Concern has been mounting over the US Department of Energy's (DOE) ability to continue with its multi-billion dollar federal loan guarantee programs after the bankruptcy of Solyndra, soon after receiving more than US$500 million and the political storm that ensued. Since then, concern has spread to First Solar that three huge solar farms it was planning to build in the US with loan guarantees from the DOE could be in jeopardy.
First Solar has now said that the planned 550MW Topaz solar farm in San Luis Obispo County, California would not meet the statutory deadline to receive a federal loan guarantee as there was insufficient time to process all requirements before the September 30th deadline.
First Solar noted that its planned 230MW Antelope Valley Solar Ranch 1 project and the 550MW Desert Sunlight project remain in the DOE process, awaiting approval. Indeed, the projects are expected to receive loan approvals shortly.
First Solar’s failure to gain a DOE loan for the Topaz farm was not unexpected, according to Jeffries' equity analyst, Jesse Pichel in an investor note issued before First Solar’s statement today. Pichel believes that the Topaz project will be sold without the loan guarantee, citing Enbridge as the potential buyer, based on media reports.
The Jeffries analyst noted that the Topaz project is expected to be sold with only a 150-200bps higher interest rate than with the DOE loan guarantee rate.
“We could envision that within a difficult financing environment, project buyers with low cost of capital can be more aggressive on price. As one large project financier expressed, ‘Golden rules are in effect; those with gold can set the rules,’” Pichel wrote in the investor’s note.
First Solar said in a statement that it was in advanced talks over the sale and financing of the Topaz project that was not dependent on a DOE loan guarantee.