North Coast Solar Stocks

April 6, 2009

BP Solar Targeting Utility-Scale US Solar Projects

Filed under: FSLR, JASO, PCG, SPWR, STP — Tags: , , , — Jason @ 1:34 pm

April 06, 2009: 01:34 PM ET
Dow Jones

NEW YORK -(Dow Jones)- BP Solar International Inc. is hoping to install 100 megawatts of large solar projects in the U.S. in 2009 as it focuses attention on the utility sector, the company’s chief executive, Reyad Fezzani, told Clean Technology Insight.

The solar unit of London-based BP PLC (BP) is bidding for numerous utility solar projects amid growing competition from such combinations of developers and panel providers as First Solar Inc. (FSLR), SunPower Corp. (SPWRA, SPWRB) and Gemini Solar, a joint venture between MMA Renewable Ventures and Suntech Power Holdings Co. (STP).

“The downstream market in the U.S. is becoming increasingly utility-focused. This means larger projects, longer lead times and increased complexity,” said John Hardy, senior research analyst and vice president at Broadpoint AmTech, a division of Broadpoint Securities Group Inc. “In three years, I would not be surprised if the U.S. market reached 3 to 4 gigawatts in annual installations.”

Driven by state mandates, utilities are seeking large solar installations. A year ago, Fezzani said, a 10-MW power-purchase agreement was considered large. ” Now the average size is 25 to 50 MW. We are bidding for tenders that are orders of magnitude larger, 100 to 150 MW and even one that’s 500 MW,” he said.

BP Solar can manufacture and sell up to 320 MW of solar panels this year, compared with 162 MW in sales in 2008 and 115 MW in 2007. Of the total 2009 sales, about 40% will be distributed to residential customers and 60%, or 192 MW, will serve large commercial and utility scale-projects, with commercial representing less than half of that. The U.S. will probably take up half of the 192 MW, Fezzani said.

Hardy places his bets on SunPower and First Solar as the best-positioned companies to win utility contracts: First Solar because of its proprietary low- cost and reliable thin-film manufacturing process, and SunPower due to a combination of its high-efficiency cells and systems-level tracker technology. But BP’s Fezzani disagrees.

Despite the fact that BP’s solar panels aren’t the cheapest on the market, ” our reserach indicates that on a cents-per-kilowatt-hour basis, over the lifetime of our offer, we are the lowest cost,” Fezzani said. That calculation stems from the long-term performance of BP’s panels that see very little degradation according to recent tests done by the company.

But that’s not all that BP is riding on to win utility projects, Fezzani said. The company is establishing strong project-finance agreements in order to calm the worry of many utilities that contractors won’t secure the necessary capital in today’s difficult environment to complete projects. BP is also keeping all of its projects, instead of selling them after completion to third parties, as in First Solar’s business model.

“We’ve just gone out to tender to the banking institutions for facilities that underpin our pipeline in the U.S.,” said Fezzani. “We’ve received a lot of positive interest from existing and new [to the solar sector] institutions.”

BP Solar is hoping that it will work out umbrella financing arrangements in the U.S., similar to those it has established in Europe. Banco Santader, for example, agreed to provide up to EUR160 million to BP a few years ago for a number of projects in development in Spain. The companies established a standardized process for getting financing for specific projects and thus sped up the financing process.

“We are now negotiating a financing set up with a large German insurance company who’s going to provide financing for projects in Italy,” Fezzani said. ” We’ll have the same kind of arrangement [there].”

There is also a high level of interest in the U.S., he said. “Almost every day now I get a new set of investors who are interested in participating in solar projects in utility or smaller scale, as well as a number of foreign companies and funds who want to participate in equity investments in the U.S. utility sector,” said Fezzani.

BP’s project pipeline isn’t the only one fund-raising now. SunPower has a 250 MW power-purchase agreement that it signed with Pacific Gas & Electric Co. (PCG) last year. That needs financing. “We are talking to financiers,” Bob Okunsiki, senior director at SunPower, said at a recent Jefferies & Co. conference in response to a question from Clean Technology Insight. “We’ll start closing financing in smaller chunks with a number of players,” he said.

SunPower is working to halve its panel costs by 2012. In order to compete better and survive the economic downturn, BP has announced its own cost-cutting measures. The company wants to reduce costs at the solar unit by 25% by next year. BP is closing module and cell processing facilities in Madrid and in the unit headquarters of Frederick, Md., even as it outsources some production to third parties, like cell manufacturer JA Solar (JASO) in China.

“We are qualifying other suppliers to do assembly for us,” Fezzani said. “But for the 320 MW [of 2009 production], most of that will be serviced internally trough existing arrangements.”

Although Fezzani said he’s looked at acquiring project pipelines, the OptiSolar pipeline acquired by First Solar for $400 million in stock, was too expensive for BP, he said. “We are not short of opportunities,” he said of the available land and development rights.

In Europe, the company has been acquiring government licenses, whereby governments allocate a certain amount of licenses under capped feed-in tariff rules, and is looking at a 100 MW license package in southern Europe, Fezzani said.

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