Friday, November 7, 2014

"First Solar Drops 11%: No YieldCo., Spooky Capacity Remarks" (FSLR; TAN)

The stock is down $5.76 (10.22%) at $50.65. As we said on Thursday:
The only part of solar we're interested in at the moment is the financing and even this offers lower expected returns than, say, shorting shiny rocks....
Right now gold is up $27.50 so the shorting shiny rocks idea isn't looking so hot. On the other hand, shorting solar deals...
From Barron's Tech Trader Daily:
Shares of solar energy technology provider First Solar (FSLR) are down $6.20, or 11%, at $50.20, after the company yesterday afternoon reported Q3 revenue that missed analysts’ expectations, though it beat on the bottom line, and forecast revenue for the full year on more or less in line.

The highlight, however, for some, was the company’s indicating that it does not intend to pursue a “YieldCo.” structure, the popular MLP-like investment spin-off that has already boosted the popularity of other energy firms such as SunEdison (SUNE), which earlier this year spun out TerraForm Power (TERP). (For more, see a column I did on the matter back in August.)
Here’s how CEO Jim Hughes addressed the matter:

Finally, turning to the oft-asked question of a yieldco, the Company has determined that we are not prepared to file a registration statement and pursue a listed yield vehicle at this time. However, we have also determined that the ownership and operation of whole or partial interest in select solar-generating assets does have a role as a component part of our overall business model. We will continue to develop generation assets in the US and select other markets. And at times we will retain either a whole or partial interest in such assets. As with any asset class, we will continue to evaluate our options for the capitalization and governance of such assets. We feel that opportunities for maturation of the marketplace and further optimization of such retained interest remain, and have decided to exercise patience. We likely will begin providing greater visibility into our retained ownership interest by reporting it as a separate segment commencing in 2015, as it will have become a material contributor by such time. You can anticipate that we will provide a more detailed financial overview at our traditional Analyst Day in early 2015.
Not helping the shares were remarks by Hughes that the company sees “quite a bit of capacity being added the marketplace now,” and that “we are cautiously watching to make sure we’re not headed into another period of excess capacity. We are cognizant that an argument could be made that there is some risk of that.”

Kudos to Gordon Johnson of Axiom Capital, who had written last month that he didn’t see a YieldCo being in the cards for the company. Today, Johnson, who has a Sell rating on First Solar stock, reiterates his skepticism of the YieldCo. prospects for First Solar:’...MORE
TAN is the Guggenheim Solar ETF which is down 1.55% at $36.31.