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FSLR Enters Power Purchase Deal

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First Solar, Inc. (FSLR - Free Report) has entered into a 20-year power purchase agreement (“PPA”) with the member cities of the Southern California Public Power Authority (“SCPPA”) to provide electricity. The electricity will be generated from the company’s upcoming Kingbird photovoltaic (“PV”) solar power plant.

Per the agreement, the company will supply power to the cities of Pasadena, Riverside, Colton as well as Azusa’s municipal power utilities. The City of Pasadena alone will take half of the electricity from First Solar and the remaining will be distributed to other three cities.

First Solar will construct its 320-acre Kingbird photovoltaic solar power project, having power generation capacity of 40 megawatt (“MW”) AC, at Kern County, CA. The company will start construction in the middle of 2014 and is expected to be online by the end of 2015.

In the first year, the company will generate adequate emission-free power from the project and avoid emission of carbon dioxide by 20,000 metric tons per year. During the peak construction period, the plant is expected to create 200 jobs.

First Solar is investing substantially to install emission-free renewable set ups, which will subsequently help the utility distribution companies to expand their renewable portfolio. It is evident that the company has a proven record to build large projects in a cost effective manner. First Solar also enters long-term power purchase agreement with several utility providers.

In Aug 2013, the company inked a 10-year PPA to sell electricity, generated from its forthcoming Lost Hills photovoltaic power plant, to the City of Roseville, Calif. This agreement will be effective from 2015. The plant has an electricity generation capacity of 32MW.

According to the agreement, the electricity generated from the plant will be purchased by Roseville for the first four years. From 2019, First Solar will start sharing the power with Pacific Gas and Electric, a subsidiary of PG&E Corp. (PCG - Free Report) , along with Roseville.

We believe signing long-term PPA at regular intervals will enable First Solar to improve its forthcoming revenue stream. Stable cash inflows will also encourage the company to invest more in the new ventures.

First Solar currently has a Zacks Rank #2 (Buy). Other solar module manufacturers which are worth considering are Canadian Solar Inc. (CSIQ - Free Report) and Trina Solar Ltd , each with a Zacks Rank #2 (Buy).

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