the deal might be cancelled because of complications in securing DoE funding. The DoE has tightened its lending procedures after its program came under scrutiny following the Solyndra bankruptcy.

With funds from the Department of Energy, the Antelope project is now under Exelon Corp’s control and First Solar will now only be involved in the construction and operation of the facility. As solar panel prices fall rapidly because of cheap Chinese imports, First Solaris focusing more on its systems installations business.

First Solar’s revenues from the systems business are projected to grow steadily over the next few years as utilities companies in the U.S. begin to invest in solar power plants because of falling costs as well as to meet regulatory requirements.

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