First Solar Acquiring 1.1 Gigawatts of Solar

First Solar announces its latest pipeline acquisition to fuel its migration to more large-scale solar business.
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TEMPE, AZ. (

TheStreet

) --

First Solar

(FSLR) - Get Report

announced in the pre-market on Wednesday morning that it is making another acquisition to drive its utility-scale solar business. First Solar is acquiring 1.1 gigawatts in a southwestern U.S. project pipeline from

NextLight Renewable Power

for $285 million in cash.

It's probably not a coincidence that First Solar announced the latest acquisition on Wednesday morning. The U.S. solar bellwether is releasing its first quarter earnings after the market close on Wednesday, and more and more focus from the Street has been on how First Solar is transitioning to the largest-scale, utility project-oriented solar space.

SunPower

(SPWRA)

recently paid a similar sum --$277 million -- to acquire a 1.2 GW pipeline in Europe.

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The acquisition of NextLight's pipeline includes 570 megawatts already under power purchase agreements with western utilities. First Solar said in the acquisition announcement that the deal brings its under contract solar project pipeline to 2.2 GW.

Wedbush Securities estimates that First Solar is paying about 26 cents/watt for the 1.1 GW pipeline of projects.

Wedbush Securities also stated in a note on Wednesday morning that SunPower may be a net loser in the First Solar acquisition.

Wedbush noted that SunPower was originally contracted to provide the modules and services for the AV Solar Ranch One project, a 230 MW project in the NextLight pipeline. "We expect that First Solar will move to nullify that contract, unless the contract had a change of control clause that would allow First Solar to terminate the contract," Wedbush analyst Christine Hersey stated in the research note.

The AV Solar Ranch One project is scheduled to start construction in the fourth quarter with completion in 2013.

Existing documentation on the Silver State North and South projects in the NextLight pipeline -- totaling a little more than 400 MW -- show that SunPower panels with trackers or First Solar panels in fixed tilt configuration were being considered. "With this deal we would assume that First Solar panels will be used in the project." Wedbush reasoned.

Another 530 MW of additional solar projects in the NextLight acquisition are in "various stages of development" First Solar said in the acquisition release. Analysts skeptical of project pipeline purchases often point to the fact that solar companies are paying cash for solar capacity that is not guaranteed.

Skeptical analysts like Wedbush's Hersey also wonder whether the acquisitions of these project pipelines show the extent to which the module sales market demand will dry up in a hurry. "We view this deal as confirmation that end market demand may be down in 2011, forcing module companies to continue to move downstream and develop projects themselves in order to sell modules," Wedbush wrote.

The First Solar acquisition is expected to close in the third quarter.

On Wednesday morning in the pre-market, First Solar shares were up 1.0%.

-- Reported by Eric Rosenbaum in New York.

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