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First Solar snares OptiSolar's unfinished projects

In a sign of a shakeout among solar companies, high-flier First Solar shells out $400 million for gigawatts of utility-scale solar projects from cash-strapped OptiSolar.

Solar panel maker First Solar said on Monday that it has acquired the rights to develop utility-scale solar projects that rival OptiSolar has been unable to complete.

The deal, valued at $400 million, is a sign of how the seized-up financial markets are derailing large renewable energy projects and forcing solar companies to change their business strategies. Because of the tough economic conditions, analysts expect there to be consolidation among solar providers this year and next.

First Solar

OptiSolar laid off half of its staff late last year and idled its Sacramento, Calif., factory because it was unable to raise additional capital. Developing utility-scale projects requires raising tens or hundreds of millions of dollars in financing, but the credit crisis has made borrowing far more difficult than a year ago.

Through the transaction, First Solar gains the rights to develop a 550-megawatt project to deliver solar-derived electricity for Pacific Gas & Electric, scheduled to begin construction in 2010.

It also acquired a pipeline of 1,300 megawatts' worth of projects with other utilities in the western U.S. and enough land rights to generate 19 gigawatts of utilty-scale solar projects. Significantly, these projects are already partially developed, allowing First Solar to short-cut a multi-year project-approval process.

The transaction is a big boost for First Solar's utility business. It comes on the heels of the company announcing that it has broken the long-pursued industry mark of producing solar panels at under $1 per watt. The company manufactures thin-film solar cells from cadmium telluride.

The OptiSolar projects will likely yield $70 million in revenue for First Solar in 2009, company CEO Michael Ahern said during a conference call on Monday.

Lazard Capital Markets analyst Sanjay Shrestha called the deal "a watershed event for the industry as it effectively takes solar industry into the mainstream" and noted that it more than doubles First Solar's project pipeline.

Like OptiSolar, other solar technology companies are making changes to their business models in reaction to the economy.

eSolar and Ausra are two concentrating solar companies which had originally planned to build and operate their own utility-scale solar power plants. Both, though, have adjusted their business models to focus instead on selling equipment--the gear that generates electricity--to utilities or power generation project developers.