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Should First Solar Follow An Emerging Practice For Raising Project Development Funds Cheaply?

May 6 2014, 9:22pm CDT | by

As First Solar reported solid first-quarter revenue growth and earnings on Tuesday, some financial analysts wanted to know whether the solar power plant developer will follow its competitors and...

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12 weeks ago

Should First Solar Follow An Emerging Practice For Raising Project Development Funds Cheaply?

May 6 2014, 9:22pm CDT | by

As First Solar reported solid first-quarter revenue growth and earnings on Tuesday, some financial analysts wanted to know whether the solar power plant developer will follow its competitors and customers to create a public-traded subsidiary and sell shares of the projects it’s built and operating.

Called “yield co,” this fundraising vehicle gives developers access to cheaper capital and promises steady, long-term dividend payments to investors. The dividends come from long-term contracts to sell electricity to utilities. A developer would sell a stake from a portfolio of projects it owns and keep the rest of the shares.

There are potential drawbacks to using yield cos. Doing so could hurt the parent company’s credit profile by moving reliable sources of cash out to a subsidiary, and there could be double taxation of earnings in some circumstances, according to law firm Chadbourne & Parke.

Yield Cos are gaining popularity among renewable energy developers and owners. NextEra Energy, which owns wind and solar power plants, saw its shares rose last Wednesday when it announced a plan to create an yield co for those projects.

Other energy companies that have created yield cos include NRG Energy and SunEdison. NRG’s yield co includes fossil fuel and solar power generation. SunEdison’s executives said earlier this year that they plan to keep more of the projects they built and create yield cos with them rather than selling those projects. Its chief financial officer, Brian Weubbels, told analysts then that keeping certain projects could create 2.5 times more values than selling them.

First Solar CEO, Jim Hughes, told analysts during the earnings call Tuesday said the company is studying the yield co structure and the market reception to the ones already created. But he and other company executives don’t “feel compelled to make an imminent decision” on whether to pursue one.

“We have been pretty good at monetizing our assets efficiently,” Hughes said. “We haven’t left a lot of money or value on the table.”

Arizona-based First Solar prefers to sell the projects it’s developed and built, and it also goes after contracts to operate and maintain those solar power plants for their owners. The company most recently completed a 290-megawatt project, called Agua Caliente, in Arizona for NRG and Mid-American Solar.

Figuring out ways to lower the cost of securing funds to build projects has been a big challenge for solar companies. The rise of the solar energy market is a fairly recent phenomenon, so banks and other investors have assigned higher risks to solar power projects than they do to fossil fuel power or wind energy projects. That in turn makes borrowing money more expensive for solar project developers.

SolarCity has sought to raise money more cheaply by selling notes backed by the rooftop solar energy systems that it installs and leases to business and home owners. The leases are really long-term power sales contracts of 15-20 years, and the company is counting on low default rates among its customers. The California company was the first to securitize rooftop solar assets, which it completed last November.

First Solar reported $950.2 million in sales during the first quarter of this year, up 26% from $755.2 million from a year ago. It posted $112 million in net income, or $1.10 per share, for the first quarter, compared with $59.1 million, or $0.66 per share, from the first quarter of 2013.

First Solar executives said Tuesday they will no longer disclose their production cost, in cents per watt. I’m rather sorry to hear that. For many years, the company was way ahead of its competitors in producing solar panels far more cheaply. It excels at building big factories and running its production process efficiently to cut costs. Its quarterly reporting of its production cost provided a target for its competitors.

But that advantage began to erode a few years ago when its major rivals, mostly manufacturers from China, built massive factories to drive down costs. Those rivals have been found to price their panels at below fair market values, prompting the federal government to impose tariffs on them.

Solar panels from China are commonly made with silicon and can convert a greater percentage of sunlight into electricity. So First Solar had to play catch-up to boost the conversion efficiency of its solar panels, which use cadmium-telluride. A year ago, company executives declared their intent to focus heavily on improving their technology and halt plans to build factories.

 
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10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin H ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Sch ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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