First Solar, Inc. (FSLR - Analyst Report) has entered into an agreement with NextEra Energy Resources, LLC, a subsidiary of NextEra Energy, Inc. (NEE - Analyst Report), for the construction of a solar power plant, McCoy Solar Energy Project, in Riverside County, Calif. Per the agreement, First Solar will utilize its cadmium telluride photovoltaic thin-film modules and provide Engineering, Procurement and Construction (“EPC”) services.
The project with an electric generation capacity of 250 megawatt (MW) will be located on approximately 2,300 acres of mostly public land provided by the Bureau of Land Management, approximately 13 miles northwest of Blythe, CA.
The company expects the construction to begin in late 2014 and be completed in late 2016. During the peak construction period, the project is expected to create 400 construction jobs.
The current project is located near the 550 Megawatt alternating current (MWAC) Desert Sunlight Solar Farm. This project is also being constructed by First Solar and is jointly owned by NextEra, GE Energy Financial Services, a subsidiary of General Electric (GE - Analyst Report), and Sumitomo Corp. of America.
First Solar is regularly winning contracts from electric utilities like NextEra for the construction of grid scale solar power projects. This marks the company as one of the world’s leading developers and builders of photovoltaic (PV) solar power systems. In Dec 2010, NextEra had purchased four solar PV projects totaling 40MW in Ontario, Canada from First Solar.
A differentiated, vertically integrated business model helps First Solar to provide utility-scale PV generation solutions to the emerging markets that have an immediate need for mass-scale PV electricity.
The solar industry continues to experience a challenging business environment due to intense pricing competition. Most of the solar modules and cell manufacturers have installed production capacity that significantly exceeds global demand. This imbalance between supply and demand continues to put pressure on pricing and results of operations.
However, First Solar has an established expertise and meaningful PV generation solutions in other areas of the solar value chain, such as, project development and EPC services. This will likely help the company to develop economically sustainable businesses.
Despite these positives, a volatile euro, apprehension over a reduction in German subsidies, falling crystalline silicon prices and the glut of modules in the market are matters of concern. The company presently has a short-term Zacks Rank #4 (Sell).
In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer JinkoSolar Holding Co., Ltd. (JKS - Snapshot Report).