From CS this morning:
FSLR proposes to acquire Nextlight
News. Prior to US mkt open, FSLR announced it has agreed to acquire Nextlight renewable power for a total cash consideration of $285mm. The acquisition would add:
(i) 3 PPAs for 570MW with PG&E and NV Energy;
(ii) 530MW of AC projects under development;
(iii) 30-person development team from Nextlight. The project would increase contracted PPA pipeline to 2.2GW, and provide visibility through 2015. FSLR will perform the EPC for the project, and will outsource the labor portion. Acquisition is subject to CPUC approval of a PPA under development, for which final decision is expected in 3Q10. The acquisition is expected to impact 2010 EPS by 9- 10c, and add $12mm to ongoing opex. Please see charts next page for a detailed list of project pipeline for Nextlight.
Industry implications.
Recall that SPWR was once associated with Nextlight projects (see our Solar Snippet date June 05th, 2009), but SPWR was likely embedding a low probability for the Nextlight project. Recall TSL had recently completed a secondary, some investors were expecting TSL may also have been bidding for this project. Also note that in a note on Mar 18, our industrials analyst Jamie Cook had noted Quanta services (PWR) was focusing on the EPC for the 290MW Nextlight project.
Implications.
The key issue for FSLR is visibility on long term margins given competition from c-Si based competitors in China/Taiwan. FSLR can achieve better margin stability through technical leadership with its thin film technology augmented by a growing pipeline of projects that have predictable margins which provide an offset. On the flip side, this is the third US pipeline acquisition by FSLR, which will condition investors to expect more in the future. The cash ROI on these investments are yet to be proven out on large US solar PV projects. We think this acquisition is consistent with FSLR’s long term strategy, and think the acquisition is Neutral for the stock, but note could be a longer term positive if it can execute to the right economics on these contracts. |
