The Pacific Gas and Electric Co. announced Thursday that it will buy 800 megawatts of power from two solar-power plants to be built by OptiSolar (550MW) and SunPower (SPWR) (250MW). SPWR’s plant will begin power delivery in 2010 and be fully operational in 2012.
Thomas Weisel views this contract win as a big positive for SPWR and for the large scale systems market. The firm also argues that it is not a negative for First Solar (FSLR), the solar company that most analysts believe is best positioned to capitalise on the nascent US solar utility market.
Weisel thinks the benefits of these California installations for the growth of the overall US solar industry outweigh any increased competitive threat from SPWR. The firm therefore recommends buying FSLR shares on any weakness.
Citi agrees and makes sure to give this disclaimer about the SPWR deal:
Based on our checks, these deals were the consummation of last year’s utility RFQ process…It is very important to keep in mind that SPWR (SPWR) was just about the only reputable game in town at that time as FSLR (FSLR) was not yet servicing the utility scale market, only acquiring capabilities to do so (via its Turner acquisition) in November 2007.
AmTech is also very positive about the “monumental implications” this contract has for the whole solar industry:
We believe this deal has monumental implications for the solar industry in general as well as SPWR specifically. The project is contingent on an extension of the US ITC. We view the deal as incremental to SPWR’s 2009 guidance and consensus estimates given the company’s decision to exclude revenue associated with a federal ITC extension from guidance. We are currently modelling 2009 EPS of $4.11 (consensus $3.63), and continue to believe consensus will move towards our numbers over time. We believe the PG&E deal could mean an additional $2.62 in earnings over the life of the contract assuming an ITC extension. In terms of industry ramifications, we believe large scale adoption of PV in the US and other regions such as Italy will force sceptical investors to abandon their myopic views surrounding diminishing Spanish demand in 2009.
Pacific Gas and Electric Company today announced it has entered into two utility-scale, photovoltaic (PV) solar power contracts for a total of 800 megawatts (MW) of renewable energy. This significant commitment to photovoltaic technology will deliver cumulatively 1.65 billion kilowatt-hours of renewable energy annually. This would be equivalent to the amount of energy needed to serve approximately 239,000 residential homes each year.
PG&E entered into an agreement with Topaz Solar Farms LLC, a subsidiary of OptiSolar Inc., for 550 MW of thin-film PV solar power. The utility also signed a contract with High Plains Ranch II, LLC, a subsidiary of SunPower Corporation (Nasdaq: SPWR), for 250 MW of high-efficiency PV solar power.
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