First Solar Inc. (FSLR) has entered into a joint venture (“JV”) agreement with Belectric Holding GmbH for the development of solar energy projects on three continents. The venture will be based in Germany and is subject to approval from governmental merger control authorities.
The JV – PV Projects GmbH & Co KG – aims to develop certain chosen photovoltaic (:PV) power projects. These projects can be independently acquired or developed by either of the two companies in Europe or North Africa, and with a with a capacity limit of 20 megawatts (MW) in the U.S.
The agreement calls for First Solar to supply its advanced thin-film modules, preferred components such as the First Solar Tracker and other services while Belectric will provide its Balance of Systems (“BoS”) and a series of service capabilities.
This First Solar-Belectric venture brings together the world's leading PV engineering, procurement and construction (:EPC) provider and the most prevalent vertically integrated manufacturer or project developer in the PV industry. These two companies have long been working together and recently completed the 128 MW Templin PV plant in Germany.
The current venture will include Belectric's existing 280 MW pipeline in the U.S. as well as other project prospects. The JV is non-exclusive enabling both parties to independently pursue the development and construction of other PV projects.
Though First Solar’s solar cells convert sunlight to electricity less efficiently than traditional silicon PV modules, its thin film PV cells have an advantage in producing electricity even in lower light. This ability to produce electricity under a wide range of light conditions makes these cells attractive for utility companies that require stable large-scale, utility-sized renewable energy production.
In order to counter the weak economic scenario, First Solar is now focused on utility-scale electricity power projects. In August, First Solar and General Electric (GE) had entered into a technology partnership agreement. Per the deal, First Solar will acquire indigenous technology from General Electric to make advanced thin-film solar panels to counter stiff competition from cheap alternatives available in the market. As a part of the transaction, General Electric will receive 1.75 million shares of First Solar, which it will retain for three years.
Again, under a 10-year power purchase agreement, the company recently announced that it will sell the electricity generated from the Lost Hills photovoltaic power plant to the City of Roseville, Calif., once the plant comes online. First Solar will begin the construction of this power plant in Kern County, Calif. in early 2014.
The company seems to be executing its strategy well by diversifying globally with a focus on rising bookings, and improving its costs. However, our apprehensions remain due to the industry-wide oversupply of solar products, its weak second quarter results and rising competition in the market.
The company presently retains a short-term Zacks Rank #3 (Hold). Other companies that are well positioned in the sector include SunPower Corp. (SPWR) and JA Solar Holdings Co., Ltd. (JASO). SunPower carries a Zacks Rank #1 (Strong Buy) and JA Solar holds a Zacks Rank #2 (Buy).
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