Darrell Issa Vs. First Solar: Can Politics Sink the Stock?

NEW YORK ( TheStreet) -- It's dubious business to base investment decisions on politics, but in the solar sector, there is no escaping the outsized role of government.

The latest case of politics meddling in the fortunes of solar stocks is an old one: The Solyndra bankruptcy and Department of Energy loan guarantee program.

This week, Rep. Darrell Issa (R. Calif.), head of the House Committee on Oversight and Government Reform, made it clear that he has it in for First Solar (FSLR) as part of the broader "making of political hay" while the sun can be shined on the DOE loan program.

Issa didn't mince words when discussing the problems he sees in the DOE loan guarantees provided to large-scale First Solar projects, entitling a lengthy section of a House committee report, "The First Solar Scheme."

Darrell Issa, House Republican, sees political hay in "The First Solar Scheme."

The report was prepared ahead of Department of Energy Secretary Steven Chu's appearance before Issa's committee. Chu's response on Tuesday: "Enough already."

That's a good enough and understandably flippant response for an Obama administration official to make in what is a very political battle with Republicans looking to score points over energy policy. In fact, I was content to dismiss it myself as one more scene of Solyndra absurd theater .

Upon further reflection, though, that's not good enough to comfort First Solar investors concerned that one more negative headline for a large-scale solar project could have the potential to sink the company's shares.

The First Solar project that Issa zeroes in on, Antelope Valley Solar Ranch, is the only project still awaiting initial funding of the loan guarantee, an event scheduled to take place on April 6. It was already delayed once as permitting issues required an extension of the former DOE deadline.

If in a worst-case scenario the loan guarantee was stopped and the utility company that has provided the equity funding, Exelon (EXC) was able to renege on its investment as a result, First Solar would be left to fund the project itself. The solar company is not in a cash flow situation to carry that load right now. Therefore, this kind of event would send First Solar shares toward single-digit territory.

Let's stress, this is a worst-case scenario, but it can't be ignored. The good news, though, is that if First Solar is headed for single digits, it seems a long shot that Issa's attack will be the reason.

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