After assessing a study by Southern California Edison (SCE), FBR Research writes that First Solar ought to buy Solyndra, a fellow solar company. The SCE study was done to look at the best way to distribute roof top solar panels in Los Angeles.
Solyndra’s modules were found to be more efficient than those produced by First Solar. Solyndra sells modules made of copper, indium, gallium, and selenium (CIGS) while First Solar’s cells are cadmium telluride (CdTe). The SCE study showed CIGS provided peak conversion efficiency of 17% versus 9% for First Solar’s modules. In addition to their efficiency, FBR found that Solyndra’s solar cells are cheap and easy to install, as they do not require roof penetrating mounts or ballasts to hold the modules.
While Solyndra has $1.5 billion in business lined up, FBR says that the company is struggling to find funding which makes them an attractive target for First Solar. Additionally, First Solar has $600 million cash, $300 million in projected cash flow, so it can afford to make the deal, though FBR warns that stock would need to be thrown in, thus diluting shareholders.
On the whole, the solar market is shaping up to be oversupplied and weak for 2009. An acquisition like this can position the company well for the long term, without investing a ton of time in developing similar technology. First Solar recently hired Solyndra’s CTO, so clearly they are interested in the technology.
Why might Solyndra sell? The young solar company is backed by a consortium of venture firms. And in this economic environment, what venture firm isn’t looking for an exit and some cash?