By Nichola Groom
LOS ANGELES (Reuters) - First Solar Inc said on Monday it would pay rival OptiSolar $400 million in stock for its pipeline of solar projects, including a major installation for California utility PG&E Corp and other nascent deals that will rapidly expand the company's presence in the U.S. utility market.
The deal, which First Solar Chief Executive Mike Ahearn called a "watershed acquisition" for the company, includes 1.3 gigawatts (GW) of solar development projects being negotiated with Western U.S. utilities and 136,000 acres of strategic land rights that have the potential to deploy up to 19 GW of additional solar projects.
In Southern California, one GW of electricity is enough to power up to 650,000 homes.
The addition of projects already at various stages of development will "catapult us into a whole new league," Ahearn said on a conference call to discuss the deal.
"This package, in total, we think would be very hard to replicate at all, and certainly not without many years of work," Ahearn added.
The deal between First Solar and OptiSolar, expected to close in the second quarter, comes as the global credit crisis had dried up funding for many renewable energy projects. California utilities, however, have been a bright spot in an otherwise gloomy solar market because they must comply with a state mandate to produce 20 percent of their power from renewables by 2010 and then 33 percent by 2020.
Utilities also benefit from a 30 percent tax credit for building solar installations.
"Although this position is not guaranteed, buying an existing pipeline increases the likelihood of becoming the preeminent solar energy provider to the U.S. utility market and potentially boxes out other competitors at a time when the industry is capital constrained," Piper Jaffray analyst Jesse Pichel said in a note to clients.
Going forward, the projects included in the deal will incorporate First Solar's cadmium telluride solar panels rather than Hayward, California-based OptiSolar's amorphous silicon panels. Both technologies are photovoltaic, meaning they use the sun's rays to generate electricity.
Both also fall under the category of "thin film" solar, meaning they are cheaper to produce than traditional crystalline silicon panels. The downside is that thin film panels produce less electricity than silicon-based rivals, making them less effective in small spaces such as residential rooftops.
Cheaper thin film panels have scored big deals with price- conscious utilities, however.
Last year, OptiSolar made headlines when it secured a deal to build a 550-MW solar power plant in Central California for PG&E's Pacific Gas & Electric. As part of the same announcement, SunPower Corp, a maker of silicon-based panels, inked a deal to build a 250-MW plant nearby.
Then, at the beginning of this year, privately-held OptiSolar cut 300 jobs, or half its workforce, and halted the construction of a manufacturing plant because it could not secure the funding it needed to expand. That lead the company to "entertain a partner," Ahearn said.
First Solar executives said the deal would add about $70 million to 2009 revenue, but would decrease earnings per share for the year by 35 cents to 40 cents a share.
The deal is expected to add to earnings "modestly" in 2010.
First Solar shares rose about 2.9 percent to $107 in extended trading following the announcement. The stock closed at $103.97 on the Nasdaq after falling $1.77, or 1.7 percent, in regular trading.
(Reporting by Nichola Groom; Editing by Andre Grenon)
