Tempe-based first Solar inc. will not get a $1.9 billion Energy Department loan guarantee for a massive California solar-power plant, but company officials said they still will build and sell the project as planned.
At least one analyst speculated that the deal, which had preliminary approval, fell apart because of the fallout from Solyndra inc., a California solar company that took more than $500 million in federal loans to build a solar-panel factory then filed for bankruptcy, leaving taxpayers with the debt.
“Given the political pressure from Solyndra and delays at the (Office of Management and Budget), we now assume the Topaz project will not receive DOE loan guarantees,” Jefferies and Co. inc. analyst Jesse Pichel said in a note to investors.
First Solar officials said the deal fell through because they couldn’t meet the Sept. 30 deadline to finalize the loans but declined to provide details or comment on Solyndra.
Once built, first Solar’s Topaz Solar Project in San Luis Obispo County has a deal to sell power to Pacific Gas and Electric Co. the project had applied for the federal government to guarantee $1.93 million in construction loans in case of a default.
A syndicate of institutional investors and commercial banks was going to make the original loan, and the debt was to be repaid over time with money made by selling energy to PG&E.
First Solar typically builds its solar-power plants and negotiates the financing and sale of their power. then it sells the plants to a utility or another business, and the buyer takes over the debt payments and, if applicable, the contract to sell power.
Pichel and other analysts, including Dan Ries of Collins Stewart, have said this week that this type of Energy Department loan guarantee is much less risky than the loan to Solyndra because the power plants are almost guaranteed by their power-purchase contracts to generate revenue once they are built.
Solyndra, on the other hand, used the money to build a factory to make solar panels, and its panels were not cost-competitive with others on the market.
First Solar still expects to get federal assistance for two other large California power plants, one of which will be a loan guarantee and the other an actual loan from the Federal Financing Bank.
The deadline for those loans is Sept. 30, and leaders in the House Committee on Energy and Commerce have asked the DOE for an update on the loans’ progress by today.
Those lawmakers said earlier this week that they are concerned the DOE could be making loans without properly assessing their risk, leaving taxpayers on the hook, like with Solyndra.
The loan program under review was created in 2005 and accelerated under the 2009 Stimulus Act. the DOE has closed 18 loan guarantees worth $9.4 billion since the stimulus passed and has 13 outstanding “conditional commitments,” including two to first Solar.
The first Solar projects still expected to get federal help – the Antelope Valley Solar Ranch 80 miles north of Los Angeles and the Desert Sunlight project in Riverside County – have already broken ground.
The Topaz project has not. to qualify for the federal assistance, the projects must break ground by Sept. 30.
The Energy Department has given preliminary approval for a $680 million loan for the Antelope Valley project and a $1.88 billion loan guarantee for the Desert Sunlight project.
The Desert Sunlight loans that are partially guaranteed by Energy Department will be funded by institutional investors and commercial banks led by Goldman Sachs Lending Partners LLC, according to the department.
First Solar spokesman Alan Bernheimer said that Topaz would not get the federal assistance because it would not complete all of the requirements for the loan by Sept. 30 but would not elaborate on which requirements the company could not complete.
Bernheimer said first Solar still will build the 550-megawatt Topaz project but will seek new financing without the federal loan support, which will likely mean a higher interest rate.
“We are . . . in advanced discussion with potential buyers regarding a sale and financing structure that does not require DOE guarantees,” he said. “And we continue to work with the DOE to close the remaining loan guarantees.”
The news would not affect a Mesa solar-panel factory that first Solar is building, he said, adding that the company has several other power plants under way not involving federal loan assistance.
“First Solar has a project-development pipeline in North America of 2,600 megawatts under contract with utilities,” he said. “We have no plans to delay completion of the Mesa factory.”
First Solar’s stock price continued to take a beating Thursday, falling $6.67, or 9.1 percent, to $66.85.