October 8, 2008 / 6:39 PM / 11 years ago

First Solar mulls projects, partnerships

NEW YORK/SAN FRANCISCO (Reuters) - Solar cell maker First Solar Inc has felt no immediate effect on its business from the financial markets crisis and could take on a role in financing new projects or buying into new technologies, Chairman and CEO Michael Ahearn said on Wednesday.

The maker of thin-film photovoltaic cells told the Reuters Global Environment Summit that the fast-growing industry would likely face higher costs of capital because of the credit crisis, and that First Solar could helping to finance new projects.

“First Solar is in a relatively strong position,” Ahearn said. “There may be some be opportunities for us to help facilitate lower-cost credit.”

First Solar’s largest market remains Germany, he said, a market with solid financial structures and subsidies in place for solar projects.

First Solar makes the lowest-cost photovoltaic cells in the industry, relying on cadmium telluride to turn sunlight into electricity. Most other companies use silicon instead.

Last week’s extension of U.S. renewable energy incentives and a new rule that will allow utilities to take advantage of tax breaks should help those utility holding companies move into the role of the financial institutions that had previously helped fund the projects.

“They are a likely funding source going forward,” Ahearn said.

First Solar said it has been discussing such deals with energy companies that would like to take the U.S. tax credits in exchange for funding new solar projects.

As a cost leader, First Solar has been at the forefront of pushing the technology toward “grid parity,” or the level at which solar power systems produce electricity at a price that is competitive with more conventional power plants.

“We’ve had a view that 12 to 15 cents per kilowatt hour for solar electricity is about the right crossover point,” he said, and the company was on track to meet that mark between about 2010 and 2012.

EYE ON NEW TECHNOLOGY

Ahearn said First Solar had been looking at other new technologies, including cells made with copper indium gallium selenide (CIGS), with an eye toward investing in companies that could break into the thin-film market.

“You could do it from a variety of ways, a partnership, acquisition or even developing our own approach,” he said.

The selloff that has hit solar company shares in recent months could open up more opportunities.

“In the last few years, the valuations have been so high everybody has had plenty of access to capital ... I see it already starting to change,” he said.

First Solar had been among those companies whose valuations have soared as its stock — the top performer in the United States in 2007 — catapulted higher.

But like others in the sector, First Solar’s stock has fallen sharply, shedding more than 50 percent of its value since the end of August, and now trades near $134 per share on Nasdaq.

Ahearn said an investor note published by Goldman Sachs on Tuesday that predicted declining prices for solar modules had contributed to the selloff this week, but said he did not see a change in industry fundamentals.

“I don’t think anything changed from the report (Goldman) did a month ago,” he said, referring to the bank’s more positive take on the industry.

In Tuesday’s research note, Goldman Sachs said it believed First Solar and SunPower Corp were two of the best solar investments, but “even these companies will face headwinds in a market that is oversupplied with modules.”

Ahearn also said while he was closely eyeing the competition, including moves by industrial giant General Electric, he remained confident that First Solar’s production expansion plans in low-cost Malaysia would keep the company at the industry’s forefront.

“I like our position relative to them, or anybody else frankly, because we’re ahead and we’re running hard and we don’t take anything for granted ... we feel pretty confident with the visibility of the things we’ve put in place,” he said.

Reporting by Matt Daily and Nichola Groom, editing by Gerald E. McCormick, Brad Dorfman

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