(Reuters) - First Solar Inc said it would not meet a deadline to receive a federal loan guarantee for a huge solar power plant it is building in California, sending its shares to their lowest level in more than four years.
The announcement cast a spotlight again on the Obama administration’s support of renewable energy, which have come under fire by Republicans since the collapse of solar company Solyndra after it won more than $500 million in backing from the Department of Energy.
First Solar, which in June received conditional approval from the U.S. Department of Energy for a $1.9 billion loan guarantee to build the 550-megwatt Topaz plant, said it was unable to process all requirements under the department’s loan program before the September 30 cutoff date.
Energy bankers and financiers have said the Energy Department’s process to qualify for the loan guarantees was far more onerous and detailed than required by private banks, countering complaints by Republican lawmakers that the administration was rushing to fund deals.
First Solar, the lowest cost solar manufacturer in the world, said it was in advanced talks to finance and sell the Topaz plant project and would try to secure financing that does not rely on the Energy Department.
If the company is able to find a buyer for the plant and secure funding, it would likely pay a higher interest rate than it could receive from banks if it had a government loan guarantee, pushing up the overall cost, according to Jeffrey Bencik, an analyst with investment bank Kaufman Bros. That higher figure could drive up the cost of building the power plant by about 50 cents per watt to perhaps $3.50 to $4.00 per watt, he estimated.
First Solar declined to discuss the costs of the project.
However, First Solar was not likely to see a dent in its near-term earnings.
“It would not impact their 2011 (profit); perhaps in 2012 and 2013,” Bencik added.
In addition to its sales of the thin-film photovoltaic panels, First Solar builds utility-scale solar power plants and sells the projects, a growing business for the company, which has been diversifying away from the key German market.
It is currently developing several large solar power plants that will deliver electricity to meet California’s 33 percent renewable energy target by 2020, including two awaiting final Energy Department loan guarantees.
Those plants, the 230-MW Antelope Valley Solar Ranch and the 550-MW Desert Sunlight projects, must receive the guarantees before that government funding program’s deadline at the end of September.
Solyndra’s loan guarantee was awarded to the start-up company to finance a manufacturing facility, while First Solar’s loan guarantees are designed to help fund construction of electricity-producing plants.
At an energy conference in Washington on Wednesday, energy investors said projects seeking the Energy Department support were subject to very detailed due-diligence reviews before they were approved.
Prices for the photovoltaic panels that turn sunlight into electricity have tumbled more than 30 percent so far this year, pressured by a glut as key markets in Europe trim subsidies for renewable energy.
That price drop has squeezed profits and margins for all solar manufacturers and driven down the WilderHill Clean Energy index 43 percent so far this year.
First Solar’s shares fell 5.2 percent to $69.69 on the NASDAQ, their lowest since June 2007.
Reporting by Matt Daily in New York; editing by Gerald E. McCormick, John Wallace and Andre Grenon