First Solar (FSLR), SunPower (SPWRA), and SunTech (STP) can all expect good news in the coming weeks reports FBR Capital Research, though the firm also cautions that the good news is already baked into most earnings estimates.
Those solar companies are expected to benefit from rooftop solar programs in California that will be approved in the coming weeks. Southern California Edison (SCE) applied for a 250 MW rooftop project about a year ago. Since then the California Public Utilities looked at the costs and benefits of the project. Now they’re expected to approve it in the coming weeks. San Diego Gas & Electric has also settled a case to build a $250 million 52MW project.
SCE is expected to build and own 160MW, while SDG&E is expected to build and own 26MW for $125 million. The rest of the projects for both will be available for independent companies.
As a result, FBR thinks First Solar will be getting the 160MW SCE project, but at a 20% margin, as opposed to a normal 30%. SunPower and SunTech are expected to get in on the remaining available orders from the two utilities, also at lower than usual margins.
While good news, it won’t be something to get excited about. FBR warns that “the headlines will look positive for First Solar, but we note that we are already modelling for a total of 971 MW of shipment by First Solar in CY09 and 1,134 MW in CY10. Thus, 50 MW in CY09 and 50 MW in CY10 for SCE are already shown in our estimates.”
Two other points from the report:
- We think boosting employment is playing a key role in accelerating the decision process for both rooftop projects. The IPPs/developers have been long arguing for project sharing. PG&E recently proposed 500 MW ground-mount solar projects to be distributed evenly between PG&E and IPPs/developers. This shift of paradigm clearly represents CPUC’s desire for competitive pricing and a fair distribution of projects among IOUs and IPPs/developers.
- Although SCE’s initial 5 MW pilot projects were priced at $5.05/W installed, the rest of the projects will be priced at $3.50–$3.85/W. First Solar is supplying modules for all three pilot projects totaling 5 MW, and we expect it to be the top beneficiary from the 160 MW piece of the SCE project because of its existing relationship. SDG&E projects, at $4.80/W, are more expensive due to lower scale and the planned use of trackers on the parking lots. We believe the low installed costs in these projects, compared with CSI’s $6.80/W installed cost for commercial projects, should preclude firms such as AKNS and RSOL from bidding for these utility projects.
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