The bill that would have extended US Investment Tax Credits (ITC’s) for solar energy for 8 years stalled again yesterday. A preliminary vote on the Energy Independence and Tax Relief Act of 2008 only secured a 52 for – 44 against vote for the bill.
This cloture vote–(a procedure to force debate to end and have an immediate vote taken)–requires the support of 60 Senators to pass. While more Republicans seems to be warming up to the idea of a compromise, the party opposes the bill because they do not want to set a precedent of using tax increases to pay for an extension of existing tax policy.
What to expect —
Our Washington sources suggest there will continue to be a lot of noise and political wrangling around the issue through the summer and, while some signs of compromise are emerging, resolution is not likely to occur until the Fall.
Citi remains bullish on SPWR and FSLR despite the risks —
SunPower (SPWR) is most leveraged to passage of US legislation and, while we still think Street estimates are conservative even given the uncertainty around the US market and the stock now has ~30% upside to our target, headline risk remains high until the bill is passed (when it would be a big +).
First Solar (FSLR) remains our favourite solar idea today as the stock, even at current prices, still does not reflect earnings power through 2010. Additionally, we expect a very strong quarter next month to be a significant positive catalyst for the stock from here.
Remember, Piper claims FSLR is the only solar company that can compete for utility projects in the US even without the Investment Tax Credits.
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