First Solar to Sell Solar Plant

First Solar Inc. (FSLR - Analyst Report) has recently entered into an agreement with Enbridge Inc. (ENB - Snapshot Report). As per the agreement, Enbridge will acquire First Solar’s 20MW solar energy project under construction near Sarnia, Ontario.

The Sarnia solar energy project is expected to be completed by the end of fiscal 2009. The project is touted as the largest photovoltaic solar energy facility in Canada and one of the largest in North America. At 20MW, Enbridge expects the project to generate enough power to meet the needs of about 3,200 homes and help to save the equivalent of approximately 6,600 tons of CO2 annually.

First Solar will provide operations and maintenance services under a long-term contract. The power output of the facility will be sold to the Ontario Power Authority as per a 20-year Power Purchase Agreement under the terms of the Ontario Government's Renewable Energy Standard Offer Program.

The Sarnia project will complement Enbridge's four existing wind energy projects, having an annualized capacity of 260MW. Enbridge, a Canadian company, is a transporter of energy with a substantial exposure in natural gas transmission and midstream businesses. The company is also focusing on renewable sources like wind and solar energy, hybrid fuel cells and carbon dioxide sequestration.

Based in Phoenix, AZ, First Solar designs, manufactures and sells solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. It sells its products to project developers, system integrators and operators of renewable energy projects primarily in Europe with a distinct focus on Germany and the U.S. First Solar also focuses on designing and deploying commercial solar projects for utilities in the United States.

First Solar enjoys a distinct cost advantage over its peers due its reliance on low cost thin-film cells. However, the advantage is ebbing fast due to falling polysilicon prices. First Solar’s growth potential and that of the solar industry in the aggregate requires prudent long-term focus on technological enhancements, capacity build-out and cost minimization.

Balancing all the three aspects would be an uphill task. Competition in the field is becoming tougher day by day for U.S. solar players such as First Solar, who miss out on Government dole unlike its Chinese counterparts like Suntech Power Holdings Company Ltd (STP - Snapshot Report) and ReneSola Ltd (SOL - Analyst Report). We maintain our market Outperform recommendation on the shares.