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First Solar Won't Get One Big Energy Loan

Chew said First Solar explained that they simply weren't going to get one of the projects done on time because of other projects they are focused on, but the company says it is in final negotiations for selling Topaz to a buyer with such a low cost of capital it only should affect the project sale price by a small amount. "I have a hard time swallowing that," the analyst added, referring specifically to the sale price only being slightly lower without the federal loan guarantee.

No one has doubted that First Solar would be able to find debt financing for its projects -- the company said as much at a conference earlier this year when investors were concerned it might not get the DOE loans in the first place. However, any capital markets debt will be more expensive than the DOE loan, and suggests that First Solar cannot sell its projects to equity buyers at as high a price, reducing its earnings, and leading to a reduction in Wall Street estimates for its earnings power.

Rival SunPower (SPWRA) also has a $1.2 billion loan with the DOE in the conditional commitment phase. However, the sale of a 60% interest in the company to French oil giant Total provided the company with $1 billion in debt financing that would likely allow its projects to proceed without the DOE loan guarantee.

An Obama administration official told TheStreet on Wednesday that it didn't expect that all 14 loans in the conditional commitment phase would be closed by the Sept. 30 deadline. Congress has no formal oversight of the DOE loan guarantee program, something the program's critics on House Energy have recently lamented. The political risk could be limited for projects that are ready to move ahead and meet all of the DOE conditions, since any delay of the Sept. 30 deadline could require a change in legislation and it seems unlikely that the federal and legislative branch would agree on something like this in 9 days time.

Collins Stewart analyst Dan Ries wrote on Wednesday, before he was made aware of the project loan cancellation, "The three FSLR projects that have outstanding 1705 loan applications (with conditional approval) are essential to our CY12 and CY13 EPS forecast for FSLR. These projects being rejected would have a material negative impact on EPS forecast, though FSLR would likely be able to financing these projects without a loan guarantee at a higher cost of capital (less profitable). The risks to our forecast have increased as the 1705 DoE loan guarantee program has come under fire due to the Solyndra bankruptcy. We know of no means by which the company can mitigate this risk, as this risk centers on the DoE and its reporting to Congress."

-- Written by Eric Rosenbaum from New York

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